Construction Contractors: Licensing, Per-Job Nexus & Retention

What to know

• Working 30 days in a new state can trigger registration + withholding there.
• Retention receivables + progress billing complicate receipts-based fees.
• S-corp + accountable plans usually beat LLC tiers for profitable crews.

Licensing comes first

Most states require a contractor's license before bidding or performing work above a dollar threshold; California's Contractors State License Board licenses the business, with a qualifying individual. Working in a new state usually means a new license before the first job.

Job-site nexus

Performing work in a state creates physical presence there for income or franchise tax and often triggers registration, withholding for workers on site, and sometimes contractor-specific taxes. Some states set short day-count thresholds before nonresident employees must have state tax withheld.

Receipts and flow-through funds

Receipts-based taxes can count money that passes straight to subcontractors. California's LLC fee is based on total receipts, which makes S-corp status attractive for profitable contractors; Texas, by contrast, lets construction contractors exclude certain flow-through payments to subcontractors from total revenue.