Texas Sales Tax Exemptions For Manufacturing
Texas offers broad sales and use tax exemptions for manufacturers. Machinery and equipment used in the production process qualify for sales tax exemptions within Texas. Repair parts and labor to qualifying machinery and equipment are also exempt. Consumables including lubricants and chemicals consumed during the manufacturing process are exempt if their use is necessary and essential to prevent the failure, decline or deterioration of exempt manufacturing equipment. Safety apparel or clothing used by employees during the manufacturing or processing of tangible personal property is exempt provided that the apparel or clothing is not sold to the employees and the manufacturing process would not be possible without the use of such apparel or clothing. Utilities consumed during production also qualify for an exemption, however a valid utility study conducted by an engineer must document the percentage of utilities consumed for exempt purposes on any meter with mixed taxable and non-taxable use. Agile Consulting Groups sales tax consultants have a wealth of experience within the state of Texas and can ensure taxpayers are maximizing the benefit of Texas sales tax exemptions for which they qualify.
For more information on Texas sales tax exemptions please visit the sites below.
Every State Taxes Services In Its Own Way
This guide is designed to provide an overview of the complexity of sales tax on services by state.
Five U.S. states do not impose any general, statewide sales tax, whether on goods or services. Of the 45 states remaining, four tax services by default, with exceptions only for services specifically exempted in the law.
This leaves 41 states and the District of Columbia where services are not taxed by default, but services enumerated by the state may be taxed. Every one of these states taxes a different set of services, making it difficult for service businesses to understand which states laws require them to file a return, aswell as which specific elements of their services are taxable.
Texas Sales Tax Exemptions For Healthcare
Texas divides hospitals and healthcare facilities in to two categories for purposes of sales and use tax exemptions nonprofit and for profit entities. The rules are straightforward for nonprofit hospitals and healthcare facilities because all items sold or leased to, or stored, used or consumed by organizations created for religious, educational or charitable purposes are exempt from Texas sales and use tax. For profit hospitals and healthcare facilities have more complex rules, but there are a number of categories of purchases which qualify for Texas sales tax exemptions. Some prominent exemptions include: hospital beds and replacement parts, intravenous or IV systems and their components, hypodermic needles and syringes, medical kits if the cost of the exempt items included in the kit are greater than the cost of the taxable items, medical oxygen and other drugs, prosthetic devices, labor charges and maintenance agreements for radiation emitting equipment such as x-rays, and orthopedic appliances and devices )
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Do You Have To Pay Sales And Use Tax On Landscaping
Your invoices or contracts should clearly identify the services you perform. The professional services of landscape designers and architects are not subject to sales and use tax. These services include consultations, research, preparation of design plans and other engineering or architectural services.
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.
Additionally, with new laws being passed every year, it is best to keep abreast of any laws that could affect the industry that one operates.
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.
In the area of taxation, ignorance is definitely not bliss.
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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 states 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.
Materials Supplies And Equipment
Give a resale certificate to the supplier when purchasing fertilizer, plants, flowerbed edging, herbicides, and processed dirt, sand and gravel used in taxable landscaping or lawn care. These materials are transferred to the care, custody and control of your customer as part of your taxable service. When landscaping a new residential structure for a contractor or homebuilder, keep in mind the difference between lump sum and separated contracts in paying or collecting tax on these materials.
You must pay sales tax on the supplies and equipment used in landscaping and lawn care. There is no exemption for the purchase or rental of wheelbarrows, lawn mowers, string trimmers, gloves and other equipment, tools, and supplies.
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Employment & Unemployment Tax
Employing a staff comes with additional expenses over-and-above the agreed upon wage negotiated with each individual staff member. Both the State of Texas and the federal government impose taxes on the employer for wages paid to employees. Additionally, the federal government maintains a withholding requirement whereby the employer must withhold certain income taxes from the employee and remit them to the department of treasury.
At the state level, employers are responsible for contributing to an unemployment insurance pool sponsored by the state. The amount of each employers contributions varies but will land at an effective rate of between .31% and 6.31%. Employers are responsible for registering for an account with the Texas Workforce Commission and filing reports as required to identify employees and the amount of wages they are paid in a given year.
