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The purpose of this information release is to describe the policy the Department of Taxation will use in applying sales tax to building maintenance and janitorial services. Paragraph 10 of this release discusses exemptions for purchases of property used in providing building maintenance and janitorial services.
Ohio Revised Code section (R.C.) 5739.01(B)(3)(j) includes within the definition of "sale" and "selling" providing a building maintenance and janitorial service. Building maintenance and janitorial service is defined in R.C. 5739.01(II) as:
… cleaning the interior or exterior of a building and any tangible personal property located therein or thereon, including any services incidental to such cleaning for which no separate charge is made. However, "building maintenance and janitorial service" does not include the providing of such service by a person who has less than five thousand dollars in sales of such service during the calendar year.
The Department of Taxation prepared this question and answer summary to explain the tax on the sales of building maintenance and janitorial services. If you have any questions about the tax or require more specific assistance on your responsibilities as a vendor of building maintenance and janitorial services, please contact us in person or by phone. The telephone number is listed at the end of this release. The address of each Taxpayer Service Center is available on our website.
1. What kinds of activities are considered a "building maintenance and janitorial service?"
In general, this service includes washing, vacuuming, dusting, polishing, and waxing in offices, houses, and other buildings. Some examples are:
NOTE: Cleaning includes the removal of soil, dirt, wax, grease, or other pollutants or contaminants from exterior and interior surfaces of a building or from personal property within the building. However, the intentional removal of a permanent finishing or coating such as paint, varnish, stain, sealers, wallpaper, tile or carpet adhesives, etc., usually in preparation for refinishing the surface, is not, in and of itself, "cleaning" and is not a taxable janitorial service.
2. The types of activities that are not a building maintenance and janitorial service, but may be associated with the service include:
NOTE 1: These activities do not meet the definition of "building maintenance and janitorial service" as used in the law, because they are outside of the exterior of a building, constitute real property work, or are not restoring or attempting to restore a clean condition to a building or its contents.
NOTE 2: Clearing leaves and other debris from lawns is not a building maintenance and janitorial service. However, it is a taxable lawn care service. Snow removal became a taxable service on August 1, 2003.
3. If I provide a building maintenance and janitorial service, must I have a license, and if so what type of license is required? How do I get one?
Yes. Anyone providing building maintenance and janitorial services must be licensed as a service vendor, unless they are considered an employee of the person purchasing the service (e.g. is paid a wage, has income tax withheld, is covered by unemployment insurance, etc.)
A service vendor's license may be obtained from any office of the Ohio Department of Taxation. (This license is not available at the county auditor's office. Applications are available on the Department of Taxation’s website; tax.ohio.gov There is a $25 application fee for a service vendor's license.
4. If I sell cleaning supplies outright, as well as provide taxable services, can I report both types of sales on the same license?
No. Report the outright sales of cleaning products (or other items) on a regular or delivery vendor's license return. A regular vendor's license is available from the County Auditor of the county where you have a fixed place of business from which sales of cleaning products (or other items) are made. A delivery vendor’s license is available from the Department of Taxation for vendors who do not have a fixed place of business but make sales of cleaning products (or other items) at the consumer's location. There is an application fee of $25 for each type of license.
Report sales of taxable services on your service vendor's license return.
5. What price should I use in calculating the amount of tax to be charged?
The total amount billed to the customer for taxable service is the "price," even though you may choose to itemize certain parts of the bill, such as cleaning supplies consumed in the service or mileage charges to travel to the building being cleaned. If you provide nontaxable services with a consequential taxable service, you must separate the charges otherwise the entire charge is subject to tax.
Example 1: A power washing company is hired to clean the exterior of a house. While there, the customer requests that the driveway also be washed. If the power washing company separately
states the charge for cleaning the driveway, no tax on this portion of the bill is due. If it does not separate that portion of the price associated with driveway cleaning, the entire charge is taxable.
Example 2: A pool cleaning company contracts with a hotel to clean and maintain pools. There are two pools, one indoor and one outdoors. Cleaning the indoor pool is taxable. Cleaning the outdoor pool is not taxable since it does not meet the definition of a building maintenance and janitorial service. If the pool cleaning company separately states the charge for cleaning the outside pool, no tax on this portion of the price is due. If the charges are not separately stated, the entire charge is taxable.
6. Am I required to register as a service vendor based upon the total amount of sales made of the building maintenance or janitorial service?
Yes. You need only register and collect the sales tax if your sales of this service equals or exceeds $5,000 in a calendar year. If you were in business last year and your gross sales from these services were $5,000 or more, you must register as a service provider, collect and remit the sales tax. If you were in business last year and your gross sales from these services were less than $5,000 and you are not sure if your sales will be will more than $5,000 this year, you must register and begin to collect the tax when your sales equal or exceed $5,000. If you expect your total sales to exceed $5,000 this year, you must register as a service provider and collect the tax.
7. When is the tax to be reported?
The sale is made when the service is provided or when the price for the service is paid, whichever comes first. You must report your sales and tax liability on the return that covers the period in which sales are made regardless of when the price is paid. Returns are due on the twenty-third day of the month following the close of the reporting period.
8. What rate of tax should be charged?
The rate of taxation for a service depends upon the county where the customer receives the benefit of your service; that is, where the building is located. In addition to the state tax rate of 5.5%, county rates, currently ranging from .5% to 2%, may also apply. If you provide a building maintenance and janitorial service for a customer with buildings in more than one county, you will need to separate the charges for each county and bill tax based on the appropriate rate for each county involved. You will receive a listing of counties and their rates, and will automatically be notified when any rate change occurs.
