The state of Florida imposes a tax rate of 6% plus any local discretionary sales tax rate. It is commonly known that tangible personal property is taxable in Florida. Tangible personal property is defined as personal property that may be seen, weighed, measured, touched, or is in any manner perceptible to the senses. What is not commonly known is that some services are also taxable in Florida. The four specific types of taxable services subject to sales tax in Florida are:
- Nonresidential Cleaning Services
- Commercial Pest Control Services
- Commercial/Residential Burglary and Security Services
- Detective Services
Unfortunately, because it is less commonly known that services are subject to sales tax, many taxpayers get hit with audits for not taxing these services. It is important to understand the tax consequences of both the taxable services and the taxable products you are selling to your customers. This is why it is so important to communicate with a tax professional each step of the way in setting up and operating your business. One thing to remember about these taxable services – the statutes identify the services specifically by NAICS Code. So, if your industry happens to fall into a more specific industry standard (NAICS) code than the one in the statute, then you just might not be taxable! We’ve won several good cases on this nuance of the law. Links to detailed articles about these taxable services are provided at the end of this article as well as a link to an article about how to fix the problem if you have been providing taxable services without taxing them.
In addition to the four specific types of taxable services in Florida, there are some things people typically consider “services” that are also subject to Florida sales tax. The most common type of these additional services are repair services on tangible personal property. If any tangible personal property is transferred to the customer when making the repair, then the whole price charged to the customer (labor and materials) is subject to Florida sales tax. This is known as the “one drop of oil rule.”
Interior Designers are surprised to learn their interior design fees are subject to sales tax if tangible personal property is sold as part of the contract. For company that manages real property rentals, commercial or residential, the management company is responsible for making sure the tax is collected and remitted as much as the tenant and landlord.
There are also several nuances depending on what specifically type of service you provide. For example, if you are charging a gym membership then that service is taxable because essentially you are renting the use of the gym equipment. However, if you are providing personal training services then those services are not taxable.
Another confusing example that highlights the nuances of Florida law is that car washes are not taxable if the car wash only uses soap. However, if the car wash uses wax then this makes the car wash taxable. The answer is the same whether the car wash is by hand or by machine.
Whether your company provides or even buys one of the designated taxable services or one of the other indirectly taxable services, you want to make sure you are aware of your obligations from a tax perspective. Proper planning can save you and your company hundreds of thousands of dollars and stress.
About the Author: Paula Savchenko is an attorney at the Law Offices of Moffa, Sutton, & Donnini, P.A, based in Fort Lauderdale, Florida. Ms. Savchenko practices primarily in the areas Administrative Law and Taxation, as she counsels and represents businesses and individuals in their dealings with government agencies. More specifically, most of her work involves state and local tax and regulatory matters, with a focus on the marijuana and hemp industries. She also speaks and writes regularly on the legal aspects of the marijuana and hemp industries. In addition to serving on the board of the Florida Bar – Administrative Law Section – South Florida Chapter, she also serves on the board of the Greater Fort Lauderdale Tax Council, as well as Cannabis Law Accounting and Business. You can learn more about Paula in her bio HERE.
About our Firm: If your business would like to consult with a Florida CPA / Attorney to determine how to comply with Florida's complicated sales and use tax laws or how to cost effectively start complying if your company has been incorrectly paying or charging sales tax, then we offer a FREE INITIAL CONSULTATION to discuss you Florida tax concerns. Contact our law offices today by phone or email via either of the links on the top of this web page. Is an auditor already knocking and you need an expert to defend you? You should have the right experts on your side. Contact The Law Offices of the Law Offices of Moffa, Sutton, & Donnini, P.A. for a free initial consultation on your Florida tax audit concerns.
ADDITIONAL RESOURCES
What Service Are Subject to Sales Tax in Florida?, published May 1, 2012, by James Sutton, CPA, Esq.
Interior Designers: FL Sales Tax Planning, published July 16, 2015, by Amanda Levine, Esq.
Cleaning Services are Taxable in Florida, published July 16, 2017, by Jeanette Moffa, Esq.
Florida Sales Tax on Private Investigators, published September 9, 2014, by Jerry Donnini, Esq.
Florida Sales Tax – Voluntary Disclosure Program, published April 9, 2018, by Jeanette Moffa, Esq.
Go to Jail for Not Paying Florida Sales Tax?, published November 3, 2013, by James Sutton, CPA, Esq.