Federal employment taxes are much more involved as they include federal unemployment taxes, social security and medicare taxes, and withholding for income taxes.
For starters, all employers must withhold federal income taxes from each employee paycheck to be remitted to the federal government. The amount withheld will vary depending on the information provided by each employee on their W-4 but in the vast majority of cases, there will be some amount of money withheld and remitted.
What Is The Texas Income Tax
Income tax rates are determined based on a number of factors beginning with the type of structure under which a company operates. For purposes of this analysis, we review the mainstays of corporate structure in Texas: Corporations, S-Corporations, Limited Liability Companies, Partnerships, and Sole Proprietorships.
Corporations are subject to what is commonly known as double taxation meaning they are taxed at both the corporation level and the shareholder level. As a result of the 2017 Tax Cuts and Jobs Act, corporations in the United States are taxed at a rate of 21% of their annual income. Double taxation takes place where at the shareholder level, the shareholders are again taxed on any dividends paid out from the corporation.
S-Corporations, Limited Liability Companies taxed as Partnerships, and Partnerships are considered pass-through entities which are not taxed at the company level but rather, income, losses, deductions, and credits flow through to the shareholder/member/partner to be reported on their personal tax returns. This pass-through taxation feature allows business owners to avoid double taxation on corporate income.
The type of tax return filed depends on the type of entity you have established. Corporations file an 1120, S-Corporations file an 1120S, Partnerships file a 1065, and Limited Liability Companies, who must elect to be taxed as a partnership or a corporation at the federal level, file the return commensurate with their election.
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While Most States Do Not Require The Payment Of Sales Tax For Services Some Do Tax Almost All Services Including Landscaping Lawn Care And Pest Control
Tax reform is taking the taxes off things that have been taxed in the past and putting taxes on things that havent been taxed before. Art Buchwald
I just wrote a check for almost $1,400 to replace the rotors, rear calipers, brake lines and a front axel on my wifes 10-year-old Mini Cooper. Ouch! Included in that total is a $90 sales tax charge. Double Ouch!
In Ohio and the county where I live, the sales tax rate for most services is 7 percent 5.75 percent for the state, plus 1.25 percent for my county. If you operate a landscape, lawn care or snow management company and bill $5,000 or more in services during the year in Ohio, you will have to charge your customers the 5.75 percent state sales tax, plus any sales tax levied by the county where you provide services.
I became interested in the topic of sales tax after reading a recent article posted by St. Louis Public Radio.
And, of course, Im still smarting after having to fork over an extra $90 for the car repairs.
The gist of the public radio article is that Missouri voters will get a chance this coming Nov. 8 to vote on a constitutional amendment that would ban sales tax on services. The amendment, in part, says:
In order to prohibit an increase in the tax burden on the citizens of Missouri, state and local sales and use taxes shall not be expanded to impose taxes on any service or transaction that was not subjected to sales, use or similar transaction-based tax on January 1, 2015.
What Transactions Are Generally Subject To Sales Tax In Texas
In the state of Texas, sales tax is legally required to be collected from all tangible, physical products being sold to a consumer. An example of items that are exempt from Texas sales tax are items specifically purchased for resale.This means that an individual in the state of Texas purchases school supplies and books for their children would be required to pay sales tax, but an individual who purchases school supplies to resell them would not be required to charge sales tax.
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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.
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 And Landscaping By The Self
Lawn care and landscaping requiring a license) are nontaxable when done by a self-employed individual who:
- does the actual lawn care or landscaping services
- has no employees, partners or other persons providing the services
- has gross receipts from the services of $5,000 or less during the most recent four calendar quarters.
If your income from landscaping and lawn care exceeds $5,000 during the most recent four calendar quarters, you must begin collecting tax on these services on the first day of the quarter after the threshold is exceeded. When your gross income from these services falls to $5,000 or below for the most recent four calendar quarters, the exemption resumes on the first day of the next quarter.
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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 states 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.
Sales And Use Tax Faqs
On January 1, 2008, changes to Arkansas state and local sales tax laws were for purposes of compliance with the Streamlined Sales Tax Agreement. Including Arkansas, the sales tax laws of nineteen states have been amended to be in conformity with the agreement which provides for uniformity among the states in tax administration processes, definitions of sales tax terms and equal application of tax laws to both in-state and out-of-state sellers registered to collect the sales tax.
