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Discussion Starter · #1 ·
So my wife has a small business, she rents items for weddings. She charges a small fee for each item, which includes installing and breaking down the items.

Since we go pick the items up after the wedding and no goods are actually sold at the end of the day, does she owe sales tax? I have been trying to read Ga laws and can't seem to find something that states that clearly. Last year, I had a new furnace installed, my bill was 1700 dollars even, from a small business owner. Tax was not outlines in his receipt, should he have allocated funds for taxes on the bill for me or could he do it at his house behind the scenes?

Do we need to be listing sales tax and collecting it. If so, who do we send a check to and how often?

We understand a tax man may be in order, we just don't know of someone. Please PM me or post if you have someone you trust. We are in the Woodstock area and would like for them to be within say a 45 min drive of us for exchanging of paper work if need be.

Thanks in advance.
 

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Yes. You sold a service. Sales tax does not only apply to merchandise sales.
 

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I do not charge sales tax for my services. Rentals of personal property are, however, subject to the tax, so it really depends upon what you are doing for a business, service or rental?
 

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a-squared said:
seajay said:
Yes. You sold a service. Sales tax does not only apply to merchandise sales.
Currently, there is no sales tax on services to my knowledge, with the exception of a few...
This is my understanding of Georgia taxes as well. I do not charge sales tax for my consulting services.

In general, one does not have to charge sales tax for items sold across state lines. Things get more complicated in some internet businesses. For example, taxes imposed by the Eurpoean Union on software sales. But that is another matter altogether :shock:
 

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frankr said:
a-squared said:
seajay said:
Yes. You sold a service. Sales tax does not only apply to merchandise sales.
Currently, there is no sales tax on services to my knowledge, with the exception of a few...
This is my understanding of Georgia taxes as well. I do not charge sales tax for my consulting services.

In general, one does not have to charge sales tax for items sold across state lines. Things get more complicated in some internet businesses. For example, taxes imposed by the Eurpoean Union on software sales. But that is another matter altogether :shock:
my business is service based i pay no sales tax on services, but i do collect sales tax on "sales" my 4th qtr. sales usually exceed the other 3 combined unless i take on new clients (hasn't happened lately) every few years ga dor sends me a letter asking for money i don't owe them, they don't like it when i submit my statement with little or no tax due, they are a pita. keep good records and copies of everything you send them so you are able to send them again, and again, and again................
 

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Discussion Starter · #10 ·
Thanks for all the replies. So, now it is up to us whether we are renting the items or charging for the service to install?

In all truth once the items have been paid for we are purely paying/getting paid for the labor involved. So, do we have to declare somewhere that you(the customer) are paying for 100 chaircovers to be installed vs. you are renting 100 chaircovers?
 

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foxtrotterz said:
Thanks for all the replies. So, now it is up to us whether we are renting the items or charging for the service to install?

In all truth once the items have been paid for we are purely paying/getting paid for the labor involved. So, do we have to declare somewhere that you(the customer) are paying for 100 chaircovers to be installed vs. you are renting 100 chaircovers?
I thought you took them back at the end of the day.
 

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Discussion Starter · #13 ·
Right we do. So, do we rent them for 0.01 and charge 2.99 for install? If they are 3.00 a piece the majority of the effort going into the product is in the washing, ironing, folding, driving to and from and setting up and breaking down. So how do you decide what the rental price is and the labor price is from a tax perspective? If we charge $3.00 a chair cover are we renting the product or selling them our services for all that goes into it?
 

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seajay said:
Yes. You sold a service. Sales tax does not only apply to merchandise sales.
:righton: :righton: :righton: :righton:
 

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foxtrotterz said:
Right we do. So, do we rent them for 0.01 and charge 2.99 for install? If they are 3.00 a piece the majority of the effort going into the product is in the washing, ironing, folding, driving to and from and setting up and breaking down. So how do you decide what the rental price is and the labor price is from a tax perspective? If we charge $3.00 a chair cover are we renting the product or selling them our services for all that goes into it?
If you rent and install chair covers for $3 each then you have to charge tax on the $3. Think of it like renting a car. they rent you the car for X$$$. Most of the cost involved is service, care and maintenance but you still pay tax on the whole ammount. You might also think of it as a hotel room. A lot the the room charges go to cover service but you are still charged tax on the whole ammount. The kind of business you are running should collect sales tax and send it in.
 

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Why not just charge them $3.00 per chair cover, as rent, and do installation and removal for free? No tax due.

ETA: Er,.....Did I have that backwards?
 

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My family owns a service business so I can look at this from the same shoes.

If I were you, I would do two things.

Shop some competition and act as a customer. Call and play totally dumb, tell them you're interested in some tables and chairs for a party. Ask them how they charge and how much. Also ask them if they deliver and set them up, and if so is there a fee?

If it is standard for your business for people to have fees for delivery and set-up, that would be something you charged but didn't pay sales tax on. Income tax though.

I rented some tables a chairs a couple years ago and can't remember what was on the invoice. I am pretty sure they charged per item/per day, and there was sales tax. I picked the items up myself so there was no fee.

My company has used the same CPA (and his firm) for a LONG time, trust him explicitly. We deal with John Williams, of Williams & Horning, CO. They are located in Alpharetta where Hwy 9 and McFarland intersect.
 

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CountryGun said:
Why not just charge them $3.00 per chair cover, as rent, and do installation and removal for free? No tax due.

ETA: Er,.....Did I have that backwards?
You have it backwards. The answer is because he doesn't want to pay the 20% penalty if he's caught cheating.
 

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Discussion Starter · #19 ·
budder said:
CountryGun said:
Why not just charge them $3.00 per chair cover, as rent, and do installation and removal for free? No tax due.

ETA: Er,.....Did I have that backwards?
You have it backwards. The answer is because he doesn't want to pay the 20% penalty if he's caught cheating.
You are correct. We don't want to do anything illegal or immoral, but what is the correct way to go about this. I read the other examples of the car and such and that makes sense, but it seems like a lot of the work going into the 3.00 is pure labor. So, would it be wrong to charge 1.00 rental fee and a 2.00 installation/breakdown fee? Doesn't sound like cheating the system if you are calling a spade a spade. I think that is accurate if not more favorable to them based on the above example.
 

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foxtrotterz said:
budder said:
CountryGun said:
Why not just charge them $3.00 per chair cover, as rent, and do installation and removal for free? No tax due.

ETA: Er,.....Did I have that backwards?
You have it backwards. The answer is because he doesn't want to pay the 20% penalty if he's caught cheating.
You are correct. We don't want to do anything illegal or immoral, but what is the correct way to go about this. I read the other examples of the car and such and that makes sense, but it seems like a lot of the work going into the 3.00 is pure labor. So, would it be wrong to charge 1.00 rental fee and a 2.00 installation/breakdown fee? Doesn't sound like cheating the system if you are calling a spade a spade. I think that is accurate if not more favorable to them based on the above example.
Maybe you missed the point of the car and hotel example. The point was you pay tax on the whole package. Not just on the car itself. That includes washing, waxing, oil changes, checking tire pressure and what ever else goes into it to let you use the car. It doesn't matter how you want to break it down. If you charge a total of $3 for a chair cover the backend services are included and taxable along with it. It don't make any difference if you only charge $0.01 for the cover and $2.99 for the backend services the entire $3 fee should have sales tax collected. Now if you want to top it out at $3 then just figure out how much of the $3 should be contributed to sales tax.

$0.01 cover rental
$2.81 backend services
$0.18 sales tax
$3.00 total
 
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