Construction Invoice Example: Annotated Progress Bill

Sample construction invoice

This is an illustrative example: the businesses, names and numbers are made up. It is the third of five monthly progress bills for a clubhouse renovation in Tennessee.

Payment terms: Net 30 per contract. Checks payable to Hawkins Building Group LLC. Retainage of 5% is held under the contract and released with the final invoice after substantial completion.

Notes: Conditional lien waiver for this payment enclosed. Next billing period: insulation and drywall. Change order #2 approved in writing by the HOA on March 12, 2026.

How the numbers work

• Work completed this period: $33,600 + $14,220 + $8,500 + $6,200 + $1,300 + $3,400 = $67,220.
• Retainage: 5% × $67,220 = $3,361, so the amount due is $67,220 − $3,361 = $63,859.
• Running totals: the revised contract is $340,000 + $3,400 = $343,400. Billed to date is $130,000 + $67,220 = $197,220, leaving $343,400 − $197,220 = $146,180 to bill. Retainage held to date is 5% × $197,220 = $9,861. The two earlier bills were paid net of retainage: $130,000 − $6,500 = $123,500.
• Why there is no sales tax line: the Tennessee Department of Revenue treats contractors as the end users of materials that become part of real property. The contractor pays sales tax to the supplier (or use tax to the state) when buying the lumber, and "should not charge sales tax to their customers" on those materials. Installation labor on real property is not taxed to the owner either. Items that stay movable personal property, such as a window air conditioner, follow different rules. Source: Tennessee Department of Revenue, Industry Specific Tax Manual: Contractors (June 2024).

Other states treat the same job differently, which is why the next section matters. Last reviewed October 28, 2026. This is general information, not tax or legal advice; check with your state revenue department or a tax adviser.

Field-by-field breakdown

• From: your legal business name, address and contractor license number. Licensing boards set their own rules on where the number must appear (contracts, bids, advertising or invoices), so check yours; showing it on every invoice does no harm.
• Project and contract reference: ties the bill to one job and one contract. Owners, lenders and property managers match invoices to contracts before they approve payment.
• Billing period and bill number: "3 of 5" tells the client where the job stands and matches the payment schedule in the contract.
• Labor, materials and subcontractors on separate lines: the client sees where the money goes, and in states that tax materials and labor differently the split is what the tax treatment depends on.
• Change orders: bill each one on its own line with its number and the date it was approved in writing.
• Retainage: show the gross amount, the percentage withheld and the net amount due. The percentage comes from your contract and any state or federal limit.
• Running totals: revised contract, billed to date, retainage held, payments received and balance left to bill. These let the client check the bill against everything before it.

Common line items for construction

Prices vary too much by region, trade and job size for a rate table to be useful, so this table shows how to word each line instead.

Variations

• Time and materials vs. fixed price: time-and-materials invoices list actual hours and materials with receipts; fixed-price and progress invoices bill a percentage of each scheduled line, like the example above. The progress invoice template lays out a full schedule of values.
• Commercial pay applications: many commercial owners require the AIA G702 Application and Certificate for Payment with the G703 continuation sheet, which lists each schedule-of-values line with work completed and retainage (AIA Contract Documents help center).
• California home improvement jobs: the down payment may not exceed $1,000 or 10% of the contract price, whichever is less, and progress payments may not run ahead of work done or materials delivered (Contractors State License Board, Industry Bulletin 22-14).
• Final invoice: bills the last stage and releases the retainage held across the job. See the final invoice template.

Tips for construction invoicing

1. Bill on the schedule the contract sets, usually monthly or at milestones, rather than waiting for completion.
2. Send lien waivers with progress payments if your state or contract calls for them. Some states prescribe the wording: California requires its statutory conditional and unconditional waiver forms (CSLB).
3. Photograph completed work before you bill a stage, so you can answer questions about percent complete.
4. Invoice change orders in the period they are approved and done, not at the end of the job.

To build this invoice in InvoiceQuickly, describe the work and review the drafted lines before saving. There is no retainage or progress-billing feature and line amounts cannot be negative, so bill each line at its net amount (for example "Framing labor, 12 days, gross $33,600 less 5% retainage $1,680", 1 × $31,920.00) and put the running totals in the notes. Invoices apply one tax percentage to the whole invoice, and your license number is not printed automatically, so add it to your business address block or the notes. More on how contractors use it: InvoiceQuickly for contractors.

Frequently asked questions

Do I charge sales tax on construction labor and materials?

It depends on the state and the type of job. In Tennessee, contractors pay tax on materials when they buy them and do not charge sales tax to the customer for materials that become part of real property. In Texas, residential repair and remodeling can be billed as a lump sum (the contractor pays tax on materials when buying them) or with materials separately stated (tax is collected on the materials only), while nonresidential repair and remodeling is taxable on the full charge (Texas Comptroller publication 94-116). Hawaii's general excise tax applies to the business's gross income from virtually all business activities (Hawaii Tax Facts 2019-1). Check your own state's contractor guidance before your first bill.

What is retainage and how do I show it?

Retainage is a share of each progress payment that the client holds back until the job is substantially complete. Show the gross work completed, the retainage percentage and amount, and the net amount due, plus retainage held to date. The percentage comes from your contract and any legal limit: on federal contracts the government may withhold up to 10% and only when progress is unsatisfactory (FAR 32.103), and many states set their own limits for private and public work.

How do I handle disputed change orders?

Do not start change-order work without written approval. Bill each change order on its own line with its number and approval date, and keep the signed document with the invoice so you can send it if the client questions the charge.

Should I attach a material list?

Attach one when the materials line is large or the contract asks for backup. A one-line "Lumber and framing materials, 1 lot" is easier to read on the invoice, and the list or supplier receipts answer the client's follow-up questions.

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Start from the construction invoice template, or read the progress billing guide for larger jobs.