Taxes are one of the least-discussed but most impactful parts of running a painting contracting business in Texas. Many solo operators and small painting companies leave significant money on the table — or create serious problems — by not understanding their tax obligations. Here’s a practical overview of what Texas painting contractors need to know.

Texas Has No State Income Tax — But You Still Pay Federal

Texas is one of nine states with no state personal income tax. This is a genuine advantage for self-employed contractors — no state quarterly estimated payments, no state income tax return.

However, federal income tax still applies, and self-employment taxes (Social Security + Medicare) add another 15.3% on top of your federal income tax rate on net self-employment income. Total federal effective tax rates for profitable painting contractors often run 25–40% of net profit depending on income level.

The takeaway: The lack of state income tax saves you money, but don’t ignore federal obligations.

Texas Sales Tax for Painting Contractors

Texas sales tax is one of the most complex areas for painting contractors. The rules:

Labor-only painting services: NOT subject to Texas sales tax. If you charge only for painting labor (no material markup), this charge is not taxable.

Materials you purchase for resale: You can buy materials (paint, primer, caulk, tape) with a resale exemption certificate (Texas Sales and Use Tax Resale Certificate) to avoid paying sales tax at point of purchase. You then collect and remit sales tax when you charge the customer for those materials.

Materials incorporated into real property: Materials that become part of the structure (paint applied to walls) are considered incorporated into real property. This is where Texas tax gets complicated — there’s a distinction between “separated materials” (itemized on invoice) and materials bundled in a lump-sum contract.

Practical advice: Work with a CPA who understands Texas construction sales tax. The rules create a common pitfall where painting contractors pay sales tax on material purchases AND fail to collect it from customers correctly (or vice versa). A single consultation prevents years of errors.

Quarterly Estimated Tax Payments

Self-employed painting contractors must make quarterly federal estimated tax payments — the IRS doesn’t have a mechanism to withhold from self-employment income, so you pay in advance.

Payment schedule (federal):

April 15 (for Jan–Mar income)
June 15 (for Apr–May income)
September 15 (for Jun–Aug income)
January 15 (for Sep–Dec income)

Underpayment of estimated taxes results in IRS penalties. A safe harbor is to pay at least 100% of your prior year’s total tax liability (110% if prior year income was over $150K) across the four payments.

Savings discipline: Set aside 25–30% of every job deposit into a dedicated tax savings account. Pay quarterly from this account. Many painting contractors are shocked by their first tax bill when they haven’t been saving throughout the year.

Business Expense Deductions for Painting Contractors

Your federal taxable income is your gross revenue minus legitimate business expenses. Painting contractor deductions include:

Vehicle expenses: Mileage (IRS standard rate) or actual vehicle costs. Keep a mileage log.
Tools and equipment: Sprayers, ladders, scaffolding, brushes, rollers. Deductible, often immediately via Section 179.
Paint and materials: Cost of goods sold.
Subcontractor labor: Payments to subcontractors (require 1099s for individuals paid $600+/year).
Insurance: General liability, commercial auto, workers’ comp.
Marketing: Google Ads, website, signage, business cards.
Home office: If you use a dedicated space at home exclusively for business administration.
Professional development: Painting trade association dues, training.
Software and subscriptions: Estimating software, QuickBooks, project management tools.

Good bookkeeping throughout the year is what makes these deductions stick.

When to Work with a CPA

Tax complexity increases when you:

Hire employees (payroll tax obligations)
Form an S-Corp (potentially advantageous for self-employment tax savings above $80K net profit)
Cross $100K+ in annual revenue
Have assets like vehicles, equipment, or real estate to depreciate

Find a CPA who specifically works with construction and home services contractors — the Texas sales tax and subcontractor issues require someone with trade industry experience.

List your painting business on House Escort to connect with homeowners seeking interior and exterior painting contractors.

Also see: painting contractor Texas estimating and home services business insurance Texas for related business operations guides.

FAQ

Do painting contractors in Texas charge sales tax on labor?

Texas sales tax does not apply to painting labor in most circumstances — labor-only charges for painting real property are generally exempt. However, if your business sells materials to the customer as a separate charge or profit center, those material sales may be subject to sales tax. The rules are complex enough that consultation with a Texas CPA or the Texas Comptroller’s office is strongly recommended.

How much should a Texas painting contractor set aside for taxes?

A good working rule is to set aside 25–30% of gross revenue into a dedicated tax account. This covers federal income tax at typical self-employment income levels plus self-employment taxes (15.3% on net earnings). The actual rate varies based on your income, filing status, and deductions. Working with a CPA who can model your specific situation provides the most accurate guidance.

Does forming an S-Corp save a Texas painting contractor money?

S-Corp election can reduce self-employment taxes for painting contractors with consistent net profits above approximately $80,000/year. An S-Corp pays you a “reasonable salary” (subject to payroll taxes) while passing additional profits as distributions (not subject to self-employment tax). The savings must be weighed against the cost of payroll processing and CPA fees. Typically worth evaluating above $100K in consistent annual net profit.

When do I need to send 1099s as a painting contractor?

You must file Form 1099-NEC for any individual or unincorporated business you paid $600 or more in a calendar year for services. This includes subcontractors, independent laborers, and specialty trade subs. 1099s are due to the recipient by January 31 and to the IRS by the same deadline (electronic) or February 28 (paper). Failure to file 1099s carries penalties.

What’s the biggest tax mistake painting contractors make?

Not making quarterly estimated tax payments. Many contractors receive their first large invoice after a profitable year and are shocked by what they owe. The federal penalty for underpayment adds to the burden. Setting aside a percentage of every invoice throughout the year and paying quarterly eliminates this problem entirely — it becomes routine rather than a crisis.

Painting Contractor Texas Taxes: What to Know