I often encounter businesses that at their core are pure services businesses, but which also sell products as part of their offerings. For example, consider a small part-time mobile oil change business. They are primarily in the service business of changing a person’s oil. However, their service includes the sale of motor oil.
I’m often asked if such a business would they need a sales tax license. The short answer is yes. The fact that the business is mobile further complicates the situation of sales tax collection since they work all over the state.
There is an acceptable workaround to getting a sales tax license in these types of situation. As long as you do not mark up the price of the products you provide to your customer you can often get away with paying the taxes at your purchasing level and passing the charges along directly to your customer.
A part-time mobile oil change business could purchase their motor oil at a local retail outlet like WalMart and pay the taxes on the sale. Then, when they invoice their customer for the oil change, they can include the cost of the oil, including the taxes paid, with their invoice as a pass-through to the customer with no mark up to the consumer.
As the service provider, you could add a handling charge, which is a service charge for your efforts to acquire and transport the product to the consumer, but the product price and tax must be pure pass-through to avoid having to obtain the proper sales tax license.
Do you need a sales tax license or will a pass-through sale work for your business?
