PA – Cleaning Services on Building Construction
Posted by salestax on July 8, 2008
The Office of Chief Counsel at the PA department of Revenue, put forth this ruling to define the difference between taxable cleaning services and non-taxable construction services. It looks like anything before the final cleaning (debris removal, trash removal, vacuuming, checking lot for misc. garbage) for occupancy is considered tax exempt and the final cleaning (windows, floors, dusting, etc.) is taxable building maintenance or cleaning services.
If you’re a cleaning service, or a contractor using one, break out your billing for each of these two phases of cleaning and only charge tax on the final clean-up. I’m certain that PA will make it difficult to prove on an audit that only a portion of the invoice was for a final cleaning and that the majority should be non-taxable.
Additionally, another tax savings idea is to ensure the cleaning company is reducing the “taxable” amount by the employee costs. Employee costs are not taxable if broken out on the invoice.
Example:
Service Fee: $100.00
Employee Cost -$20.00
Taxable: $80.00
6% PA Sales Tax on $80 = 4.80
Amounts charged: $100 + 4.80
Total Due: = $104.80
If the cleaning service doesn’t break out the employee cost, then the whole $100 would be taxable at 6% which would increase the total due to $106.00. If you spend a lot on these services, this could save a good bit of cashflow.
Brian said
Any thoughts or links on the taxability of day to day waste removal services?
salestax said
Brian,
I believe basic trash hauling service would be exempt under Pennsylvania Code 31.6.(a)(6) Hauling and Transportation services.
Here is a link to the PA Code:
http://www.pacode.com/secure/data/061/chapter31/s31.6.html
However, if your service also includes the sale/rental of trash containers, there might be different tax consequences depending on how it is billed.
a. If you lump the service and the sale/rental in all one price, the PA department of revenue is likely to tax the entire charge.
b. But, if your service includes the container and there is no additional charge (meaning the price of the waste removal is the same regardless of whether they use your containers), it would be non-taxable. In this case, though, you would be responsible for paying the tax on the containers when you buy them.
c. It would be best to split the cost of the sale/rental from the service fee and only charge tax on the cost of the actual property being transferred to the customer.
Not knowing the circumstance that prompted this question, I hope this has been of some help. If you have a specific scenario to share outside of what I presented here, I can look into it for you.
Ernie Ginoble said
This question is almost exact to sales tax on rental of containers at job sites, except we rent portable toilets for job sites and I’m wondering if I invoice in a different way I wouldn’t even have to charge sales tax. If I showed the rental as a no charge and only charged for the hauling of the waste then I too could also fall under the 31.6 tax code. If you could help me out with this I would appreciate it.
salestax said
Ernie,
I believe there are ways that you can correlate your portable toilets to the same type of service as trash hauling and medical waste hauling. These services also loan containers for the customers to use. I have a lot of thoughts on this and will reply privately… there’s too much to detail here.
Ernie Ginoble said
I previously wrote to about charging sales tax on rental of my portable toilets, thank you for replying. My new question is can I request for a refund for my tax I charged and if so is there a time frame because currently I am behind in paying my 2008 sales tax and they are telling me I am to late to file for an appeal. Also, do I need written permission from chief council to operate under 31.6(a)(6). I already started billing in the form of waste removal with no words related to rental based on what you told me and a lot of reading. But I still need my tax license restored just in case I need to charge tax for some other service.They told me it can’t be restored until I paid ‘08 tax in full. Now they are threatening to take me to the magistrate for operating without a sales tax license and I told them I changed my way of billing, that’s why I asked you if I need official permission or not. I would appreciate your response a.s.a.p. Thanks alot
Ernie Ginoble said
I tried to pass off the code you sent to me to the local Dept of Rev.They told me no way. They said I fall under 31.11 – 31.16 and 61 Pa. Code ss 60.1 I read this over and can’t fiqure out where portable toilet cleaning fits into this. This is a major situation for me since I owe back sales tax for some months in ‘08. I couldn’t find the code 31.6.(a)(6) that you sent me. I talked to my attorney and my accountant and nobody knows anything. I believe that the cleaning of temporary restrooms is a very vague subject. I talked to one person from the Dept of Rev. her interpretation is if I go to the said site where the unit is and I pick up the unit and take it to the dump and dump it that makes it not taxable, similar to a dumpster. Now because I stick a wand in the tank and pump the waste into my tank truck and then take it to the dump then its taxable, fiqure that out.
Ernie Ginoble said
I guess I’m writing to much I ran out of room. I don’t mean to bother you with this but I can’t seem to get an honest answer out of anybody
Thanks Ernie