# Marking Up Paint to increase profits



## IMpainting (Feb 6, 2014)

How should Painting Contractors price material (paint) to their customers
1. Free- Charge for labor only
2.Wholesale, no mark up
3.Wholesale plus a __% Mark up 
4.Retail: the same as what the paint store would have charge some on the street.
5.Retail plus a __% mark up6.Other way


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## Woodco (Nov 19, 2016)

I dont show my clients my material cost. I add a 10-15% markup in my bid, but I dont itemize that.. I also overshoot my paint estimate, so what I dont buy is $$$!


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## IMpainting (Feb 6, 2014)

Woodco
Marking up paint 10-15% seams low when suppliers are offering contractor discounts between 30-40% off retail.
Should customer pay painter closer or above what they could buy it at the paint store?


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## Mace (Nov 16, 2017)

I myself just add an extra $5.00 per gallon of wall paint.
Works for me.


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## Brushman4 (Oct 18, 2014)

IMpainting said:


> How should Painting Contractors price material (paint) to their customers
> 1. Free- Charge for labor only
> 2.Wholesale, no mark up
> 3.Wholesale plus a __% Mark up
> ...


#4, retail price. I'm using my time to order and pick up the paint and I will make money off of it!


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## Repaint Florida (May 31, 2012)

Retail ... that's the point of a business

Should you charge them labor at cost? NO

What other business sells at cost? 


But Sherwin Williams is killing the trade ... paint is on "sale" 80% of the year
for the homeowner ... 

That's 1 reason i don't shop SW ... they value homeowners more than contractors
rant over


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## cardgunner (Feb 29, 2016)

Wow. I just hand them my receipt and they pay it. I'm at the BM paint store anyways getting supplies 90% of the time. If this was my "full" time job maybe it would be different. Just seems wrong. I like my clients.


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## Woodco (Nov 19, 2016)

IMpainting said:


> Woodco
> Marking up paint 10-15% seams low when suppliers are offering contractor discounts between 30-40% off retail.
> Should customer pay painter closer or above what they could buy it at the paint store?


You're right.. I do like to tell the potential client That i get a good deal, and pass some savings on to them, though. Subconcious sales tactic.


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## PACman (Oct 24, 2014)

Let the paint stores mark the paint up. You provide a service not a "Product". And technically if you make any profit off of the paint you have to pay sales tax on your mark up. Although i've never seen anyone get caught on that. It could happen at some point.


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## RH (Sep 7, 2010)

As a reason to go with us, I offer the customer my discount on any paints, primers, stains used on a job. However, I insist on being in charge of the ordering, pick-up, and getting it to the job. I do factor in a percentage for doing all of that. I also don’t include the cost of any product in my bid (blasphemy). I tell them they will get the paint at my price but whatever the paint costs is what it is. I do, however give them an estimate (usually on the high side) so they can budget for it. 

With paint prices being somewhat all over the place, this assures that I won’t be forced to eat any unexpected costs because a customer wants a higher priced used on their job. Ex., customer liked a SW color, fine; Duration at a medium price range. Then she found an accent color she liked at our new BM dealer; also fine; Aura at a considerably higher price. Makes absolutely no difference to me.
Also saves me from having to sweat out the costs for paint down the exact gallon. Sure, I could allow for a higher amount in my bid to cover my zzz, but being able to tell the customer, “We buy, and you only pay, for what is needed for your project, and whatever is left stays with you.”, has sold more jobs than I could ever remember.

Been doing it this way for the last 15 years and only had one customer ( that I know of) who balked at that arrangement. When they got my contract, they said they didn’t know the cost of the paint wasn’t in my bid, which was totally untrue - I made that abundantly clear at several points during the bid process. I suspect they ended up getting a lower bid after they agreed to go with me and used that as an excuse to “go another direction”. 

Of course, there are times that circumstances dictate that the product needs to be factored into the bid, but not very often. 

Okay, bring it on. I’ve heard it all before and am still convinced it’s an excellent way to conduct business - at least for me.


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## jennifertemple (Oct 30, 2011)

QUOTE=Woodco;1646853]I dont show my clients my material cost. I add a 10-15% markup in my bid, but I dont itemize that.. I also overshoot my paint estimate, so what I dont buy is $$$![/QUOTE]

...No doubt encourages the "I'll buy my own paint" mindset on the part of HOs. Now I understand where they're coming from!

I consider the materials my advertising cost. My clients pay what I paid and I rarely over shoot amounts. In fact, I tell them they can place and pay for the order on my account and they or I can take it to the work site. This way, they are thrilled to get the paint at contractors rates and all they need to do is show my supplier the signed contract as evidence the material is for my use. They tell their friends and I get more work. I NEVER pay for direct advertising, it's always been a waste of money for me. I rely on word of mouth so I always leave my clients something to talk about.


