At What Point Should I Collect Sales Tax When I Allow My Customers To Pay Installments?

Good question and the answer is . . . . . at the time of the transaction.

For example, you did a repair but you’re allowing them to pay in installments – tax is due the signing day of the contract or the day of the verbal agreement. You sell retail and allow your customers layaway options – tax is due the time the items are put on layaway.

And it’s the FULL tax that is due upfront, even if you haven’t collected all the money from your customer.

So if you have a $100 service in a 6% county and you allowed your customers to pay the balance in $25 installments, sales tax in the amount of $6 is due the day the contract is signed, not when the service is paid in full.

This tricks a lot of people up because they always question ‘how am I to pay taxes on funds I haven’t received?’ Good question, but that’s not given any consideration when it comes to the law. You can read the upfront sales tax requirement clear as day here under 12A-1.056(1)(a), F.A.C.

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How Are Service Warranties Taxed?

First, let’s look at FDOR’s definition of a service warranty which also goes by the name of maintenance contract: ‘Any contract or agreement that indemnifies the holder of the contract or agreement for the cost of maintaining, repairing, or replacing tangible personal property.’

Service warranties are taxable, but they are not taxed when it covers an item that is not subject to tax. For example:

Taxable: A service warranty for a car is taxable since cars are taxable.

Not taxable: A service warranty for a hearing aid is not taxable since hearing aids are not taxable.

When a service or replacement is made under a warranty, the payment made by the service warranty issuer to the person making the repairs is not subject to tax. However, any payments made by anyone else besides the service warranty issuer are taxable. For example:

A customer comes to you for repairs to his car. The total charge for the repair is $3,000.00. The taxpayer will be using his service warranty to cover the repairs but has a deductible of $1,000.00. The $1,000.00 paid by the customer is taxable; the remaining $2,000.00 paid by the service warranty issuer is not taxable.

You can read more about service warranties here under 12A-1.105, F.A.C.

Get it? Got it? Good! Cheers!

Is Painting a Building Taxable?

The charge to paint a building is exempt from sales tax. If your charge includes the material and the labor, the entire charge is exempt from tax. But, if you have one invoice for the labor and a separate invoice for the paint – the labor is exempt from sales tax but you will need to collect and remit sales tax for the paint.

The painting of a building is considered improvement to real property which is exempt from sales tax. You can read more about real property improvements here.

 

What proof do I need to show I shipped my sales out of Florida?

Good question, especially if you’re ever audited *gasp* and any of the below will work as proof that you shipped your sales out of Florida:

  1. Internal delivery orders listing item(s) sold, mailing address, and delivery date (with proof of expenses due to the delivery i.e. trip tickets signed by the person who delivers the item).
  2. United States Postal Service parcel post receipts with supporting documentation listing the item(s) and mailing address
  3. Common carriers’ receipts, bills of lading, or other proof of mailing address
  4. Export declaration
  5. Receipts from a licensed customs broker
  6. Proof of export signed by a customs officer.

You can read more about proof of shipping out of state (aka exports) here, under 12A-1.0015(2)(c), F.A.C.

Taxable grocery, household and medical items versus Nontaxable grocery, household, medical items

Believe it or not, there’s a small list (well, 3 pages worth which is considered a small list by FDOR) of taxable grocery, household and medical items, and nontaxable grocery, household, and medical items. This list doesn’t include every single thing that is taxable and nontaxable but it’s a start. Click here for the list.

 

I install cabinets – I gotta charge tax or what?

Quick answer: You don’t have to charge tax on the installation of ‘permanently’ installed cabinets.

I’ve never heard of temporary cabinets – but you never know.

Anytime you permanently install an item (fixture) to a building (real property) the installation is not taxable.

Real Property: Any property attached directly to land, including the land itself (which means your lawn is considered real property).

Fixture: An item that is permanently attached to real property but keeps its own identity (basically you can tell it apart from the real property). But the definition, for FDOR, does not include titled property, machinery, or equipment.

Here’s a lil more info:

If you sell cabinets only – taxable.

If you permanently install cabinets only – not taxable.

If you sell and permanently install cabinets on the same order – not taxable.

See how that works?

If you sell a fixture only – taxable.

If you permanently install the fixture only – not taxable.

If you sell and permanently install the fixture on the same order – not taxable.

You can get more information about adding to real property (aka real property improvements) here.

Is My Home/Office Cleaning Service Taxable?

Cinderella decides to take her cleaning skills to the next level and go into business for herself – but if she decides to move to Florida to do it, will she need to charge taxes on her services? You already know the FDOR’s favorite answer: It depends.

Residential Services:

If Cinderella decides to clean homes, apartments, condos, any type of sleeping accommodation buildings, she will not have to charge taxes for her cleaning services. She will have to be pay tax on her cleaning supplies though.

Non-residential Services:

If Cinderella decides to mix it up and clean offices, hotel lobbies, warehouses, any type of area where business activities are typically held, she will have to charge sales tax. However, there are three exceptions that Cinderella may want to look into:

  1. Carpet cleaning is not taxable
  2. Pressure cleaning the exterior of a building is not taxable
  3. Cleaning buildings owned by nonprofit organizations that provide their current Florida Consumer’s Certificate of Exemption (DR-14) is not taxable.

But, she’ll still need to pay taxes on her cleaning supplies.

You can get more info about the taxation of residential and non-residential cleaning services here.