You may have been thinking about getting into the junk removal business for some time, and now you have finally decided to go ahead and move forward. You get your business set up, start getting some sales, and all of a sudden you get a letter in the mail saying you owe your government some sales tax. The problem is. You haven’t been charging your customer’s sales tax. What do you do? You eat it and vow never to make a dumb mistake like that again.
This situation occurs many times in many states for many different types of service business owners. You may think that just because you don’t sell anything that means you are in the clear. You may think also that you won’t have to pay sales taxes. Often you might go a year or more without paying sales taxes, and then all of a sudden, you might get hit with a huge bill. But it’s best to avoid that mistake altogether.
Most states have a tax on services. North Carolina recently passed a tax that a provider must collect sales tax if they are performing a service. A service that requires the installation of tangible property. You not only collect sales tax on the cost of the property but also on the cost of the labor. In addition, some states order that you must collect sales tax if you perform a service that improves the value of a property. For example, some require tax tcollection on landscaping and janitorial services.
You should keep up to date on sales tax changes throughout the year. Make sure to always ask your accountant if there have been any sales tax changes for the year. So you can plan if all of a sudden your service is going to need to begin collecting sales tax. The nice thing is that the government will give you plenty of warning. But, again, just because you operated without collecting sales tax in the past is no excuse.
For an interactive map on what states require sales tax on services visit the Junk Removal Business Sales Map.
Lee Godbold is the co-founder of Junk Doctors, a $2 Million a year junk removal business in North Carolina, and Junk Removal Authority, the junk removal industry’s premier provider of information and support.