sales and use tax ?

Discussion in 'Business Operations' started by haybaler, Jan 21, 2008.

  1. haybaler

    haybaler LawnSite Senior Member
    from ma
    Posts: 511

    I know this varys from state to state. my question is: if I buy say 4 yards of mulch and mark up the price 20% do I have to have a sales and use tax ID and collect and report the tax on that extra 20%? If I don't mark anything up can I not have an ID. I would love to know how this process works. I've been trying to find a tax consultant in my area but it's hard.
  2. echeandia

    echeandia LawnSite Bronze Member
    Posts: 1,131

    I don't charge sales tax on mulch. When I buy it I pay sales tax to my supplier. When I get paid for the mulch the price includes the price of installing it. So as far as the state is concerned they don't get any more sales tax. (In Virginia there is no sales tax on the services I offer).
  3. Roger

    Roger LawnSite Fanatic
    Posts: 5,924

    Contact the agency in MA that issued your collection license. You are ultimately accountable to their guidelines on these matters. Opinions on LS, and information from other states does you no good, and may lead you astray.
  4. AI Inc

    AI Inc LawnSite Fanatic
    Posts: 25,393

    What you realy should be doing by law is buying it tax free, and then charging the 5% state sales tax on the price you sell it for. Then you turn that into the state.
    Thats the legal way. Not everyone does it like that.
  5. echeandia

    echeandia LawnSite Bronze Member
    Posts: 1,131

    I am guessing you are responding to me. I did speak with my accountant and she did not have a problem with it.
  6. lawnman_scott

    lawnman_scott LawnSite Fanatic
    Posts: 7,547

    But he is still right about how the law works. I do it your way too. Its no big deal since no one is paying any more or less tax.
  7. haybaler

    haybaler LawnSite Senior Member
    from ma
    Posts: 511

    Thank you. I was hoping to hear from someone in Mass. How do I go about setting up an ID with the state? Now if I charged by the yard installed like the other guy said, I could just call the extra I get for the mulch labor and that's not taxed.
  8. quipit

    quipit LawnSite Member
    Posts: 29

  9. AI Inc

    AI Inc LawnSite Fanatic
    Posts: 25,393

    In all reality that is the easiest way , sell em the mulch or what you paid for it, and add the markup into the labor cost, thus avoiding the whole tax issue.
  10. dougaustreim

    dougaustreim LawnSite Senior Member
    Posts: 488

    Every state is definately different. In SD we also have a contractors excise tax on realty improvements, so everythings gets taxed at one rate or another. What work goes under which category is really confusing. Landscaping is sales taxable, and therefore you should buy the material tax free and remit the tax on the final total. Irrigation and hardscaping is excise taxable and there you pay sales tax on the material and then the excise tax on the total contract. If more than 25% of the job is excise taxable than the whole job is excise taxable. the end result is that you almost have to look at every job to see how to set up the taxes. We had an audit this past year. The auditor spent a whole week going over every contract, purchase invoice, etc. In the end we didn't owe much because our mistakes were made both ways so that we had a lot of credits as well as debits, but it really gets confusing.

    The auditor gave us sort of a cheat sheet that shows what is subject to which tax. I asked here where I would have found that information and she told me that she didn't know. She had made it up herself just for me since I was the first landscape contractor she had ever aduited. She admitted that it would have been almost impossible for anyone to actually know all the rules

    Austreim Landscaping

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