At a recent locksmith meeting, sales and use tax was discussed. One locksmith had met with the California State Board of Equalization (B.O.E.), they examined his records and he was required to pay tens of thousands of dollars for unpaid taxes.
According to information shared by he and others, since February 2009, locksmiths are responsible to charge tax on some of the services performed.
This, according to California State Board of Equalization, Locksmiths Publication 62, which I will quote and paraphrase.
" In general, tax applies to charges for fabrication labor, but not to charges for work considered installation or repair".
They continue with examples of fabrication labor performed by locksmith include making new keys by duplication or cutting by code. Making an “old key” if necessary to rekey a lock, if you provide the old key to your customer (an “old key” is a new key made in order to open an old lock).
They move on to repair labor, which is not taxable. However, tax may apply to the merchandise or material you transfer to your customer as part of your repair job. Key, pin or wafer tumblers, etc.
Then to installation labor, which is not taxable. However, tax may apply to the merchandise or material you transfer to your customer as part of your installation job. This includes locks, access control systems, etc.
Then to service charges or trip charges, which may be nontaxable, fully taxable, or partially taxable, depending on conditions of the transaction.
A trip charge or service call is not taxable when the job involves labor or services only and no merchandise to your customer.
The trip or service charge is taxable, if materials are sold retail to the customer. This depends upon the percentage of taxable charges.
When your job includes both taxable and nontaxable charges, tax applies to part of your trip charge.
The sixteen page Locksmith Booklet can be read on www.boe.ca.gov
Questions can be answered at 800-400-7115
According to another person at the meeting, there is an Android phone app "CA Locksmith Calculator" that will provide the amount of tax required for a job.
As always, your thoughts are appreciated.
