Here in N.Y we are required to collect sales tax for all service work except for capital improvements (form required). I'm just curious if it is the same way for all states, do all you guys collect sales tax on every service call or non-capital improvement type work? What about commercial and industrial service calls?

Ok... I guess this is really a dead site or the question was considered soo stupid nobody will dignify it with a response.

shhh! IRS!

PA, I am only required to collect sales tax on "repairs".
Does not apply to new installations.

Install a ballast. Not repair light.

Nuf said.

Here in NJ it's pretty much the same. Repairs and maintenance are taxable and capital improvements are not. Yes, we have a form called "ST-8" which the customer is suppose to sign, but most panic and have to call their accountant before signing it. We, as contractors, have to pay sales tax on materials in NJ. If we itemize our repair bill we only have to tax the customer for the labor....technically speaking that is.
Andy

Hey, there is somebody out there! I didn't think about that IRS thing, just dense I guess. Was really only curious about actual tax laws related to different states and service type work. So it seems to me that in most cases, the material is already taxed when I buy it from supply house so I just tax the labor. I guess I'm still a little confused and wonder if I'm doing it wrong, accountant is not much help and always in a hurry so I guess I need to educate myself.

BobH,

I'm from NY too. You have to apply tax to the whole bill for non-Capital Improvement related services and then claim credit for Tax already paid on materials when you file your NYS Sales Tax returns

Bill

Bill,
Ok, so you would have to claim credit and basically you would be keeping the tax you collected from the customer because the tax for the materials was already paid by contractor. So this would be done quarterly?

BobH,

BTW, whether you did it quarterly or not depends on the amount of taxable sales you have. If you're below a certain level you could do it only once a year.

Here's my understanding of how it works; (I'm using round numbers that are easy to deal with)

You buy $100.00 worth of materials and pay $8.75 in sales tax to the supply house. You do a job and mark up the materials to $150.00 and have $250.00 in labor costs.

$150.00 + $250.00 = $400.00 job cost
Sales tax (8.75%) = $35.00
$400.00 + $35.00 = $435.00 you collect from Customer.

When you file the NYS Sales Tax form you report the $400.00 as a Taxable sale which gets multiplied by the tax rate (8.75%) and comes up with $35.00 that you tentatively owe to NYS in sales tax. You then put the $8.75 that you paid the supplier as a credit (for sales tax already paid) on the form and it gets subtracted from the $35.00. BTW, you have to attach a separate note explaining that the credit in Box #?? is for sales tax already paid on materials used in taxable sales.

So, $35.00 - $8.75 = $26.25 owed to NYS. You get a small credit for performing the sales tax collection service, so the amount you send them would be slightly less.

Bill

THANKS Bill, you explained that process better than 2 accountants I have already talked to and trying to get definitive answers from NYS proved to be almost futile.

Ok but how about this. You go on a service call and say you have to reset a breaker. No material involved only labor. I have for years been charging sales tax on the service call charge.

A few weeks ago a savy customer deducted the tax and it got me thinking. I know I should ask my accountant but I believe the customet is correct and I should not add tax on labor only invoices. I'm in NY what do you think?.

-Hal

Hal,

I'd say he was wrong. It's my understanding that Repairs are taxable, whether materials are involved or not.

I found the following on a NYS website: (bold is mine) Bill

Hmmm, yes that's printed on the back of the capital improvement form the customer must sign in such cases. I still don't think it covers the situation I'm talking about.

Time to email my accountant and see what she has to say. I'll be back.

-Hal

It's tax season and it could take days...

Anyway, I just went out for coffee and stopped in to see a buddy of mine who is in the locksmith/architectural hardware sales, service and installation business.

I mentioned this to him seeing as he is in the same sort of situation. He says this is a gray area, nobody knows for sure. He normally puts tax on the invoice but if the customer feels they shouldn't pay and they deduct it he doesn't care.

His father is an CPA who used to handle his business so I'm sure this is where this came from.

-Hal

Hal,

From the publication mentioned above: I think your resetting the Breaker would fit here (restoring to a condition of readiness)
This shows that Labor alone is taxable if it is not part of a Capital Improvement project.

Bill

Ahh if only the tax code was as easy to understand as the NEC!

-Hal

Well, this is what my accountant had to say-

Your services are specifically included within the range of services subject to sales tax so the guy should have paid the sales tax. When the mechanic fixes your car, the entire bill is subject to sales tax because the law was written to specifically tax services performed "installing, maintaining, servicing or repairing property not held for for sale." Everybody thinks they know the law but they don't.

So Bill, you are correct. Unless the job is a capital improvement or for a non-profit tax exempt organization they have to cough up the tax.

-Hal

[This message has been edited by hbiss (edited 04-04-2005).]

Hal,

Thanks for the follow-up.

Bill

In my state, Georgia, you can't tax labor. The only thing you can tax is materials. We pay the tax on materials when we buy them. We try not to break out materials and labor to avoid having to collect the tax on the mark-up. They do not require service companies to collect tax, one less thing to worry about.

GA same as MA - Labor is not taxable, only materials. (5%)