Sales tax on wax again

[mac]

Got a call today from an operator that is being audited by the state sales tax people. This one has a new twist. I'm in FL, but most states want a tax on a wax product, since they think wax stays with the car, so you are buying a product. No problem so far. With the automatic wash, you just figure the number of washes with wax, and pay that tax based on the price of the entire wash selected. This agent wants to apply that logic to the self serve washes sold. If a customer uses wax at any time during a visit to the wash, tax should be owed to the entire cycle. Well can anyone out there tell me how to calculate that? There may be a handful of operators who have computer tracking systems connected to the self serve that could figure this. I have never seen one in Florida, or anywhere else for that matter. There are no currently available systems on the market that can do this. I have three questions regarding this:
1. There has to be a state standard directing collection agents on how to investigate and collect. If so, anyone else in FL ran across this?
2. If there is no way to figure this, how would you answer the agent?
3. Most self serves have rotary switches. During a cycle that the customer does not want wax, he may turn by that selection going to another. Would that constitut a wax usage?
At least the agent is not performing full body pat downs.

 

[JimmyJaffa]

When we operated self service washes in Florida, we had an additional timer for wax for each bay. Then we took the time for wax divided by the total time. The percent we came up with times wash income (not vacuum) divided by (1+tax rate) equals the taxable wash. With that same percentage multiply the taxes paid on on all soaps + tax paid on wax. Tax due then would be wash tax calculated minus percentage tax paid on soaps + wax tax. I seems complicated, but the Florida sales tax is crazy, car washing is lumped together with laundromats.

Good luck, the tax man never bothered me when we did it this way.

 

[pitzerwm]

Jimmy sounds like the smart move, in this guys case, I guess, I'd figure out the amount of wax used per minute, then I would determine the buckets of wax used during the period of the audit. Wax used per minute x .25 or whatever you charge per minute.

i.e. you use 1/2 oz. per minute, you have used 1 gal of wax in that period. 1 gal = 256 minutes x .25 = $64 x tax rate = amount + fines and penalties for not paying it correctly.

 

[mac]

Let me explain a little more. This agent wants to collect the tax based not just on the wax usage, but on the total time the customer was in the bay and used wax. Unless you put an auditor on site for every bay, I don't see how this is possible.

 

[mjwalsh]

I seems complicated, but the Florida sales tax is crazy, car washing is lumped together with laundromats.

Jimmy,

No offense, but I have never heard of laundromats in Florida being taxed with some weird twist you describe. Rather than starting or continuing a potential false rumor ---- can you be more specific on the laundromat comment? The last time I heard from the Coin Laundry Association --- there were only 4 or 5 states that impose a sales tax on laundromats & Florida was not one of them. The state of Washington recently took the sales tax off of the laundromats. The non service vend items & use tax (out of state purchases) are separate items though. I know they are defining the wax as a non service or stay on car but what I don't understand is how that relates to the laundromat.

I wouldn't be chiming in ---- but everytime we put a statement that is not accurate out in the public they tend to use that against us enabling them to describe us as the ones who are the "idiots" to take focus off of themselves.

Another thought --- it appears that they have been purposely trying to complicate the process so the Florida car washers throw in the towel thinking that it is "sooo much more simple just paying on the whole gross". Floridians should not fall for or reward them for that approach!

MJ

 

[robert roman]

When I operated full-service in Florida, it was tax on wax.

I have a friend in Kansas with conveyors who now pays state sales of 8% on gross sales.

You guys in Florida should be happy to get off so easy.

What is so hard about calculating wax tax for self-service? The difference between inventory and purchases gives wax sold.

Am I missing something, other than who in their right mind would want to pay tax?

 

[Randy]

You guy’s should consider yourself LUCKY you don’t live in Washington state. I don’t pay sales tax on Wax. I pay 9.6% sales tax on the gross, less the price of the wax, now figure that one out. That’s 9.6% on vending, vac’s and bay time, everything but wax. Everything we buy from out of state we have to pay use tax it’s the same 9.6% as the sales tax so there is little or no benefit to buying anything out of state. I had a customer who bought everything he could from out of state with his personal credit card, figuring that the state couldn’t access his personal credit card information. When he was audited by the state they had it all. The couple of thousand he saved by buying out of state and not paying the use tax had grown into around $15K in interest and penalties. You’re better off just paying the tax and be done with it.

 

[JMMUSTANG]

Does the IRS state "wax"?
If you use another similar product but not "wax" you might not be legally responsible for paying a tax.
I would contact a tax attorney with this question.

