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If he was a contractor he wouldn't have paid sales tax on the items he bought and used doing your job.

That must be only in some states. That is certainly not true in MA. DH pays sales tax on all the materials that he buys


The labor may or may not be taxable in CA. It is in WA.


At least in MA, labor is not taxable.

Undocumented worker.
Under the table transaction.


Neither of these, if even true, are the OP's problem. This would be the problem of the contractor as it is up to him to deal with his own taxes. The client is not responsible for ensuring that the contractor has done his duty relative to taxes.

Request for tax credit not knowing for sure if the transaction was legal.

That transaction is legal because the OP has hired a contractor and paid him for work that is being done. That's all the OP needs to be concerned about. A receipt detailing the work from the contractor is the proof that the OP needs for his taxes. If the worker is undocumented or the transaction is under the table, that all belongs to the worker and is not the responsibility of the OP in any way, nor does that change that his transaction, from his end, is legal. What the other guy does can be a different story, but that is for the other guy to handle and not the OP.
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