A residential contractor completes a $45,000 addition project. The contract price includes $3,600 in Georgia sales tax. What is the net contract amount subject to contractor licensing requirements?
Correct Answer
A) $41,400
The net contract amount is $45,000 - $3,600 = $41,400. Sales tax is excluded when determining contract amounts for licensing purposes.
Why This Is the Correct Answer
$45,000 (total contract price) minus $3,600 (sales tax) = $41,400. For Georgia contractor licensing purposes, sales tax is excluded from the contract amount. The net amount subject to licensing thresholds is the pre-tax value of $41,400.
Why the Other Options Are Wrong
Option B: $45,000
$45,000 is the gross contract price including tax. Using the full contract amount fails to exclude the sales tax component, which is not part of the contractor's compensation for work and materials.
Option C: $48,600
$48,600 results from adding $3,600 to $45,000 instead of subtracting. This would be the case only if the tax were applied on top of an already tax-exclusive price — but the question states the $45,000 already includes the tax.
Option D: $43,200
$43,200 has no mathematical basis in the given figures. It may result from an incorrect partial deduction or from using an incorrect tax amount in the calculation.
Memory Technique
Sales tax belongs to the government, not the contractor. Strip the tax out before calculating the net contract amount: $45,000 − $3,600 = $41,400. The contractor's 'real' contract value is what remains after the government's share is removed.
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