9. How will I report the tax collected on this service?
Service vendors file a sales tax return (Form UST-1) on which you report your gross sales, exempt sales, net taxable sales and tax liability for the reporting period. A vendor must also complete a schedule on which it reports the information by county. Sales tax returns are mailed to you shortly after you apply for your license. All returns must be filed even if no sales are made in the period to be reported. If you temporarily suspend business for a time longer
than your return period, we suggest that you file your return(s) early or have a responsible person file it on time for you to avoid being considered delinquent.
You are entitled to a 9/10 of 1% (.9%) discount on the tax to be paid, if tax returns are timely filed with full payment of the amount due.
10. Am I entitled to claim exemption on the purchase of equipment, tools, or supplies used in providing a building maintenance and janitorial service?
Your purchase of equipment tools and supplies used in providing building maintenance and janitorial service generally are not exempt. However, you are entitled to claim exemption on your purchases in two circumstances.
You may claim the "resale" exemption for those products that are sold outright. (See Question #2 above.) You may also claim exemption on the purchase of personal property used to perform the building maintenance or janitorial service if the property will be permanently transferred to the customer of the service as an integral part of the performance of the service.
Example 1: A building maintenance and janitorial service company uses products and equipment to clean and wax floors. It sells some of the products directly to customers for the customers' own care of their floors. The company may claim exemption for any products sold outright to consumers as personal property "purchased for resale."
Example 2: The company may also claim exemption for the floor wax that it uses to polish the floors because the wax is "permanently transferred to the consumer of the janitorial service." The company may not claim exemption for other products, which it does not permanently transfer to the consumer of the service, such as soaps, cleaning solutions, mops and brooms. Other exempt items include, but are not limited to: furniture polish, stain or water repellants and trash can liners. Taxable items include, but are not limited to: mops, rags, brooms, trash carts, vacuum cleaners, floor polishing equipment, sponges, pails, cleaning/stripping solutions and other chemicals.
11. Am I entitled to claim exemption on the purchase of any other service that is considered "sale" and "selling" under the Ohio Revised Code?
If you purchase another "building maintenance and janitorial service" for the purpose of reselling that service to a customer, you may claim "resale" from that service supplier. However, you must charge tax on the total price of all the building maintenance and janitorial service provided.
Example 1: Company A has a contract to clean an office building daily. The contract also calls for a periodic carpet cleaning every six months. Company A does not have the personnel or equipment to adequately clean carpeting, so it contracts with Company R. Company A may claim exemption from tax on its transaction with Company R based on its resale of R’s service.
Example 2: Company C has the same contract as Example 1, except when it is time to clean the carpet it hires temporary help from an employment agency and rents the equipment needed for
the job. Since Company C is consuming both the employment service and the rental of the equipment and not reselling either of the transactions, it is not entitled to claim exemption.
12. If a building maintenance and janitorial service is provided for a customer and that customer claims to be nontaxable, what proof does the law require?
If the customer is never subject to tax (such as the U.S. government; the state of Ohio; a city, county or other political subdivision of this state), a copy of the sales invoice is all that is needed, provided that the name and address of the customer are clearly identified. (Note: Leasing to an exempt organization does not entitle the owner of a building to claim exemption from tax.)
If the customer is claiming that the use of the service is not subject to tax (see example) or that it is a nonprofit charitable organization or a qualifying state veterans' organization headquarters, obtain a valid exemption certificate from the customer and keep it in your files. If the customer claims to hold a direct payment permit with Ohio, the customer must furnish evidence of the permit. (A direct payment permit number is always 98 + six digits.)
Example: Retailer A sells and cleans carpeting. Rather than use its own employees to clean carpeting, it subcontracts the cleaning service to company B. Since A is considered to be the retail seller, it is responsible for collecting tax from its customers on both types of sales. B is selling its service to A and does not charge A tax, if B obtains from A a valid exemption certificate (claiming "sale for resale" as a reason.)
13. What are my responsibilities if the consumer refuses to pay tax?
As a provider of a taxable service, you are responsible for charging, collecting and remitting tax. If the purchaser of your service has no valid reason for not paying tax, you may pursue collection as you would any unpaid debt. R.C. 5739.26 reads, "No consumer shall refuse to pay the full and exact tax as required by ...[Chapter 5739.], or refuse to comply with such sections and the rules and regulations of the tax commissioner, or present to the vendor a false certificate indicating that the sale is not subject to tax." See also R.C. 5741.19. A rule of the Tax Commissioner (Rule 5703-9-03 of the Ohio Administrative Code) requires that exemption certificates be accepted in good faith.
14. If my company is hired by a construction contractor to clean-up a building after a remodeling job is complete, am I providing a building maintenance service and, if so, who is to pay the tax?
Yes. You are providing a building maintenance and janitorial service and the construction contractor is the consumer of the service provided. You should charge the tax and the contractor must pay the tax based on the total price of the service you provide.
15. As a heating and air conditioning company, we perform many yearly "clean and check" multi-point tune-ups on residential and commercial building systems. These service calls involve adjustments, calibrations, lubrication, efficiency tests, checking for leaks, and cleaning of components when necessary. Does the fact that cleaning is involved make these tune-ups subject to the tax?
No. The service provided is considered to be much more than mere cleaning of the systems. The cleaning is incidental to the overall scope of the service provided. However, if a vendor makes a
service call for the sole purpose of cleaning a system (e.g. ductwork cleaning), the sale would be taxable.
Caution: The actual services performed are the factors that will determine whether or not tax must be charged. The tax cannot be avoided by merely calling the service something other than the work that is actually performed. It is suggested that the records of service providers be sufficiently clear to reflect the actual work done to avoid problems in the event an audit is ever conducted.
If you have any questions regarding this matter, contact our Taxpayer Services Center at 1-888-405-4039, or e-mail us through our website at tax.ohio.gov.
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