Running a legal business

tomstrees

tomstrees

Participating member
I have some general questions as I know what the theory is on running a legal business; file and pay taxes, licensing and insurance, employees on "the books", etc.. Practically I see a lot of businesses that don't carry insurance when advisable, don't charge customers sales tax, and I've had cases when the customer wants to do a cash deal or refuses to pay sales tax. I see a lot of businesses that hire questionable or illegal workers. The licensing requirement in CT arose through lobbying by the big services like Bartlett; the reason for it was mainly pesticide applications, but was extended to any "tree improvement", pruning, cabling, etc.. Also advertising those. You can cut trees down in CT without a license but you can't legally cut a limb.

What is reasonable or unreasonable behavior on all these rules?
 
Here in Co you don't pay sales tax on service work. In some cities we are required to have a business license to collect sales tax, which I think is silly because at the end of the year I claim $0 collected. Just more red tape. Income tax is a different story obviously. Some cities require an arborist license ( contractor license ) some don't. Even more confusing, some cities there are different arborist licenses, example ornamental tree license or large tree license. I haven't seen insurance stated as advisable, its either required or not.
 
Here in CT it is required but lightly enforced, I know a lot of contractors that don't collect without much consequence. I've spoken with the state tax collectors about various types of non-compliance in taxes and they say they don't have the resources.
 
Here in PA there is no special licensing for doing tree care/removals. There is a PA home improvement contractors registration which is very vague and super gray when it comes to tree companies. As for sales tax the only part of our business that we must collect sales tax for is applying any chemical to control an insect. EAB treatments, yes. Shot hole fungus treatments, no. Hemlock wooly adelgid oil sprays, yes. Fertilization, no. Then we cross state lines into DE and there is no sales tax.
Income tax for the business, and collection for employees on the other hand... complete pain. The business pays income tax in 2 states, and one “city”. We have to apportion our work come tax season between the three. And the “city” work we pay city and the other state on!
We currently have business licensing in 1 state and the city also but they aren’t specific to trees. And just tax collection. We are, in the new year going to be applying for at least 2 additional municipal licenses but not sure what those are going to entail.
Insurance is certainly “optional” around here, if you know what I mean. It’s not required by the state but for the municipal licensing you must show proof. Also, the enforcement of the insurance is done by the job owner by requesting proof of ins. No proof, no worky. Unfortunately, the COI’s rarely elaborate on “what is covered” under the policy. Just “yea he’s got insurance.... to mow your lawn wish a push mower”.
Also, something not mentioned in the OP which IS enforced and can get very EXPENSIVE.... DOT. That is a very deep rabbit hole not within the scope of this conversation currently.
Legal is truly in the eye of the beholder. DOT and WC are really the only two locally anyone is going to push or enforce. Unfortunately that’s why many struggle with the hacks!
 
First...good for you wanting to do it right. Too many small shops just don't care and I think it hurts all of us.

As to customers refusing to pay sales tax, point out it is the law. Do they refuse at a restaurant, hotel, or retail establishment? This is no different if the state requires it on services. If you get the sense that may be a problem or if it is a problem more frequently than not, just up your prices and include language "sales tax included" or "no extra for sales tax". Sometimes I'll tell somebody the price for a small job that I do right away (for example a pest treatment that I can do right away). Before I know it, they are handing me a check for that amount. That happens infrequently enough that I just record it as if I charged them price-tax then their total bill including tax is what they paid. Eating a few $ here and there is no big deal. Won't do that on larger invoices. Never had a problem when I say "the state wants their portion so I need to include sales tax".

(As an aside, I think it is BS that I am required to be an agent of the State collecting their taxes for them - both sales and income tax withholding...but that is the way it is)

Everything else is straightforward...you gotta do what you gotta do. Don't have to love it, but those are the rules.

In OH workers comp is through the state. A couple of months ago another tree company owner was indicted on 3 felony charges of defrauding Bureau of Workers Comp. I don't know the details, but couldn't help but wonder if he just wasn't correctly reporting payroll? That sounds a lot worse than the pain in the neck paperwork of following all the rules...
 