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## jennifertemple (Oct 30, 2011)

@RH You tell'em Guy! IMHO, there is no better advertising and I write the paints into the contract that they present to my supplier, he just fills the order as I wrote it. After that, I don't care who picks it up. The client or me. 

There is another trick I've been known to pull: I over estimate the job 15-20% and at the end give the HO a rebate for any amount over and above what I actually wanted to make for the job. The HOs are always thrilled and I am well covered for anything that comes up!


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## Gymschu (Mar 11, 2011)

Depends on the customer for me. If it's a regular, on-time paying customer, I generally give them MY price but I do remind them that, "It's normally $50 per gallon retail but I'm giving you my price for the paint." If it's someone new, I do tack on a small percentage for any hassles of going to and from the paint store. If it's a HIGH RISK customer, I charge full retail.


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## Pete Martin the Painter (Nov 8, 2012)

They pay what I pay....unless I have to go out of my way to get the paint. Then I simply charge them the time it takes me to get the paint.

Someone told me that in Massachusetts if contractors up charge they are legally required to pay a sales take on the extra amount the customers pay. I doubt anyone has ever had to pay this tax, and there are obvious ways to claim you are not up charging, such as I noted about charging for the time to get the materials, which seems legit to me.

Sent from my SM-A600U using Tapatalk


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## PACman (Oct 24, 2014)

Pete Martin the Painter said:


> They pay what I pay....unless I have to go out of my way to get the paint. Then I simply charge them the time it takes me to get the paint.
> 
> Someone told me that in Massachusetts if contractors up charge they are legally required to pay a sales take on the extra amount the customers pay. I doubt anyone has ever had to pay this tax, and there are obvious ways to claim you are not up charging, such as I noted about charging for the time to get the materials, which seems legit to me.
> 
> Sent from my SM-A600U using Tapatalk


any time you make a profit off of an actual item you are supposed to pay sales tax on it. In almost every state.


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## BrushPro (Nov 15, 2018)

If I think I need 10 gal and my price per gal is 31$ before tax I just round it up to 40$/gal when I estimate. I say I think it will be $400 in paint and ***x for labour. Your final price is $4000. If I go over budget on paint I don't charge them and I don't rebate if I go under. I like fixed prices and so do a lot of clients so they know exactly what they will pay. I don't see the reason in charging retail for paint, why not just increase your rates for labor and have higher fixed prices???


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## PACman (Oct 24, 2014)

"stay in your lane bro, stay in your lane"


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## cocomonkeynuts (Apr 14, 2017)

PACman said:


> any time you make a profit off of an actual item you are supposed to pay sales tax on it. In almost every state.



ehh I always viewed it as a service charge for physically picking up, storing & handling the paint. Come tax time that's how I would expect their accountant to enter it as well.


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## Wolfgang (Nov 16, 2008)

Never made a dime on any paint. I always told the customer that and would actually show them the receipt if they wanted to see it. They appreciated it and it was a good selling point not to mention a good bit of information they had to possible referrals.


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## AngieM (Apr 13, 2016)

PACman said:


> any time you make a profit off of an actual item you are supposed to pay sales tax on it. In almost every state.


I have a sales tax exemption at SW so I itemize the actual paint usage and yes pay sales tax on it. 

Sent from my moto z3 using Tapatalk


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## Wolfgang (Nov 16, 2008)

I look at having to go to the paint store as part as the cost of doing business. The cost is compensated in my hourly rate. Otherwise, on my estimate and contract I'll put a $25 charge for incidental supplies. Haven't had a customer question that at all. Can't paint if you don't have the material right? Besides, when I have to go to the paint store to fill shop stock items, equipment and tools who do I charge for my time?


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## Woodco (Nov 19, 2016)

PACman said:


> any time you make a profit off of an actual item you are supposed to pay sales tax on it. In almost every state.


Only if you invoice it that way. I just charge X amount of dollars to get the job done. I dont invoice for $***X for labor, and 13 gallons of paint at $XY per gallon. 

I dont sell the client paint. I PROVIDE the paint. If I sold the clients their paint, I wouldnt have to pay sales tax at the store. Instead, I pay Income tax for any profit I make no matter what it is.


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## Mysticumbrella (Jan 28, 2019)

PACman said:


> Let the paint stores mark the paint up. You provide a service not a "Product". And technically if you make any profit off of the paint you have to pay sales tax on your mark up. Although i've never seen anyone get caught on that. It could happen at some point.


I agree completely - I simply pass my price on to the client. I'd rather see my clients using the best paints possible, and me playing a role in helping them with that brings value to our "service". It also helps us in production when the better paints are used.


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## MikeCalifornia (Aug 26, 2012)

You don't charge your clients per gallon of paint used or hour of labor? Unless its T&M. You are charging to do a particular scope of work at a set quote/bid/proposed price. It is none of your clients business how much you buy paint for, how much you pay your employees/yourself. Bid your jobs to cover these costs (materials x materials overhead x tax) + (labor x labor overhead) + overhead percentage + profit. Trust me you will never underbid or have to sell yourself short.


