For anyone who doesn’t know me, I own and run a successful marketing company. But in the beginning it started with a little window cleaning company, A Pane in the Glass.
Years ago A Pane in the Glass received a Sales tax audit. No big deal as I’ve always ran my company/companies on the up and up and never take any Tax short cuts. Well this one was different and one a lot of you won’t see until it happens to you.
Washington State is where my service company is located. We have a couple different taxes we pay to do business here. The regular L&I taxes, B&O (Excise), etc… like there aren’t enough already, but one break we get is not paying sales tax on window cleaning services. Well it isn’t a Monetary break for us, it just saves us the hassle of having to charge it. If we had to pay it, no problem we would just charge the customer.
Window cleaning is a service in Washington State in which sales tax isn’t charged. We use a CRM which allows us to describe the service. So let’s say you’re not only cleaning the windows on a customer’s house but you’re also doing their patio glass, Hard water removal, screens, etc… Well we list these other categories separately on the invoice.
This is where it gets tricky for us. The auditor agreed there is no sales tax for window cleaning, but some of these other categories don’t fall within window cleaning. Patio glass cleaning isn’t window cleaning? Nope…. So after the audit going back five years, it was determined my company owed just short of $22,000 in sales tax for some of the non window cleaning descriptions.
After going back and forth with the auditor there was no way out. They let us make payments but stuck us for the entire amount. Professional accountant running our books and payroll didn’t matter. They missed it too. How easy this would have been to avoid if we had only known, charge the customer the sales tax. It’s nice to have all this separated on the invoice but honestly you can do the same in the notes.
Morale of the story
If you are sales tax exempt like a lot of us are for Window cleaning or pressure washing services, make sure you check with your accountant on the sub categories. Roof Cleaning, House washing, Gutter cleaning, Mirrors, Hard Water Removal, Scratched glass removal, etc… Anything you are categorizing differently on the invoice you need to make sure you aren’t going to be on the hook for the sales tax 5 years down the road.
Justin Monk Seo
1312 N Monroe St. Suite 137; Spokane, WA 99201
509.808.0787 Direct | 877.380.7859 Office