How to invoice in California

The CSLB licence number

The Contractors State License Board (CSLB) licenses contractors, and work above a small dollar amount, combining labor and materials, needs a licence. Check the CSLB site for the current limit, because it has changed. Licensed contractors put the licence number in all advertisements, and CSLB lists it as required content for a home improvement contract.

Put the same number on invoices and estimates so the paper trail is consistent. In Paylark, setting California as your state suggests the label “CSLB license #”, and your number prints on each invoice.

Written contracts and the down payment limit

California requires a written contract for home improvement projects over a small amount, and the CSLB says the down payment on a home improvement job is limited to the lesser of $1,000 or 10 percent of the contract price, with a few exceptions for licensees with certain bonds. The CSLB’s consumer guide lists both rules, so read it before you set your deposit.

In practice that means a small deposit and a progress schedule: bill a stage when the stage is done. Use separate invoices for each stage so the customer sees what each payment covers. Contracts signed at the customer’s home also carry a cancellation notice, so check CSLB’s guide for the wording.

Sales tax in California

California’s base sales tax rate is 7.25 percent, and cities and districts add more, so the rate depends on the location. Labor is generally not taxed. Tax on materials depends on your contract: a contractor who sells on a lump-sum basis is generally the consumer of the materials, while under some contracts, such as time-and-materials contracts, a contractor can be treated as selling the materials. The rules are detailed, so ask the CDTFA.

The California Department of Tax and Fee Administration (CDTFA) publishes guidance for contractors. Ask them how your jobs are billed.

Stages, change orders and records

A California job rarely stays exactly as quoted. Write each change as a signed change order before the work starts, then bill it on its own invoice or as its own line, so the original price and the extras never blur together. Progress billing works best when each invoice names the stage it covers, for example demolition, rough work or finish, and shows what has been paid so far.

Beyond the state licence, cities and counties in California generally require their own business licence or tax registration, so check the places where you work. Keep your invoices, change orders and receipts for each job in one place; if a customer disputes a charge, a clear paper trail helps if a customer disputes a charge.

If you have employees, the CSLB also expects the right insurance on file, so keep that current as well, and ask the CSLB which bonds and insurance apply to your licence class.

On the invoice

• Business name, address, phone and CSLB licence number.
• Customer name and the address of the job.
• The stage, change order or item the invoice covers.
• Materials and labor on separate lines.
• Tax on its own line where it applies.
• Payment link and due date.

Handymen, electricians and contractors can start from the pages for contractors, handymen and electricians. See the pricing or try the demo. General information, not legal or tax advice; verify with the CSLB and CDTFA.

Official sources

Check the rules with the people who write them:

• Contractors State License Board: cslb.ca.gov
• California Department of Tax and Fee Administration: cdtfa.ca.gov

Rules change and this page is a starting point. Confirm with your state revenue department and licensing board before you rely on it.