Carpet Cleaning and Related Services
Carpet cleaning services for both residential and nonresidential property are taxable.
Listed below are some taxable services related to carpet cleaning and repairs. If you'd like to know about the taxability of a service not listed, send us an e-mail or call us toll free at 1-800-252-5555.
Taxable services include:
- carpet cleaning in residential and nonresidential properties;
- upholstery cleaning;
- carpet repairs in nonresidential property (e.g., reinstall or lay, stretch and repair seams);
- water extraction in nonresidential properties such as office building, retail stores, and hotels;
- treating or applying carpet with protective chemicals (e.g., ScotchgardTM and similar products);
- applying chemicals for odor control or to prevent or eliminate mold and mildew; and
- hauling away carpet or pad ruined by water damage, from either residential or nonresidential property.
Nontaxable services include:
- water extraction from residential carpets; and
- carpet repairs in residential properties.
Equipment, Supplies and Materials
You must pay tax to your suppliers on equipment, tools, materials, supplies, and utilities used to provide taxable or nontaxable services. Tax is due whether the equipment and tools are bought or rented for use in general or for a specific job. Tax is due on consumable supplies such as spot removal chemicals, soaps, and detergents that are not transferred to the customer.
You can give your supplier a resale certificate instead of paying tax when buying items that will be transferred to your customer (that is, remain in the carpet) as an integral part of the carpet cleaning service. Examples of such items include carpet protectors, fire retardants, antistatic applications, flea killers, and rust inhibitors.
If you separately bill taxable and nontaxable services, collect 6.25 percent state sales tax plus any applicable local sales tax only on the taxable charges. Taxable charges must be reasonable and should include all expenses connected with providing the services, such as storage fees, mileage reimbursement and equipment rental costs that you pass on to your customer. The nontaxable services and expenses must be distinct and identifiable, and commonly provided without other services.
A single, lump-sum charge for both taxable and nontaxable services is presumed to be taxable if the taxable portion is more than 5 percent of the total. You can overcome this presumption at the time the transaction occurs by separately billing a reasonable charge for the taxable services. If the taxable charges are not separated at the time of the transaction, you or your customer can later provide documentation to the Comptroller to establish the percentage of the total charge that is taxable.
For example, if you do a residential water extraction and bill for the following services, no tax is due on these separately stated charges. You owe tax on equipment purchased or rented to provide these services.
- emergency service or after hours service call;
- lift carpet and remove wet pad to allow drying;
- water extraction from carpet or any hard surface in the home;
- equipment set-up charges;
- equipment use charges, for such things as dryers and dehumidifiers;
- monitoring charges to make sure all surfaces are dry;
- removal of baseboards and drilling holes in walls or cabinets to expedite drying;
- clean and sanitize equipment used after a sewer back-up;
- block and pad or relocate furniture to prevent further damage;
- install new pad;
- reinstall carpet;
- reattach seams;
- reinstall tackless strip; and
- reinstall threshold metals.
If you also provide the following services, you should collect tax on separate charges to:
- clean and deodorize carpet;
- treat carpet and subfloor with the appropriate chemicals to prevent mold or mildew;
- clean and deodorize or restore furniture damaged by the water; and
- dispose of unsalvageable carpet and pad.
You must keep adequate records on all taxable and nontaxable services you perform. You will owe sales tax on your total receipts if you cannot document the taxable and nontaxable charges.
Contracts with Tax-Exempt Organizations
You should not charge tax when you provide taxable carpet cleaning services for a governmental agency. Some nonprofit organizations are exempt from tax and can give you an exemption certificate, while other nonprofit organizations must pay sales tax. If you have a question about a customer's exempt status, you can look for them in our online listing at http://aixtcp.cpa.state.tx.us/exemptall/allexempt_srch.php or give us a call.
The tax law provides an exemption for laundry and carpet cleaning services, repair and restoration services of nonresidential real property, and repair and restoration of tangible personal property damaged in a natural disaster provided the area is declared a disaster area by the Governor of Texas or President of the United States. The labor for these services must be billed separately from the materials. Tax is due on the materials used to complete the job. Have your customer complete an exemption certificate stating that the property was damaged in a disaster. This exemption does not extend to waste removal services. Collect tax on any charges for waste removal even if the waste is the result of a disaster.