I could never figure out how to run build the business legally with all the legal requirements around here, so at this point I am doing basic work like log splitting on the side. A department manager in the outdoor department at a national chain advised a customer who came in to pick up illegals, I reported him to the company headquarters, and don't really regret it. The illegals have ruined the less regulated trades in this area, I picked some up 15-20 years ago but don't want to play that game. Some of the bigger local outdoor services built their businesses on hiring non-legal day labor. Government regulation is light.

On the sales taxes you send a bill and they don't pay the sales tax, not a lot you can do.
 
You never get financed on cash income.

You buy fancy stuff, like 10-40k tree equipment with cash, that's going be looking funny.




My state Dept of Revenue has a web page for sales tax by address (addresses different rates for transportation district fees, school levies, city sales tax.

I price my stuff as $xxx plus tax, all the time. If I don't click the correct rate, my default Jobber tax rate is my highest. Always easy to drop the bill by up to 1% difference in rates. $50 difference on a recent job. Property has been divided between city (wetland) and county (house) for tax purposes. Using the correct tax rate ended up with a $50 tip. He said he didn't need to rewrite the check after our city/ state tax discussion (trees actually on county parcel, 1% lower rate and no City Business and Operations tax (0.01% of gross revenue at city addresses).



Only takes one simple accident to ruin everything, if uninsured.

One of my former, poor-attention-having employees walked into the stationary truck. Split his cheek, 1" from his eye with a metal corner of the tool box he opened and didn't shut.
I just sent him to the hospital. I didn't sweat it much. His $700 visit will cost me $1500 in increased premiums. If he lost an eye instead, the huge bill would have cost me $1500 and a little more in increased premiums.
I closed up the job that day and didn't sweat it.

No WC on machines or legit sub-contractors!!!
 
Get your CT arb license then file your biz with the state. The sooner you start the sooner you build a record you can borrow on. Your progress will be painstakingly slow if you don’t borrow for larger purchases like a bigger chipper or truck. If you have the work you can only make the money if you have the equipment you need.

As for employees, I don’t know what the requirements are to start in CT but in RI it was about 3800 down and then you’re audited on payroll after the year. You need, need, need workman’s comp. It all works into your hourly/daily rate.
 
I'm not doing anything more than one man jobs now, not enough to need workers or other regulated activities. I've been there, unregulated doing big jobs, I can't afford it now over 15 years later nor do I want the risks.
 
Recently I had two customers on jobs only worth a few hundred who had an envelope of cash after a hard day's work without any communication with me on the amount. I was doing heavy work for hours and when I am done I generally am in no shape to argue. Both failed to pay sales taxes on the invoices, but I sent both of them bills for that with a handout explaining taxable business activities in the state; maybe I'm too focused on the law, but it is the principle that counts. I have spoken with the state revenue people who say the tax is due whether or not the customer pays.
 
In Washington we are required to collect sales tax, for everything but consulting. This is newish 15-20 years.
City business license if working within city limits. The city gets a portion of the sales tax which is a pain in the ass to account for.
State business license requires tree work to carry a bond and insurance. Two options one for specialty contractors, one for a general. Different bond requirements and sub contractor rules are about the only difference between the two licenses.
Workman’s comp is hourly based on employee hours worked. Base rate +/- “safety” rating. They keep sending me letters congratulating on my safety rating, giving me discounts as the base rate increases making my rates higher overall.
Owners have the option to pay into workman’s comp, employees are mandatory. Legit subs are required to have employees. But as a owner and you pay into workman’s comp, the whole day needs to fall into the highest classification of the day. For an example I clock in and start admin, I pay like .23 cents per hour, but then I run a do a few bids that’s a sales rate, then I do some shop maintenance at a shop rate, then I go chip a little brush the whole day needs to go to a treeworker rate of 5-8$ an hour. They will audit you and make up numbers! If they find you wrote “felling” on a invoice the whole day goes down as logging at $20+ per worker hour.
 
tomstrees said:
. I have spoken with the state revenue people who say the tax is due whether or not the customer pays.
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Right...so if it is a $100 job, I invoice for $106.75. If they wrote the check already and I'm feeling generous, I'll take the $100. It gets recorded as an $93.68 job and still taxed at 6.75% to come out to $100 even. I do try to avoid that. If it becomes too common, I'd just start quoting $110.

