I have been in business full time almost a year. After being in business about 4 months, I hired an accountant, who has been very helpful and a good consultant. She told me that I am supposed to collect sales tax on my cabs, same as the big box stores, but I have lost jobs because of my higher price. I show the estimate with subtotal, sales tax, total figure, but usually the customer just sees that I am 500-700 higher that the next guy. I don't think my competitors include sales tax in their estimate. What should I do? Leave the sales tax line out of the estimate? Surprise the customer at the end of the job with the sales tax charge? Don't say anything to the customer about sales tax and build it into my estimate?
(Business and Management Forum)
From contributor A:
In South Carolina I do not have to collect sales tax as long as I pay sales tax on my supplies. In other words, I am not sales tax exempt. It may be different in your state, but I believe your accountant should be able to guide you on this.
I don't know about other states and I know 1/2% is not much, but it's money that is yours. As far as Florida sales tax, there are about a million rules depending on what your business is classified as (contractor, construction, manufacturer, installer, etc.), what type of work you are performing, if you use materials or if it's just labor, and if the moon is in the waxing phase. It's just crazy.
One more thing. You should lose jobs because other shops are lower than you. If your prices are set correctly, you should get about 30-40% of what you estimate. You don't bid. You tell them what it will cost. If it's too much, tell them you can work to their price, but they have to give up stuff. Lower quality slides, different wood, different construction methods, whatever. We are highly skilled professionals in a dying breed and should be paid as such.
If the homeowner is buying the cabinetry directly from me, no install, then I charge tax on the total cost of the kitchen (same as a box store).
General contractor is buying the cabinets, then charge tax on materials, again no install.
If either buys the cabinets but my company is doing the install, then charge tax on the materials, but none on the labor of building the cabinets or the install.
If either buys the cabinets and I am subbing out the install, then charge tax on the kitchen cabinets and not the install (install in that case is a service).
I do have an accountant and we had trouble interpreting the laws, so we called the IRS office in our area to get it correct. As for how I write up my estimates, I give them a subtotal and then state after that it's "plus all appl. taxes." I got this idea from a local building materials yard. The client brought in their bid and wanted to know why I was so much higher. At that time I gave them the grand total with the tax included. When I pointed that out to the customer and we figured the tax on his, I was only $1000.00 higher with a much better product, and the customer went with me. From then on, I point out to the customer that the price does not include the tax on the estimate.