Who needs to collect sales tax

[Pacun]

I normally don't do business returns but I am getting some now.

I deal with DC, MD and VA so if anyone can help with this it will be great.

Will a hair salon collect sales taxes from clients?

How about a home repairs company?

How about a handy man?

I know this vary from state to state.

[ILLMAS]

Our city and state is the capital of sales tax, hair salons only collect sales tax on products sold and used, home repair companies and handy man are supposed to charge sales tax to the end user for products that are bought at wholesale, for example an electrician buys a box of switches at wholesale (no sales tax paid), he is suppose to charge the customer the sales tax.  No one does that, they rather buy the switches at retail, pay the sales tax and avoid having to prepare sales tax returns.

[Roberts]

Since those are city / state issues - you need to contact your local taxing authority for a set of rules.

Had a client who gave yoga instruction as an independent contractor at a studio at night. Our state deemed that to be a sales tax applicable service even though it had been deemed exempt. Now they've reversed themselves yet again. They were even trying to get lawn care and day care to be a sales tax applicable event. Be aware - those things can change and what you thought was exempt - may not be.

edit: if a restaurant has a note that says 15% gratuity applied to all groups of 8 or more (whatever the numbers), that's a sales tax applicable gratuity in my state.

[Pacun]

34 minutes ago, Roberts said:

 

edit: if a restaurant has a note that says 15% gratuity applied to all groups of 8 or more (whatever the numbers), that's a sales tax applicable gratuity in my state.

That explains why our banquet and private parties charged taxes on labor since it was part of the contract. Thank you for the replies. I hope I get more even if they are from other states. I think Hair Salons are almost taxed in a standard way in most states.

[Lion EA]

The state web sites for business taxes in the states you're working with will probably have a list of sales-taxable services and products.  You may have to wade through some legalese.  But, if the biz clients you are getting are new to business, you might be able to research more efficiently than they can.  I'm in CT so don't know about your states.  Also, ask around your local networks to see if you can pick another preparer's brain in each state.

[grmy2h]

In Virginia, contractors (building, electrical, etc) pay sales tax on the materials that they buy. This is considered part of the cost of the material. End users are not charged a separate sales tax.

[Pacun]

11 hours ago, grmy2h said:

In Virginia, contractors (building, electrical, etc) pay sales tax on the materials that they buy. This is considered part of the cost of the material. End users are not charged a separate sales tax.

grmy2h,

So contractors go to home depot and they pay taxes when purchasing materials and then they have to pay "sales or usage tax" on those materials used on remodeling every month to VA?

[Gail in Virginia]

Not quite.  In Virginia, the contractors pay the sales tax when they buy the materials.  There is no sales tax on labor.  So contractors, as a rule, do not file sales and use tax returns. 

[Pacun]

51 minutes ago, Gail in Virginia said:

Not quite.  In Virginia, the contractors pay the sales tax when they buy the materials.  There is no sales tax on labor.  So contractors, as a rule, do not file sales and use tax returns. 

How about hair salons? Do you have to pay taxes on what they resell and ALSO on the shampoo they use on their clients?

Are auto repair shops different than contractors?

[grmy2h]

1 hour ago, Pacun said:

grmy2h,

So contractors go to home depot and they pay taxes when purchasing materials and then they have to pay "sales or usage tax" on those materials used on remodeling every month to VA?

Not exactly... my husband runs an HVAC Company, so an example would be:

Customer is building a new home and wants a new Heat Pump installed, he also needs ductwork... the whole deal.

We buy the heat pump from our supplier, the metal for the ductwork from a supplier, misc fittings, supplies etc from home depot. We PAY sales tax on EVERYTHING we purchased for the job at the time of purchase. When it comes time to bill the customer we bill one total price for the job. There is no sales tax billed to the customer and there is no sending more sales tax to the state. It was all taken care in the original purchase of our materials.

I'm not sure how hair dressers work, but auto repair shops (just from using them) charge me sales tax on parts but not labor.

[SaraEA]

This is the type of questions clients give us because it has the word "tax" in it (or numbers in it, regardless if it relates to sales tax, Social Security, insurance premiums, the price of bananas, ).  Sales tax is NOT our bailiwick!  Rather than doing extensive research, I have been making a habit of telling clients to call the state themselves and ask if their services are subject to sales tax.  If so, let them register and get their permit.  We will do the sales tax returns if they want, but truly this is a question for the state, not us.

The exception is when a client starts a new business that I already know has to collect sales taxes.  Then I will warn them to get registered with the state and start collecting the tax.  I have seen too many cases where a couple of years down the road the state gets a clue and imposes retroactive sales taxes and huge penalties on what the state declares their income to be.

I am getting to the same point about Social Security questions.  When can I collect, how much can I earn, what if I retire in Sept or May?  Call SSA!  It sounds harsh I know, but appease them too much on non-income tax issues, and pretty soon they'll be asking you to fill out the forms for their license renewal.