Sales Tax on Mulch

[Billy Goat]

How do you bill a mulch job, lump sum or itemized? How do you factor in sales tax if you are legit and are tax exempt? Let say you buy 1 yard for $30 and charge the customer $70.

[willshome]

Lawn care business tips

Some people charge cost on mulch and just charge labor so the tax is already paid. Check if there is tax on labor in your state

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[SECTLANDSCAPING]

Originally Posted by willshome

Some people charge cost on mulch and just charge labor so the tax is already paid. Check if there is tax on labor in your state

yeah I would tax the whole $70 but thats how CT is. We dont have to tax mowing but almost any other service we do.

[Steve]

How do you factor in sales tax if you are legit and are tax exempt?

Do you have to collect sales tax on mulch in your area? What about the installation of it?

If you do on one of them, it might be better to itemize. If you don't, you could simply give one price.

[dpld]

in my state everything is taxable so your options are if you are a registered sales tax collecting business is to use your sales tax exempt form with your vendors and then charge tax at the end the entire sale.

or if by chance you paid sales tax on the materials you purchased and have a receipt you can deduct the amount of that transaction from the total job and pay tax on the difference.

as long as the state gets their tax money they don't care if it comes from you or anyone else or any combination for that matter.

[Billy Goat]

Originally Posted by dpld

in my state everything is taxable so your options are if you are a registered sales tax collecting business is to use your sales tax exempt form with your vendors and then charge tax at the end the entire sale.

or if by chance you paid sales tax on the materials you purchased and have a receipt you can deduct the amount of that transaction from the total job and pay tax on the difference.

as long as the state gets their tax money they don't care if it comes from you or anyone else or any combination for that matter.

Can you give me a break down with numbers so I understand you correctly. Purchased 1 yard of mulch for $30 and sold the mulch for $70 installed. The sales tax is 6%. What would be the break down for business records and what would the bill to the customer look like?

[dougcaskey]

This is by no means difficult

If you are going to sell your mulching service with installation included in your (per yard ) calculations , it would look like this....

10 yards/mulch $ 700.00
Sales Tax 42.00 ( my rate is 6%)
__________

Total $ 742.00


Hope this helps....................

[dpld]

Originally Posted by Billy Goat

Can you give me a break down with numbers so I understand you correctly. Purchased 1 yard of mulch for $30 and sold the mulch for $70 installed. The sales tax is 6%. What would be the break down for business records and what would the bill to the customer look like?

as far as the customer and the state are concerned the sales tax would be based on $70 per yard X's the amount of yards used plus 6%.

whether you paid tax on the mulch when you bought it and charged tax on the difference of $40 per yard it works out exactly the same on the bill as if you charged tax on the $70 per yard.

the only real difference is the state already got tax on $30 dollars of your $70 per yard price through your vendor.

and when you do your sales tax monthly or quarterly return depending on how much tax you collected in a month you would just keep a tally of all the jobs like that you did where you paid tax on the material portion of the job and that would fall into the deductions line on your return.

for example, my state charges 7% sales tax and if i did a job like you did and charged $70 per yard x's 10 yards the total would be $700.00 + 7% with a grand total of $749.00. being that i paid taxes on the mulch when i bought it and the mulch was $300.00 i already paid $21.00 in sales tax which means i would owe another $28.00 in tax on the remaining difference.
i would still charge the customer the $749.00 and i would be reimbursed the $21.00 that i already paid.

if that is all i did that month using that as a example i would fill out my return stating that my gross receipts for the month was $700.00 and when it asked me what my deductions were if any i would put down $300.00.
then it would ask me how much tax i collected and i would say $28.00, which is on the $400.00 dollar difference between my gross sales and deductions.

in a sales tax report the deduction line is for amounts that are either non taxable or amounts where tax was already collected.

that is why you need to keep records on the materials you purchased and already paid tax on so in case you do get a audit you have your bases covered.

i know we all live in different states and some things are slightly different but one thing i am pretty certain on is that when a business becomes a state licensed sales tax collecting business that you get a state certificate of authority that has a tax registration #. you are also entitled to fill out the tax exempt form and hand that to all your suppliers to keep on file because you will be re-selling the product.
they do allow for a occasional deductions because they take into consideration that you may not deal with the same vendors all the time as well as you could be working for a church or something like that which is tax exempt.
they do frown on businesses that don't utilize the tax exempt forms as well as like i said it raises red flags if used too often.
it did for me when i started taking care of a large church and cemetery for the last 3 years and deducting 4k each filing.
even though it was all legit they still had to check and i still had to go through the crap of proving so.

if you are not a registered sales tax collector then do not by any means charge sales tax ever.
you will get in huge trouble by doing so if caught and if your customers found out you would be seen as a scoflaw scamming them out of more money.

as i said in a earlier post all the state is concerned with is getting their cut, my states cut is 7%.
at the end of the day all that translates to is they want 7% of all your sales and they don't care if it is all by you or a combination of you and your vendors. as long as the numbers add up to them getting their 7% of that transaction that is all they care about and that is why i can not stress enough how important it is to keep proper records.

sales tax is money that the customer pays and all you do is work out being the middle man between the state and the consumer.
if at any given point you are paying money out of your own pocket for sales tax then you are screwing yourself up big time.

[Billy Goat]

Thanks dpld, your last comment really helped me understand how to factor in sales tax and how to report it to the state. I use to sell stuff on ebay for a profit and had to tax maryland residents 6% sales tax. I had a sales and use tax license and reported my gross sales along with tax collected. Now going into lawn service, I was a little confused when you factor in mulch plus labor and customer pays tax on installed mulch. Iam a good record keeper so I shouldn't have any problems. I was lucky and never got an audit from the state. I want to keep it that way.

I want to have my facts straight if a customer questions me why I add sales tax and more so why so much because of upcharge and/or labor cost. They might think Iam ripping them off if they found out you can buy mulch for $30 per yard and I charged them $70 per yard installed. Then taxed them on top of that. Iam sure I will lose some bids because of adding in sales tax.

[SECTLANDSCAPING]

Originally Posted by Billy Goat

I want to have my facts straight if a customer questions me why I add sales tax and more so why so much because of upcharge and/or labor cost. They might think Iam ripping them off if they found out you can buy mulch for $30 per yard and I charged them $70 per yard installed. Then taxed them on top of that. Iam sure I will lose some bids because of adding in sales tax.

Well the mulch place would be charging them tax anyway. If they delivered it for say $30, they would be taxed on that too.

The autoshop,grocery store, electrician, plumber, would all charge tax on the total bill. So why would we be different?