Taxes and budgets

Started by RobertW31 • 9 replies • 645 views

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RobertW31 (New York)
Posts: 41

Posted:

Just wondering how this is handled in HOA budgets. Our management company prepares our annual budget and provides monitoring reports throughout the year. Our budget includes a line for our lawn care contract. The item lists the cost of the contract and shows the regular payments expected.

When the actual payment is made it includes the sales tax which is not part of the lawn care item in the budget.

When trying to estimate the cost of a new lawn care contract and what impact it will have on the budgeted figures it becomes very difficult to do since nowhere do i find a line for sales taxes. Only a line for the estimated cost of lawn care, which in this case is last year's lawn care company who we terminated after one year of the three year contract.

Do HOA budgets normally have a separate line for sales taxes. In this state we pay a sales tax for services to the contractor and the contractor is responsible for making the tax payment.

Just to be clear I have asked the question of the management company but so far no specific answer.

MelissaP1 (Alabama)
Posts: 13,836

Posted:

Sounds like the contract includes paying the sales tax to the contractor. Since the contractor pays the sales tax themselves, it's probably not listed. Maybe they have the sales tax factored into a different box or part of the contract?

Former HOA President

RoyalP
Posts: 1,104

Posted:

..... Do HOA budgets normally have a separate line for sales taxes. In this state we pay a sales tax for services to the contractor and the contractor is responsible for making the tax payment. .....

Said tax 'should' be included as part of the total contract cost. It is merely a paperwork issue. Sorta like buying a car.

(ex NYer)

TimM11
Posts: 354

Posted:

Yeah, I don't understand why this wouldn't be in the quote/contract. It's always been factored in for ours.

DouglasK1 (Florida)
Posts: 2,046

Posted:

The budgeted amount for lawn service should be the all-in amount including sales taxes.

Escaped former treasurer and director of a self managed association.

ND (PA)
Posts: 792

Posted:

Agree with others that contract cost should include applicable tax and then that figure is used for budgeting.

I'm confused as to what your current contract status is though. If you're trying to use an old landscaping contract cost as a future budget amount . . . thats' a good starting point, but to accurately do a future budget (assuming new landscaper), you need to get new quotes (by putting out an RFP that landscapers can bid on), select a contractor, and use that figure in your budget.

RobertW31 (New York)
Posts: 41

Posted:

So the new budget has what would have been the cost of the second year of the contract if we had continued with that contractor. We are now in the process of hiring a new contractor have the bids and are interviewing.When trying to estimate increases in cost with a new contractor the sales tax is not listed in the budget. I think it should be since it is hoa finds that are paying the tax but it doesn’t seem to be. Bids do include the sales tax.

ND (PA)
Posts: 792

Posted:

No need to list taxes separately in the budget, just lump all together in the line item for "Landscaping Maintenance" (or similar). The Board can view the contract for the specifics if needed, but when it comes to budgeting, splitting all apart isn't necessary.

CathyA3 (Ohio)
Posts: 6,299

Posted:

The only reason I can think of to do taxes separately would be if the landscaper were an employee of the HOA vs. an independent contractor, but it doesn't sound like this is the case. I agree with the other commenters, this would be no different from any of the other sales taxes an HOA may have to pay for other goods and services.

Couldn't hurt to ask the person who files the HOA's tax returns, though.

Cathy
(not a tax professional)

JohnC46 (South Carolina)
Posts: 14,265

Posted:

I have never heard of breaking sales tax out as a line item.

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