The changes effective January 1, 2008 do not change the taxation for repair services performed at the customers location or for repair service occurring at the dealers store location where the property was brought to the store location by the customer and picked-up by the customer after the repair was completed. Taxation of repair services performed at the dealer location with the repaired property delivered or shipped by the dealer back to the customer at a location other than the store location is changed and is subject to tax at the point of receipt or delivery to the customer of the repaired property.
Local Tax Cap Changes
Rebates to Businesses of Additional Local Tax Paid on Purchases
- Purchased items outside Arkansas that would be taxable if purchased in Arkansas
- Use, store, consume, or distribute these items in Arkansas, and
- Have not paid Arkansas sales tax or an equivalent amount to another state .
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Lawn Care Services Exceeding 5% Of Total Charge Taxable In Texas
The Texas Comptroller recently ruled that a lump sum charge for both real property services and other services was taxable.
Texas taxes sales that include taxable services and nontaxable services if the services are sold for a single charge, and the taxable services are worth more than 5% of the total charge. Taxable services include mowing, trimming, fertilizing, watering, and any other treatment or service performed on private or commercial yards or lawns.
Here, the taxpayer owned a golf course on a capped landfill. The taxpayer requested a refund on a lump sum payment for several services. The services included lawn and yard maintenance, landscaping, structural pest control, and waste removal services.
The Comptroller ruled that the taxpayer was not entitled to a refund. The lawn and yard maintenance portion of the lump sum payment accounted for more than 5% of the total charge, so the whole charge was taxable.
Texas Small Business Taxes
April 18, 2021 6 minute read
As a small business owner, it is easy to become mired with the unrelenting burden of acquiring clients and generating revenue. As a result, it is easy to overlook many of the organizational necessities of running a business. One in particular that cannot be avoided is the responsibility of the business owner to pay-to-play. At both the state and the federal level, numerous taxes must be paid on a monthly, quarterly, or annual basis and failure to do so can have disastrous consequences. Below is a basic primer on the state and federal taxes most Texas-based business face.
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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.
Texas Taxability For Motor Vehicle Repair Services
The Texas Comptroller of Public Accounts explains the sales tax treatment of repair services performed on motor vehicle component parts. When a repair person repairs or rebuilds component parts that a customer places in inventory or installs on a vehicle other than the vehicle from which the part was removed, the repair person is not considered to be repairing a motor vehicle, but rather is considered to be repairing tangible personal property. Therefore, the repair person must collect tax on the total charge for the repaired part, including labor and materials. On the other hand, when a repair person repairs or rebuilds component parts that will be placed on the vehicle from which they were removed, the service is considered to be motor vehicle repair, and it is not taxable. Since the repair person might not be able to determine whether the repaired part will be replaced on the vehicle from which it was removed, the customer should issue an exemption certificate that clearly states that the repaired part is being placed on the original vehicle.
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Sales Tax Guide For Landscapers
This guide provides some general information on tax issues specific to landscapers and resources for registering, filing returns and making payments. It is not intended to be used as a legal ruling, but merely as a general guide for sales and use taxes as they relate to landscapers. Not every tax situation is covered in this guide. If you have questions about the taxes on the goods or services you provide, see the Contact Us section of this guide.
Landscapers As A Retailer
- Other materials and products
is a retailer.
When a landscaper purchases material that will be resold to its customers in its retail outlet, the landscaper should present a completed and signed resale certificate to its supplier at the time the material is purchased. The landscaper is not required to pay sales or use tax on the items purchased for resale.
1. Bobs Landscaping sells a customer a piece of yard art and several plants from its store. Bobs Landscaping should collect sales tax from its customer on the retail price of the material excluding from the retail price any cost for delivery.
2. Bobs Landscaping owns and operates a retail store selling plants, mulch, seed, pavers, sod, yard art and other materials and products. When Bobs Landscaping purchases material from its vendor that will be resold to Bobs customer in its retail store, Bobs Landscaping should present a completed and signed resale certificate to its supplier at the time the material is purchased.
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