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QuickBooks for Texas contractors — set up around the contract.

Generic QuickBooks setups fail contractors twice: cost codes get crammed into the chart of accounts, and the Texas layer gets skipped entirely — even though lump-sum and separated contracts run tax through the books in opposite directions. This is the setup that handles both: lean chart, items as cost codes, Projects as jobs, and invoices that mirror the contract.

Books structure only — what's taxable on your jobs is the Comptroller's and your CPA's territory, and this guide keeps saying so.

Cited to Comptroller Pubs 94-116 · 94-157 Operator-built · 40 years

In brief

Contractor QuickBooks, in four answers.

Where do cost codes go?

In the Products & Services list as items — not in the chart of accounts. Accounts hold cost families; items hold the codes; Projects hold the jobs. Three layers, three altitudes.

What's the Texas layer?

The contract type. Lump-sum and separated contracts run tax through the books on opposite tracks (Comptroller Pubs 94-116 / 94-157) — the setup builds both tracks so each job just uses its own.

Who decides what's taxable?

The Comptroller's rules and your CPA — never the bookkeeping. The books' job is that whichever answer comes back, the file can only invoice it one way, and the liability reconciles to the filings.

Is the generic setup ever enough?

Sometimes, honestly — a small all-residential lump-sum shop with a handful of jobs can run on defaults plus Projects. The fork, the item structure, and payroll-to-jobs are where that stops.

A Westgate framework · the Texas layer

The Contract-Mirror Rule.

The Contract-Mirror Rule: a contractor's books mirror the contract — each job's tax track, invoice structure, and cost treatment is set by what the contract says, decided when the project is created, never reconstructed at invoice time. Texas makes the rule unavoidable. Under the Comptroller's guidance for real property work (Publication 94-116) and homebuilders (Publication 94-157), a lump-sum contract makes you the consumer of your materials — you pay tax when you buy, the cost rides in the job, the customer sees one price — while a separated contract makes you the retailer — incorporated materials bought with a resale certificate, the invoice itemizing materials and labor with the materials charge at no less than your cost, and the tax you collect landing in a liability account it never leaves until it's remitted. Same lumber, same crew, opposite bookkeeping.

The rule earns its name at the failure points. A file with one all-purpose labor item and one invoice template applies somebody's treatment to every job — and by the time the sales-tax liability disagrees with the filings, no one can say which invoices did it. Mirrored setup means the decision happens once, up front, where it's cheap: the job is created as lump-sum or separated, its items and template follow, and the invoice physically can't blur the tracks. And the register stays honest — which treatment a contract gets, whether a nonresidential remodel's charge is taxable, what today's rates are: Comptroller and CPA territory, always. The books don't make those calls; they make the answers trackable. Rules and rates change — confirm current guidance with the Comptroller.

The three-layer scaffold: families in the chart, cost codes as items, jobs as projects — each with its contract type set at creation. The dashed box is the classic failure: cost codes crammed into the chart until no report reads in one pass.

The method

The setup, in seven steps.

Contract inventory first, structure second, rhythm last — QuickBooks Online with Projects (Plus and Advanced carry it as of mid-2026; confirm current editions with Intuit), and the same logic holds in Desktop's contractor editions.

1 · Start from the contracts you actually sign

Before touching the software, answer one question per line of work: residential or nonresidential, new construction or repair-and-remodel, lump-sum or separated? Under the Comptroller's rules those answers drive who pays or collects sales tax on a job — and therefore what the books must track. Which treatment applies to a given job is a question for the Comptroller's publications and your CPA; the setup's job is to have a home ready for each answer.

2 · Keep the chart of accounts at family altitude

Direct-cost families in COGS — materials, direct labor, subcontractors, equipment, permits and fees — plus ordinary overhead. That's it. The classic contractor mistake is an account per cost code: sixty COGS lines that make every report unreadable. Cost-code detail belongs one layer down, in items — the chart stays lean enough that the P&L reads in one pass.

3 · Build the cost codes as Products & Services items

Framing, electrical, plumbing, concrete, drywall — each becomes a two-sided item that posts purchases to the right COGS family and sales to income. Items are where estimating, invoicing, and job costing meet, so item granularity is the real design decision: add a code only where you'd genuinely bid, buy, or bill at that level.

4 · Turn on Projects and give every job one

One project per job, under the customer, and then the discipline that makes job costing real: every bill, timesheet, and invoice tagged to its project, no exceptions. Do that and the profitability question answers itself from the project P&L; skip it on 'small stuff' and the untagged costs quietly flatter every job they're missing from.

5 · Mirror each job's contract in its items and invoices

The Contract-Mirror Rule, explained below — the Texas layer of the whole setup. Lump-sum job: you pay tax when you buy materials, the tax rides in job cost, and the customer invoice carries no tax line. Separated job: incorporated materials are bought with a resale certificate, the invoice itemizes materials and labor, and tax collected lands in the sales-tax liability account — never in revenue. Set the items and invoice templates so each job type does this by default.

6 · Route time and payroll to jobs

Labor is most contractors' largest direct cost and the first thing generic setups lose. Hours get tracked against projects so wages land in job costs, not in one undifferentiated payroll line — and the payroll-tax burden on those wages belongs with them. If crews won't tag time, this is the step to make easy before it's the step that fails.

7 · Set the monthly reads — and reconcile the liability

Four reports on a monthly rhythm: P&L by project, estimates vs actuals, open items, and the balance sheet with the sales-tax liability reconciled against what was actually filed — the filing itself and what belongs on it are your CPA's and the Comptroller's territory, but a liability account that matches the filings is the books' job. Close it monthly and the setup stays a setup instead of becoming next year's cleanup.

