It happens more often then I’d like. Despite a long day at the office, a last minute phone call or email has kept me at work until my car is the only one I see in the parking lot when I leave. But even if it feels that way, I am not the only one in the office building. At some point, the night’s cleaning person will slowly open my door and peak in to make her presence known. It’s time for me to get out, she says with her raised eyebrows.
I don’t know if the cleaning personnel are direct employees of the building or if they are independent contractors working on behalf of another company. But while the distinction doesn’t make a difference for me, it does for sales tax purposes for the building’s management company.
Florida’s sales taxes on services make little sense. Rather than have a hardline rule, such as with tangible personal property, Florida chooses to exclusively tax very specific services. One of those services is commercial cleaning as defined by NAICS code. The types of services that are taxable include but are not limited to the following:
- Acoustical tile cleaning services
- Building cleaning services, interior
- Custodial services
- Deodorant servicing of restrooms
- Disinfecting services
- Floor waxing services
- Housekeeping (cleaning services) on a contract or fee basis
- Maid services
- Maintenance of buildings (except repairs)
- Office cleaning services
- Restroom cleaning services
- Service station cleaning and degreasing services
- Venetian blind cleaning
- Washroom sanitation services
- Window cleaning (interior or exterior)[1]
If that is not enough, there are also some oddball questions that come up with cleaning services. For example, what if a tax exempt entity pays their lessor for cleaning services? Despite the commercial nature of the tax exempt entity, are the cleaning services exempt? If you read the rule, 12A-1.0091,then you would think cleaning service paid for to a landlord by a 501(c)(3) would be taxable. However, when a commercial tenant pays for cleaning services, pest control, or security services as a condition of rent, then the payments are really considered taxable rent (not a service). What the rule neglects to mention is that 501(c)(3)’s can rent real estate tax exempt under 212.08(6)(p).
The first determination that needs to be made when faced with the question of whether a cleaning service is taxable is: does the cleaning occur in a residential or commercial facility? This may seem like an easy question. A residential facility is a house while a commercial facility is a business. But what happens when a business, such as a hotel, rents residential rooms and hires a cleaning service? What about when an individual, through Airbnb, rents a room and hires a cleaning service? To make it further complicated, what happens when the fee for that cleaning is included in a non-avoidable charge to the guest? Clearly, determining when a cleaning service is subject to tax is not that simple.
But the surprising complexity between resident and commercial is not the only thing to consider here. Taxpayers must also ask: what is a facility? For example, aircrafts, boats, motor vehicles and other transportation are generally not considered to be nonresidential. However, mobile homes can be considered residential or nonresidential.
The nonresidential distinction is important. Section 212.05, F.S. (1)(i)(b) imposes tax on “nonresidential cleaning … services.” Meanwhile, residential cleaning services are generally nontaxable.
The second determination that needs to be made when faced with the question of whether a cleaning service is taxable is: does an employee or independent contractor provide the cleaning service? Cleaning services are not taxable when provided by employees to their employers. An independent contractor is defined as someone who provides services for a company on a fee basis. The company can have no direct control over the details of performance of that person’s duties beyond general statements about the scope and nature of the contract between the two parties. Furthermore, if fees paid are not subject to withholding taxes or social security taxes, that person is not considered an employee of the company.
The rules for determining when a cleaning service is subject to tax are clearly less “clean” than they appear. It doesn’t help that there are specific nuances that have no rhyme or reason and seem to go against some of the common understandings of tax law. In addition, pressure cleaning (power washing) of the exterior of building or parking lot/structure, despite being a cleaning service, is not subject to tax. Finally, if tax is due on the sale of the service, then it would make sense that the materials and equipment used would be exempt for resale, as is the case with tangible personal property. However, for cleaning services, tax can be due both on the purchase of equipment and supplies and on the sale of the service. Of course, exceptions exist for this rule as well, such as when a cleaning service provides and replaces the toilet paper and paper towels in a restroom.
While commercial cleaning services might not seem to be a large expense, audits go back three years. The payments for these services can amount to a large sum over three years and they are easy for auditors to flag when doing an audit of bigger ticket items such as sales. Furthermore, cleaning service companies should be aware of the various distinctions between their clients. For example, a building is mixed-use for both residential or nonresidential, the price of the service for each type of area must be separately stated or the total charge will be taxable.
I may not know whether the people who clean the office building of Moffa, Sutton, & Donnini, P.A., are employees or independent contractors, but I sure hope management does.
ABOUT THE AUTHOR
Jeanette Moffa is an associate attorney of the Law Offices of Moffa, Sutton, & Donnini, P.A. Ms. Moffa concentrates in the area of State and Local Taxation with a heavy emphasis on sales and use tax. In addition to Florida and multi-state sales and use tax issues, she also works on appellate administrative law cases. When she is not practicing law, she teaches English as an adjunct professor at Broward College. You can read more about Jeanette at her bio here.
AUTHORITY
Rule 12A-1.0091 Cleaning Services
Rule 12A-1.0161 Sales and Use Tax on Services; Sale for Resale
ADDITIONAL SOURCES
FL TAX – VOLUNTARY DISCLOSURE CAN BE THE PERFECT SOLUTION, published October 5, 2012, by Jerry Donnini, Esq.
GOING TO JAIL FOR NOT PAYING FLORIDA SALES TAX?, published November 3, 2013, by James Sutton, CPA, Esq.
FLORIDA SALES TAX AUDIT HELP, published July 14, 2013, by James Sutton, CPA, Esq.
FLORIDA CPAs – YOUR CLIENT OWES SALES TAX AND THEY WILL BLAME YOU, published July 18, 2016, by James Sutton, CPA, Esq.
CLOSE A BUSINESS TO AVOID LARGE FL SALES TAX ASSESSMENTS?, published March 24, 2013, by James Sutton, CPA, Esq.
FL SALES TAX – TAA 14A-020 – NAICS CODES VERSUS NONRESIDENTIAL CLEANING SERVICES, published October 8, 2014, by James Sutton, CPA, Esq.
ARE CLEANING SERVICES TAXABLE IN FLORIDA?, published November 30, 2016, by James Sutton, CPA, Esq.[1] Although pressure washing the outside windows is a nontaxable service.