customers not paying sales tax

Discussion in 'Business Operations' started by gcbailey, Aug 21, 2013.

  1. gcbailey

    gcbailey LawnSite Silver Member
    from WV
    Messages: 2,717

    It seems like this happens every year as the season wears on, but it's getting worse and worse. WV requires we collect sales tax on services performed. We invoice about 70% of our clients and they get a statement showing the price+tax. No problem. The rest leave the money/check ahead of time. More and more who pay by check are leaving the sales tax off. WV is 6% so on a $100 property that's $6.

    What's the best course of action? If the customer leaves off the sales tax, is that something that can be wrote off as bad debt? Over the course of a week it can add up to over $100. I try to leave notes reminding homeowners that we have to collect tax.

    I had even thought about raising the price to the nearest dollar over what the sales tax was, then back it out in quickbooks, but that gets too confusing.

    Thoughts, suggestions?
  2. underESTIMATED

    underESTIMATED LawnSite Member
    Messages: 130

    I have the same problem for customers that already have a check waiting.

    I dont bother with the hassle....and just write it off as a bad debt account. B
  3. gcbailey

    gcbailey LawnSite Silver Member
    from WV
    Messages: 2,717

    That's the problem... the checks are already written without tax added. My accountant has never said one way or another what she does, but I am going to ask. I just wondered how anyone else handles it in their books.
  4. Stillwater

    Stillwater LawnSite Platinum Member
    Messages: 4,889

    with your invoice include a copy of the state statute outlining your services are taxable, you must include a copy of your business licence authorizing you to collect state sales tax. This fixes the issue.

    CHARLES CUE LawnSite Silver Member
    Messages: 2,320

    I had the same problem so I changed my invoices not to show sales tax just the total amount at the bottom. Don't know if people just don't look down to the bottom of the page or what. My estimate are the same way.

    Charles Cue
  6. BandBLawncare

    BandBLawncare LawnSite Senior Member
    from Ohio
    Messages: 375

    What part of WV are you in?
  7. CL&T

    CL&T LawnSite Senior Member
    Messages: 493

    It absolutely cannot be written off as a bad debt, it's not your money. You collect the tax for your state then you must send it to them and I can tell you that they get very pissed if you do not. You are personally liable for it even if you are a corporation and there is no statute of limitations, meaning that even after 20 years they can go after you for the principle, interest and penalties.

    The only way to handle it is to figure the tax on what the customer actually paid you- in this case $100 divided by 1.06= $94.34. So you were paid $94.34 and the tax on that is $5.66 that you send to the state. This way you are square with the state sales tax on what you grossed.

    The customer then has a remaining balance due of $6.00 which you make sure they pay. Usually a call to remind them that sales tax must be paid does it. Usually it's just a misunderstanding, if not you don't need them as customers.
  8. Stillwater

    Stillwater LawnSite Platinum Member
    Messages: 4,889

    If the vendor notifies the Tax Commissioner in writing of such refusal by the customer, the vendor may be relieved of any liability. The notification must include the name and, if known, address of the purchaser, the purchase price of the item, and the amount of tax not collected. The vendor may also be relieved of any liability if he has accepted IN GOOD FAITH false, expired, cancelled or otherwise ineffective or unlawful exemption documentation. If a customer gives you any of the following exemption documents instead of paying the tax, keep it on file for future reference.
  9. gcbailey

    gcbailey LawnSite Silver Member
    from WV
    Messages: 2,717

    @BandB - we are at the very bottom of the state, right on the WV/VA border in the Princeton/Bluefield area.

    @CL - That's what we have always done, we still pay the sales tax on the correct total, not just on what was received. What we have been doing, if the original invoice is for $100+ 6% = $106, and the customer only left a check for $100, we would change the invoice to show $94.33, which with tax would be $100. It's aggravating after a while.

    Now granted, remember I said these are for customers who are primarily leaving a check already at the property. Not the ones we bill. There have been times that we mail receipts out to clients who leave a check out ahead of time showing that we changed the invoice to reflect what they actually paid. I don't want to be a butt about it, especially on higher end properties. I don't think it's worth arguing over $8, $9, $10+, but I do want them to be aware. That's why I was wondering if we had any recourse as a business for those who continue not to pay tax or pay attention that they aren't paying.
  10. birddseedd

    birddseedd LawnSite Silver Member
    Messages: 2,111

    partial payments are late payments. charge them a fee

    how do you "write off" bad debt?

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