I get people asking on occasion if I charge less for cash. Apparently others do because they are surprised that I don't... I think it is a pain. I'd have to keep 2 books, make sure the one stays hidden. On top of that, I have to take cash to the bank...checks can be deposited from anywhere with mobile deposit now!
 
I ran into a local tree climber yesterday at the grocery store, I had seen him at Home Depot picking up quarts of alcohol free gas the day before. I asked him about all the legal requirements like workers? He said he calls into ADP, a lot easier than other systems. Tree and landscape companies are so independent, too bad they don't help each other get legal with their operations. Instead you get reported if someone sees you are doing something not according to code, I know that happened to me, as the state DEP told me as much regarding advertising without a license.
 
tomstrees said:
I ran into a local tree climber yesterday at the grocery store, I had seen him at Home Depot picking up quarts of alcohol free gas the day before. I asked him about all the legal requirements like workers? He said he calls into ADP, a lot easier than other systems. Tree and landscape companies are so independent, too bad they don't help each other get legal with their operations. Instead you get reported if someone sees you are doing something not according to code, I know that happened to me, as the state DEP told me as much regarding advertising without a license.
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Just go legit. It’s not that hard and if you are smart about it there are bennies
 
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ATH said:
Right...so if it is a $100 job, I invoice for $106.75. If they wrote the check already and I'm feeling generous, I'll take the $100. It gets recorded as an $93.68 job and still taxed at 6.75% to come out to $100 even. I do try to avoid that. If it becomes too common, I'd just start quoting $110.

I get people asking on occasion if I charge less for cash. Apparently others do because they are surprised that I don't... I think it is a pain. I'd have to keep 2 books, make sure the one stays hidden. On top of that, I have to take cash to the bank...checks can be deposited from anywhere with mobile deposit now!
Click to expand...

Screw the banks cash is for drugs, paying others in cash, keep cash cash and don’t spend it until you have to
 
I keep dreaming that if the "good guys" played by the right laws and the government did its job, the society would be a lot better, but they don't deal with the non-legal workers or employers and when the government does, senators, congress people and special interest groups complain they are being cruel. Meanwhile wages keep falling for tree and other outdoor workers.

The town of Stamford, CT put up a "labor pick-up" sign 25 or so years ago near Auto Zone on the Boston post Rd. There those who are probably not legal get picked up in the morning, and property owners and contractors drive by in their trucks and cars to pick them up at 6 am or 7 and pay them cash. No enforcement.
 
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tomstrees said:
I keep dreaming that if the "good guys" played by the right laws and the government did its job, the society would be a lot better, but they don't deal with the non-legal workers or employers and when the government does, senators, congress people and special interest groups complain they are being cruel. Meanwhile wages keep falling for tree and other outdoor workers.

The town of Stamford, CT put up a "labor pick-up" sign 25 or so years ago near Auto Zone on the Boston post Rd. There those who are probably not legal get picked up in the morning, and property owners and contractors drive by in their trucks and cars to pick them up at 6 am or 7 and pay them cash. No enforcement.
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Instead of whining about illegal workers, how about you start helping find a way to make them legal workers.
Either that or stop caring about what everyone else is doing and go about your business. Change your market, find a way to go legit, it’s a headache sometimes but it’s really not that hard. Hell if I can do it anyone can.
 
southsoundtree said:
Outsource accounting and taxes. My accountant filed my incorporation.
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Same, but set it up as a LLC that files as a s-Corp. I have a trade worked out for my book keep so no cost there, and the time my CPA saves me is close to or over 40 hours a year if I did it myself.
 
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tomstrees said:
I keep dreaming that if the "good guys" played by the right laws and the government did its job, the society would be a lot better, but they don't deal with the non-legal workers or employers and when the government does, senators, congress people and special interest groups complain they are being cruel. Meanwhile wages keep falling for tree and other outdoor workers.

The town of Stamford, CT put up a "labor pick-up" sign 25 or so years ago near Auto Zone on the Boston post Rd. There those who are probably not legal get picked up in the morning, and property owners and contractors drive by in their trucks and cars to pick them up at 6 am or 7 and pay them cash. No enforcement.
Click to expand...
 
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