 

[Louise]

I just went thru a pretty thorough Florida sales tax audit. Honestly, the agent didn't really understand the business and didn't focus much on the self serve wax issue. I have a meter on my wax and calculate the tax on the number of minutes of wax used. She accepted it with no question. I also was afraid that they would want me to calculate tax on the entire wash IF it included wax. There is simply no way to do it. As far as I know, no one does that.

She did, however, focus ALOT on out of state purchases. Make sure you are calculating tax on those purchases and paying the correct amount. I wasn't that thorough on that. I had to pay the back tax, but no penalty.

PM me if you want to know more about my experience.

Best of luck,
Louise

 

[mac]

The agent down here in south Florida is insisting that the tax is charged on the total cycle time when wax is used in a self serve bay. Say a person stays in 4 minutes and uses some wax, then the tax is figured on a four minute purchase. This seems insane. This auditor is also hinting that the tax should be retroactive for some period. How far back can they go?

 

[Washmee]

The agent down here in south Florida is insisting that the tax is charged on the total cycle time when wax is used in a self serve bay. Say a person stays in 4 minutes and uses some wax, then the tax is figured on a four minute purchase. This seems insane. This auditor is also hinting that the tax should be retroactive for some period. How far back can they go?

The operator needs a tax attorney. Getting into a ****ing match with the tax auditor is going to cost this guy more than it would have cost to hire the attorney.

 

[Louise]

As I recall, they can go back 2 years. With me, they looked heavily at a three month period. Determined the amount of tax per month within that 3 month period that was unpaid and then multiplied it by 24 months. On your first time they do not charge interest or penalty.

My adjuster made ALOT of calls to her supervisor for advice. Can you speak to this guys' supervisor yourself. I don't know any operator that can or does monitor the tax usage in the way he expects.

I might even go to a local tax office outside your area and tell them you are considering buying a self serve carwash and ask them to educate you in how to charge sales tax. Might give you some ammo.

Best of luck.

 

[mjwalsh]

The agent down here in south Florida is insisting that the tax is charged on the total cycle time when wax is used in a self serve bay. Say a person stays in 4 minutes and uses some wax, then the tax is figured on a four minute purchase. This seems insane. This auditor is also hinting that the tax should be retroactive for some period. How far back can they go?

Mac,

An effort needs to be made to make that specific auditor's supervisors aware of the both unreasonable & impractical request. If they do not give you a good response --- you can at least show an honest effort to correct the situation. If & only if that approach fails --- call &/or write to all the pertinent elected officials & see what & how they articulate the defense of the specific law. Withhold the amount & clearly state in writing why you are withholding the amount. At that point a public hearing should be asked for ---- try to make sure that the news media does not paraphrase or misquote you too much. To back down from that would be a mistake ---- unless you & your fellow operators feel that they are utilizing the resources better than you are.

If the car wash associations, other individual operators, the car wash vendors & the local Chamber of Commerce give you no assistance whatsoever &/or an apathethic or no response --- they are unconsciously enabling that until the net effect is ---- that the general public is less served. Public awareness of those facts need to be brought to light until they shape up!

MJ

 

[rph9168]

Find a good tax attorney or at least get an opinion from one. Fighting the issue based on common sense or the difficulty of coming up with a good revenue figure is a waste of time when arguing with a government official. They really don't care how unreasonable their requests are and can only be swayed when the law or precedent is on your side.

 

[pitzerwm]

In this state forever. I'd drop the wax and go to clear coat. You might try and say that the wax wasn't really used for many years.

 

[JimmyJaffa]

My comment about car washes being lumped with laundromats is a "plain wash, is not taxed" but car that leaves with any other than soap and water is taxed. How ever you come up with some formula, remember to deduct the taxes paid on the same percentage of soap that you purchase, and do not pay taxes on the wax(s). Using a time counter and event timer,come up with some plausible formula for the future. As I remember, about 25% of my revenue was taxed (we did not have low pressure wax or rain-x). You might be higher or lower(?) depending on your equipment.

 

[Jim L.]

Mac

Years ago when I first got into this business, another owner tried to explain to me the rules regarding Fl. sales tax. I was completely confused and went down to the local sales tax office (Pensacola) and got the rules from the horse’s mouth. If I recall correctly, they were quite helpful and made copies of the rules for me and even highlighted the important parts.

As per those rules, I pay tax on my metered SS wax time and on the entire auto wash that includes wax. I also pay on my vending sales as well as Fragramatics use.