When a business contracts to perform cleanup on foreclosed properties for consumers (e.g., for banks, realtors, or investors), they often provide a combination of services for either an agreed-upon lump sum price or an amount to be based on the actual time spent cleaning up the property. These services are considered special cleanup jobs and may include, but are not limited to:
- Securing the site by:
- Rekeying doors.
- Replacing or boarding up windows.
- Securing other openings.
- Performing winterization services.
- Making safety repairs.
- Lawn and yard services, including:
- Sweeping sidewalks and pathways.
- Cleaning, including:
- Personal property and debris removal.
- Wiping down or replacing fixtures.
- Plastering/drywall repair.
- Pressure washing.
- Roof and gutter cleaning.
Businesses performing these types of cleanup services on foreclosed properties are generally making retail sales, and must collect and report retail sales tax. These businesses will also generally be subject to the retailing B&O tax. These cleanup jobs do not qualify for the exclusion for “janitorial services” because the services provided by these businesses are beyond the scope of cleaning and caretaking services ordinarily provided by commercial janitorial businesses.
Limited circumstances under which a wholesale sale may occur
Instead of being hired by the property owner (e.g., bank, realtor, or investor), a business (Business S) performing foreclosure cleanup services may act as a subcontractor to a business (Business C) that was hired by the property owner. In such a situation, Business C hired by the property owner will collect and remit sales tax. Business S acting as a subcontractor would report its income under the wholesaling B&O tax classification, but only if it has received a reseller permit from Business C.
Equipment, tools, and supplies
Equipment, tools, and supplies used by businesses during the cleanup of foreclosed properties are subject to retail sales tax when purchased. If retail sales tax was not collected by the seller, the business owes deferred sales tax or use tax on the items purchased. Deferred sales tax and use tax can be reported on the excise tax return.
Financial Business, Property Managers and Real Estate Brokers
If you hire someone to perform the cleanup activities discussed above and that person does not collect sales tax, you would owe use tax on such payments. Use tax is to be reported on your regular excise tax return or on a Consumer Use Tax Return.