Billing & Tax Question

Discussion in 'Starting a Lawn Care Business' started by BP348, Feb 14, 2009.

  1. BP348

    BP348 LawnSite Member
    Posts: 48

    Let's say you charge someone $40 to cut their lawn. When you send them the bill do you charge a tax on top of the $40 or do you include the tax as part of the $40 you quoted for the job?
     
  2. yardatwork

    yardatwork LawnSite Senior Member
    Posts: 645

    In Pennsylvania we have to charge a 'sales and use tax' on all maintenance work. This includes things like mowing, watering, edging, over seeding, shrub trimming, mulching, weeding, etc. This is at a rate of 6%. But, we do not have to charge on things like trimming limbs on trees, cutting the whole tree, doing a new lawn, landscape design, planting new shrubs, etc...basically one time jobs. So, many people who do a mulch job will write it up as "landscaping" or "hardscaping" to avoid the tax. There are so many gray areas in the tax documentation that the Department of Revenue sends out when you register your business. It's always better to pay it if you're in question of the service. Just remember, if you get audited, you'll be paying huge fines and accrued interest.

    I personally just charge a flat rate with keeping in mind the 6%...I include the tax expense in the overall cost. Many clients will be really confused when you send them a bill with sales tax for a service provided.
     
  3. LB1234

    LB1234 LawnSite Gold Member
    Posts: 3,210

    We charge sales tax on after what the total cost is. We do NOT include it in our pricing. Although you could.

    For us sales tax is freakin confusing....

    In jersey its currently 7% but there are some weird laws/regs. You really need to check with your state and/or your accountant. There are grey areas in our 'landscaping' industry as well. IF someone fills out an ST-8 then they are EXEMPT from being charged sales tax...this is mostly for capital home improvements. BUT...as of Nov of '06 NJ changed the laws stating a landscape install is no longer a capital home improvement. HOWEVER, hardsacpe installs ARE capital home improvements...so no tax is charged. AND...if we pay sales tax on materials we are NOT allowed to charge sales tax on either the sales tax we paid OR the amount we already paid sales tax on...in other words we can only charge sales tax on the materials markup. HOWEVER, if we roll materials into the labor then we can than just charge the sales tax on the whole amount...

    Ya, I'm confused too....
     
  4. DLAWNS

    DLAWNS LawnSite Fanatic
    Posts: 5,778

    I always charge sales tax on top of what the cost of the work is.
     
  5. Tommy Boy

    Tommy Boy LawnSite Member
    Posts: 220

    In Georgia, service is tax exempt so a $40.00 service visit is just that. I have to charge if it's product related. then it's sales tax on top of.
     
  6. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    I always kind of Cringe when I read or hear someone saying they Charge tax.......

    you dont Charge tax. you collect it. you wil have to check your state laws.

    if so, then you will need a TAX number. diffrent than a EIN. then you will find that you have to pay for the honor of collecting tax for your state.
     
  7. daveyo

    daveyo LawnSite Senior Member
    from N.J.
    Posts: 907

    In NJ if your just cutting a lawn you charge $40.00 and then 7% sales tax. And yes you work for the state for free. You then report your tax monthly if you exceed a certain dollar amount, if not quarterly is good. As for landscaping there are different ways you can do it, but you still have to collect the tax and pay the taxman payuppayuppayuppayuppayuppayup
     
  8. Tommy Boy

    Tommy Boy LawnSite Member
    Posts: 220

    Excellent Post We Collect Tax, you are 100% right my friend!
     
  9. bohiaa

    bohiaa LawnSite Fanatic
    Posts: 5,220

    Also: what's werid. "here in Texas anyway" If I go cut grass, I can NOT collect tax for the service. But If I purchase a tree, at holesale price, then I pay that tax, I then sell the tree for retail. I have to collect tax for the diffrentace......

    Dang it gets hard to keep up with
     
  10. Hoots

    Hoots LawnSite Senior Member
    from DFW
    Posts: 327

    Bohiaa, you are supposed to collect sales tax for all services. I think the rules changed not too long ago. I was given a page by my CPA that showed taxes for the mowing labor. (I mow for another CPA and he has not questioned the tax on his service)

    When you purchase your trees, mulch etc. you should provide your sales and use tax ID to the wholesaler and not pay tax when you purchase it. When you sell it, you charge the customer retail price plus tax. When you go to Home Depot or Lowes (I need to in a pinch) you can set up a sales tax exempt account with them to purchase goods like mulch at the sales price with no tax. HOWEVER if you are purchasing a hammer or something for business use you must pay sales tax at the store.

    EX: Tree wholesale $100 Write the check for $100
    Sell the tree to the customer (including labor) for $200 plus tax.

    Our tax rate is 8.25% SO The customer receives a bill for $216.50

    $200 stays with me for all expenses and $16.50 goes to the state comptroller once every quarter.


    For the new guys who may not know, when you need to tell a customer what their mowing rate will be with sales tax, use this multiplier:

    1.0XXX x $XX Move the decimal to places to the left.

    Tax rate of 8.25% 1.0825 x $20 = 21.65

    Congratulations, you just earned Uncle Sam $1.65 sales tax.
     

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