Texas has confusing retainage requirements, but those requirements don't discuss taxes or even place limitations on what a contractor can withhold from their subcontractor. So, because there don't seem to be relevant regulations, retainage between a contractor and their sub should be used in accordance with the contract. And, if the contract is silent as to retainage, then a contractor should likely not be withholding retainage at all. After all, that'd constitute withholding payment that's already owed for work performed without any grounds for doing so.
5% of a small part of the contract sounds like a meager retainage amount, but the point stands - in order to utilize retainage, that right should be established in the contract. And, when payments are being withheld in a way that's out of line with the contract, then it may be time to evaluate payment recovery options.
For more discussion on retainage in Texas: Texas Mechanics Lien Guide and FAQs.
The information presented here is not legal advice and should not be construed as such. Rather, this content is provided for informational purposes. Do not act on this information as if it is advice. Further, this post does not create any attorney-client relationship. If you do need legal advice, seek the helSee More...See More...