Taxes. We all hate them but we have to make sure we comply with the rules of the game if we want to be a part of the system. Most new lawn care business owners are aware they will need to pay income tax on their earnings but quite a few don’t realize they also may need to collect sales tax as well. Along with sales tax collection, sales tax payments need to be made on a certain schedule. As we will see in this discussion from the Gopher Lawn Care Business Forum, tax laws differ depending on your area. It’s up to you to make sure you are complying with your local tax laws.
One lawn care business owner wrote “I live in Washington state and I just got my first lawn care customer with 4 lawns. So this is a real new and exciting time for me.
I was at lunch with a buddy of mine the other day and we got to talking about lawn care business. I was asking him questions about taxes and what not, and he told me since I am performing a service, just mowing the lawn care customer’s lawn I should not charge sales tax, however he was saying if I performed a capital improvement to the property by adding a new landscape element, I then did need to collect sales tax. Is this true? I don’t know if it matters or not but I am running my lawn care business as a sole proprietor.”
A second lawn care business owner shared “different states have different requirements when it comes to collecting sales tax.
Since I have moved quite a few times in my life, I have found my experiences in various states to differ quite a bit. For instance I have done business in New York where sales tax is on everything (material and labor). South Carolina where sales tax is only on materials, and Florida where sales tax is only on material. It has been almost 30 years since I was in Florida, but even back then, I collected sales tax and as long as I made the tax payments on time each month I was fine.
The only way to know for sure what your state’s rules are is to check your state website for requirements.”
A third lawn care business owner said “you really should ask an accountant or call your local tax office. Where I live, in Canada, it’s based on gross sales. When your income hits $30,000 a year, it’s no longer an option and this division of the government audits on a constant basis. I went through two audits last year as we report every quarter. I have come through each time with flying colors due to my constant observance of the tax laws.”
A fourth lawn care business owner said “the other thing you have to look into further is how your state wants you to make your sales tax collection payments to them. Some states require it to be paid quarterly, just like you would pay your estimated federal or state income tax payments. While other states may require you to make monthly sales tax payments, depending on your income level.
Certain states have an income threshold, that after you pass the amount, your payments go from quarterly to monthly, so be aware of this. Do a little investigation work on your state’s website and you’ll find answers that pertain to you.
Oh and one last thing, there are certain cities that also tack on an extra sales tax percentage that require you to make payments to them. So it wouldn’t hurt to look into that as well.
I know there are probably a bunch of newer lawn care business owners reading this and thinking, ‘well I just won’t collect it and then I don’t have to pay any of the collections. If and when you get audited, you will find out that you are responsible for those sales tax payments regardless if you collected them or not. Then if you fail to pay, there will most likely be penalties added on top of the amount of money you owe. So do your best to comply with your tax laws.”
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