Is your state one that requires you to charge sales tax for your services? If not, be careful and don’t let this happen to you.
I own a service company “A Pane in the Glass” in Spokane, Washington that provides Window Cleaning and Pressure Washing Services. I have a General Manager now that runs the company full time, while I spend my time chasing google.
In 2019 we were subject to a sales tax audit. In Wa state our customers do not pay sales tax on services such as Window Cleaning or Pressure Washing. Therefore we don’t charge it. However, we classify different categories such as Patio Glass, Hard Water Removal, Screen Cleaning, etc…separate from Window Cleaning on the invoice our CRM generates.
The Auditor went back five years and declared we owed sales tax for several of these categories. We paid our accountant a grip to go back and forth with the auditor, but in the end we were on the hook for a little over $20,000 in taxes plus all the fees that go along with it. We could easily had just charged the client sales tax if we had known. But in the end there’s no way to go back and charge them now so we were stuck with no other choice but to pay it.
I am not an accountant so please check with a certified CPA before making any changes. But it’s definitely something a little time now checking can save you some cheddar later.
-By Justin Monk
o (877) 684-6083 c (509) 808-0787