Focusing on local business works well for many electrical contractors, but others have found additional rewards working across state lines.
Electric Supply Co. Inc. in Sioux Falls, S.D., is celebrating its 100th year with 90% of its business originating in South Dakota, and 10% from neighboring states.
“That 10% is a good portion of our business,” said Bob Jarding, Electric Supply’s president. “It comes to us generally because we want to attend to our clients’ needs. We help them where they need help. It’s worth the effort to keep our clients happy.”
For a national healthcare group, Electric Supply handles anything within 100 miles of Sioux Falls.
“Numerous contractors are licensed in multiple states,” said Ed Christian, executive director of the Dakotas Chapter NECA, Fargo, N.D. “But you can’t just go and work in another state. There’s a lot to it.”
Christian is referring to having to satisfy additional legal requirements, such as obtaining a masters of record license issued by most state departments of revenue, having to take tests based on the National Electrical Code and municipal building regulations to obtain local electrical contractor licenses, paying prevailing wages tied to different IBEW locals and dealing with varying state taxes.
“Not every state has licensing for electrical contractors/electricians,” Christian said. “But if the state you want to work in requires it, you need it. So, you have to make a conscious decision—do you want to do work in a certain state?”
Like many contractors, Electric Supply helps employees secure overnight accommodations when working out of town.
“If we’re going to put someone on the road, we’re going to see that they have a room and whatever they need,” Jarding said.
Paying wages tied to union local jurisdictions turns out to be less costly than paying an employee, plus per diem. It can also make life easier for employees wanting to stay closer to home. But it can get tricky for back-office operations.
Electric Supply tackles this challenge in stages.
“You have to honor the collective bargaining agreement, which changes every year,” Jarding said. “That becomes tough because if you travel a lot, you will have to pay lots of different rates. Whenever we travel to another jurisdiction, we adjust the pay and the bid. It’s a lot of work keeping things straight. If you are going to work and travel, you must be versed in all of this.”
Costs and benefits
As a member, Electric Supply starts by checking NECA’s website, which offers guidelines, forms and local labor rates.
“We do rely on this, but it’s always good to contact the local NECA chapter directly,” Jarding said. “Before taking any job, it’s always good to stay in conversation with the local NECA chapter executive director to find out what’s happening in the business climate. You don’t want to come into a situation where everybody’s busy and there’s no labor to take on the project.”
Before going across state lines, a contractor wants to know the costs, Christian said.
“If it’s more burdensome to process payroll, there’s going to be a cost to implementing a new system with training of employees and integration of processes.”
Pay close attention to changes in state laws and policies affecting the construction industry in the region. For example, the Minnesota Paid Family and Medical Leave program goes into effect January 2026. It will provide paid time off when serious health conditions prevent people from working, when time is needed to care for a family member or a new child, and for certain military-related events or personal safety issues.
“It’s a work in progress,” Christian said, “and for every dollar paid to an employee, so much has to be set aside in order for the employee to take paid family leave.”
Electric Supply works in several different locales.
“They allow you to bring four of your own people in, but if you need more than four, you’re supposed to hire from the local jurisdiction,” Jarding said. “A lot of times the help is not available, so we may bid with just four of our people.”
Operating with fewer workers can extend timelines. And sometimes, even when outside personnel are solidly planned for, availability changes.
“It can be devastating, say, if you estimate you can complete a job in so many days or months with so many people, and you don’t have them,” Jarding said. “I’ve seen smaller contractors take on Walmarts or Costcos and not be able to get the job done.”
This situation can break smaller contractors that have to eat the extra cost. Electric Supply has been hired to help other contractors catch up.
“In those cases, we’re caught between a GC and a peer contractor who is suffering and can’t get enough people,” he said. “We feel bad for the peer contractor but there’s nothing we can do.”
“Portability is a constant discussion with IBEW and NECA,” Jarding said. “It’s becoming more prevalent because there is so much work and labor is in high demand.”
For now, Electric Supply prefers serving customers mostly in its own backyard.
“You have everything you need right here,” Jarding said. “But [when] you need to work elsewhere, you do your homework and strategize.”
South Dakota charges a 2% excise tax, payable by the general or prime contractor on the total construction bill. That includes labor, not just products and materials, Jarding said, “which is a surprise to many contractors. They’re not used to paying a tax on labor. If you are hired by the general contractor, then you have to do the paperwork to get the exemption on paying that fee.”
With a national division established more than 40 years ago, and licenses to do electrical work in 39 states, Hunt Electric Corp., headquartered in Bloomington, Minn., also has found ways to meet the challenges of working across state lines. The large-scale specialty contractor employs 1,100 electricians and technicians, as well as 375 office personnel.
“The biggest reason for us to work across state lines is our customer base is not just in Minnesota,” said Keith Colvard, the company’s COO. “We do a lot of work for repeat customers that have facilities in many different states.
“For almost 30 years, 65% of our business was in Minnesota. Since COVID, ... our business model flipped. Now 70% of our business is outside of the state,” he said.
Colvard outlines the biggest challenges for doing business across state lines as:
- Having proper licensing and business registrations
- Properly calculating expenses related to state and local sales and use taxes on equipment rental and purchases, as well as purchase of materials
- Properly calculating payroll rates and payroll taxes
“We also have a systematic process for the states we want to work in, and we have vetted out states we do not want to do work in,” Colvard said.
“When we go into an area, even if we were there recently, laws may have changed, and we have to think about things differently,” he said. “Staying on top of what’s changed is essential for doing business. Typically, our controller spearheads this with the help and support of our accounting and finance team. And there’s a high level of research involved to ensure compliance.”
Hunt arms its field leaders with the latest construction software for ordering materials. It also generally avoids areas experiencing labor scarcity. After careful evaluation, it will sometimes opt out of jobs in high-demand areas, referring work to contractors with easier access to labor.
Hunt also relies heavily on prefabrication/off-site manufacturing to reduce installation time at job sites. The company recently opened a 400,000-square-foot prefab facility doing business as Baer Manufacturing in Hudson, Wis.
“While we still are an electrical contractor, we’re adding manufacturing to our business model for future growth,” Colvard said.
Shipping products assembled and manufactured in Wisconsin to locations across state lines also introduces complexities, Colvard said, but these are not insurmountable.
Tax exemptions for construction projects further complicate Hunt’s prefabricated/manufactured products. Many healthcare organizations are tax exempt, while most privately held corporations are not.
“There’s a lot of setup on the front end so we can be set up for the taxes,” he said.
Hunt owes much of its success to partnering with contractors belonging to a peer group, enabling the firms to secure larger contracts. Yet, Colvard said, the process the company follows for doing work across state lines would work similarly for contractors of any size.
- Contacting the secretary of state to find out what is required with business licenses
- Contacting the local electrical enforcement agency, whether at the state, county or local level
- If you’re union, contacting the local IBEW to ensure proper contract language suited to collective bargaining agreements (Hunt is a signatory for many locals, so it automatically receives updates on the labor rates and contract information)
- If you’re a member, reaching out to the local NECA chapter for help in these areas
“If our partners are in an area, that’s where we go for work,” Colvard said. “We don’t generally venture out into the middle of nowhere where we don’t have partners.”
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