Two steps have deeper companions: the lean-chart discipline in step two is the chart of accounts template (the One-Door Rule applies doubly to contractors), and the monthly rhythm in step seven is the month-end close checklist. The construction-specific bookkeeping that runs on this setup — job costing discipline, WIP, retainage, change orders — is its own page.

The honest section

Do you need all of this?

Not always. A small shop doing all-residential, all-lump-sum work — a handyman operation, a one-crew remodeler working home projects at one price — can genuinely run on the QuickBooks defaults plus Projects and a pruned chart: tax rides in costs on every job the same way, so there's one track and no fork to build. If that's your whole book of business, set up the three layers, skip the ceremony, and spend the saved afternoon on your estimates.

The line moves the day the work mixes. Separated contracts enter the picture, or nonresidential repair-and-remodel jobs — which the Comptroller's rules treat differently from residential work — or crews whose payroll needs to land in job costs, or draw schedules and deposits on longer jobs. Each of those is exactly where a generic file starts writing next year's cleanup, and where a setup done once, properly, is cheaper than the repair — that's QuickBooks setup work with the contracts in hand. The sales-tax side — a liability tracked, reconciled, and ready for every filing — is its own service, and long-run job-cost discipline is monthly bookkeeping on top of the structure this guide builds.

Not sure whether your file has the fork built — or whether your jobs even need it? The free assessment reads the setup against the contracts you actually sign and tells you plainly.

Free books assessment

Contractor setup FAQ · Updated July 2026

The questions contractors ask about the file.

How do I set up QuickBooks for a construction business?

Four layers, in order: a lean chart of accounts that holds cost families (materials, direct labor, subcontractors, equipment) rather than cost codes; a Products & Services list that carries the actual cost codes as two-sided items; Projects turned on with one project per job and everything tagged; and — in Texas — items and invoice templates set up to mirror each job's contract type, because lump-sum and separated contracts run tax through the books in opposite directions under the Comptroller's rules. Most generic setups get the first layer roughly right and skip the other three, which is why the fix later is a rebuild rather than a tweak.

Do I need a chart of accounts line for every cost code?

No — and building one is the most common way contractor files become unreadable. The chart holds families: one materials account, one direct-labor account, one subcontractors account. The cost codes — framing, electrical, plumbing, roofing — live in the Products & Services list as items that post into those families, and the per-job story lives in Projects. Three layers, each at its own altitude: accounts answer 'is the business making money,' items answer 'on what kind of work,' projects answer 'on which job.' Collapse them into one giant chart and every one of those questions gets harder to answer.

How do lump-sum and separated contracts change the QuickBooks setup in Texas?

They send the same job through the books on different tracks, so the setup needs both tracks ready. Under the Comptroller's rules (Publications 94-116 and 94-157), a lump-sum contractor pays tax on materials at purchase and doesn't charge the customer tax — so in the books, that tax simply rides inside job material cost and the sales-tax liability account never moves. A separated contractor buys incorporated materials with a resale certificate and collects tax from the customer on the materials charge — so purchases land tax-free in job cost, invoices itemize materials versus labor, and collected tax posts to the liability account, never to revenue. Which treatment a contract gets, and what today's rates are, is Comptroller and CPA territory — confirm there; the setup's job is that each answer has its track already built.

How does a resale certificate show up in a contractor's books?

As an absence, mostly — and that's the point. When a separated-contract job qualifies you to buy incorporated materials with a resale certificate under the Comptroller's rules, those purchases enter the books at their pre-tax cost, so the job cost is clean and the tax obligation moves to the customer invoice, where the collected amount posts to the sales-tax liability. Two bookkeeping disciplines keep it defensible: the certificates themselves stay on file and current with each supplier, and materials charged to the customer are priced at no less than what you paid — a specific requirement in the Comptroller's guidance. Whether a given purchase qualifies is a determination for the Comptroller's rules and your CPA, not for the bookkeeper's best guess.

How do I keep taxable and nontaxable work from blurring in one QuickBooks file?

Structurally, not by memory. A shop that runs residential new construction alongside nonresidential remodel work — which the Comptroller's rules treat very differently — needs the difference built into the file: separate service items for each treatment, invoice templates that apply the right one by default, and the job's contract type decided when the project is created, not reconstructed at invoice time. The failure mode is one all-purpose 'labor' item quietly used on every job; by the time the liability account disagrees with the filings, nobody can say which invoices caused it. What's actually taxable on a given job stays a Comptroller and CPA question — the file's job is that whichever answer comes back, the invoice can only do it one way.

How should customer deposits and draws be set up for contractor jobs?

Money received before the work is earned isn't revenue yet — a deposit or advance draw posts to a liability account until it's applied against an invoice for completed work, and a setup that dumps deposits straight into income makes every job look profitable early and every year-end a surprise. Progress billing runs through estimates: build the estimate from the same items as the job, invoice draws against it, and the books show billed-versus-earned by project. How revenue should ultimately be recognized across long jobs — percentage-of-completion versus completed-contract — is a method question for your CPA; the setup's job is capturing deposits, draws, and costs cleanly enough that either method has real numbers to work from.

Want the file set up with your actual contracts in hand — and kept clean after? That's QuickBooks setup plus construction bookkeeping. More guides: the guides hub →

Keep reading

The guides that pair with this one.

Chart of accounts template

The lean-chart discipline this setup stands on — the full numbered chart, and the One-Door Rule that keeps sixty cost codes out of it.

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Month-end close checklist

The monthly rhythm that keeps the setup a setup — including the liability reconciliations contractor files live or die on.

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