​Should I charge tax on my next mow?

Should you charge sales tax for your lawn care services?

It depends on your state. Here’s a quick guide to help you determine if you should charge tax and how to do it properly.

Why Understanding Sales Tax is Crucial for Your Lawn Care Business

• Avoid unexpected tax bills and ensure compliance with tax laws.
• The responsibility to collect sales tax lies with the lawn care provider

Quick Answer:

Charging sales tax for lawn care services varies by state. Check local regulations to ensure compliance

Introduction to Sales Tax in Lawn Care

Look, nobody wants to get a surprise tax bill at the end of the season for their lawn care business.

So what is the proper practice of collecting sales tax?

And how do I collect sales tax properly for my business?

It's true, part of laying the foundation of your lawn care company, is figuring out what taxes you need to be collecting.

So, let's find out.

Should I charge sales tax for my lawn care services?

Well, the answer to the question about lawn care taxation is “maybe”. A lot of the answer will depend on the state you operate in.

This is crazy but, according to the Internal Revenue Service, $458 billion in taxes go unpaid every year. 

Of that $458 billion, $319 billion of those unpaid taxes include personal income tax from small businesses and partnerships. 

Get this, in a recent survey conducted by TurboTax, they found that lack of tax knowledge attributes to 20% of small business owners not filing taxes, or not filing them properly.

The Burden to Collect Sales Tax is On the Lawn Care Provider

As a lawn care provider, the burden for ensuring you are in compliance with all tax rules and regulations falls solely on your shoulders. And this area of taxation can easily be misunderstood by lawn care/landscaping business owners.

Since paying taxes is a civic duty and a requirement of the law; that can be punishable by fines, or even worse jail time. 

You need to break down a few facts to determine the best way to handle your tax obligations as a lawn care provider.

Alternatively, applications such as Gusto can be used by lawn care providers to automate tax collection in compliance with your state's regulations.

Here is some of what you need to consider. 

Lawn Care Sales Tax Regulations Vary By State

Like carrying liability insurance for your lawn care company, the laws around taxes vary by state. 

Sales tax normally applies to all sales of goods and services that are exchanged for monetary value. Though these tax rules can vary widely from state to state. It is safe to assume that all lawn mowing services are taxed unless the state’s tax rule states otherwise. 

For example, cutting grass in Chesterfield, Missouri, may yield a 7% sales tax, while cutting grass in Belleville, Illinois may only yield a 5% tax rate. 

Because of the complex nature of taxes, providers should double-check and become familiar with the tax regulations of the states in which business is conducted.

Categories of the Service Provided Can Determine Tax Rate

In some states, the difference between taxing what is sold, or what is serviced can be very complicated. 

For example, in some states, one may not have to charge sales tax on mowing alone. But you may still be on the hook for taxes on the mulch or flowers purchased for the homeowner. 

Again, it is best to rely on the advice and knowledge of a tax professional when determining what goods and services can and should be taxed.

A Sales Tax Permit is Required

Most states make it mandatory to have a sales tax permit, or license for the business to engage in sales of both goods and services. 

By obtaining this permit, you are allowed to charge sales tax on customers’ purchases so one can collect the necessary amount owed when filling out taxes. 

To obtain this permit, you must fill out an application through the department of taxation in the state, or states, of operation. After approval, the state will issue a sales tax identification number.

Lawn Care Professionals Who Charge Sales Tax Must File Tax Returns

All lawn care professionals, even sole proprietors, and Limited Liability Corporations who collect sales tax are mandated to file sales tax returns within their state’s tax authority. 

The occurrence and schedule may vary by state. So it is advisable to double-check with a tax professional who is familiar with local tax regulations. As well as being familiar with the services industry.

Collecting Sales Tax at the End of the Day 

As the saying goes, "only two things in life are certain; death and taxes.” 

Paying taxes is one of the certainties of life and an obligation when running a business. The intricacies of tax laws and regulations are normally a burden for anyone that has not been a student of the field. 

By becoming familiar with these facts, you can make certain that you are abiding by all rules and regulations set forth by the state of operation. And manage your lawn care business effectively.

In the area of taxation, ignorance is definitely not bliss.