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## EveryDay (Mar 23, 2019)

RH said:


> As a reason to go with us, I offer the customer my discount on any paints, primers, stains used on a job. However, I insist on being in charge of the ordering, pick-up, and getting it to the job. I do factor in a percentage for doing all of that. I also don’t include the cost of any product in my bid (blasphemy). I tell them they will get the paint at my price but whatever the paint costs is what it is. I do, however give them an estimate (usually on the high side) so they can budget for it.
> 
> With paint prices being somewhat all over the place, this assures that I won’t be forced to eat any unexpected costs because a customer wants a higher priced used on their job. Ex., customer liked a SW color, fine; Duration at a medium price range. Then she found an accent color she liked at our new BM dealer; also fine; Aura at a considerably higher price. Makes absolutely no difference to me.
> Also saves me from having to sweat out the costs for paint down the exact gallon. Sure, I could allow for a higher amount in my bid to cover my zzz, but being able to tell the customer, “We buy, and you only pay, for what is needed for your project, and whatever is left stays with you.”, has sold more jobs than I could ever remember.
> ...


I'm going to be gentle on you, lol.
You are a gentleman for treating your customers fair. 
Indeed a very good method and I do practice the same, including few dollars for gas and my time in the paint store. 
As you stated gives the customer options as to quality of paints to be used on their project according to customer's budget.


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## EveryDay (Mar 23, 2019)

Woodco said:


> Only if you invoice it that way. I just charge X amount of dollars to get the job done. I dont invoice for $***X for labor, and 13 gallons of paint at $XY per gallon.
> 
> I dont sell the client paint. I PROVIDE the paint. *If I sold the clients their paint, I wouldnt have to pay sales tax at the store.* Instead, I pay Income tax for any profit I make no matter what it is.


I think that's wrong assumption.
You have to pay the sales tax at the store and what you do with the paint after that is matter of accounting rules. 
If you re-sell the paint to the customer you must charge them sales tax on it and apply for the store tax that you paid to be reimbursed from your income tax.
NO?


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## RH (Sep 7, 2010)

Sales tax is not an issue here - we don’t have one.


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## EveryDay (Mar 23, 2019)

RH said:


> Sales tax is not an issue here - we don’t have one.


I just notified Donald about it.
Expect changes, tax evaders.


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## Woodco (Nov 19, 2016)

EveryDay said:


> I think that's wrong assumption.
> You have to pay the sales tax at the store and what you do with the paint after that is matter of accounting rules.
> If you re-sell the paint to the customer you must charge them sales tax on it and apply for the store tax that you paid to be reimbursed from your income tax.
> NO?


I dont delve too far into it, but I do know that if you have a resale number, and you buy stuff at a store, to sell somewhere else, you dont pay sales tax. You charge sales tax when you sell it yourself, and that goes to the local government.

For me, I dont see it as a "markup", I see it as a "deal with the paint store fee." No sales tax there.


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## PACman (Oct 24, 2014)

EveryDay said:


> I think that's wrong assumption.
> You have to pay the sales tax at the store and what you do with the paint after that is matter of accounting rules.
> If you re-sell the paint to the customer you must charge them sales tax on it and apply for the store tax that you paid to be reimbursed from your income tax.
> NO?


Paint sold tax exempt at a paint store must be used on a consumer good, and not a fixed location. You must be able to physically move the end product for the paint to be considered a raw material used in the manufacture of that product. Therefore if you make a profit off of that paint itself by selling it at a mark-up, in most states you are required by law to not only charge tax on your profit but have a retail vendor license. This is usually only checked on by the man for paint stores that sell OEM paints, as they represent a much larger portion of the paint industry as a whole than architectural paints and they must have proof that the paint they are selling is being sold to an OEM end user or in another country.

I have never seen any IRS or state tax people check on a painter in the field. They COULD, and i am sure there are red flags they may look for. I've never seen it though.

The best thing to do is not do a line item on an invoice for "paint" itself, as this would be an obvious red flag if and when they decide to enforce that law. Just absorb the paint price(cost for you) into your labor or some other line item such as "supplies", which are technically tax exempt as they are "consumable goods" that are "consumed" by being used on the job. Tools are a tax deduction on your annual tax returns. If you charge your customer for "tools" on a line item they are technically "sales" taxable as well.

Every state is different as sales tax and sales tax laws are state laws and not federal laws. If a company was big enough and enough money was involved the IRS could actually investigate and levy fines for the state the offense occurred in.

And also there is the issue of it turning into a major pain in the ass to keep track of the whole process. Why make your business more difficult to run by adding another paperwork load? Keep it simple and just add a percentage to your labor as the others have suggested. I have seen probably hundreds of painters get burned in one way or another by trying to be a paint company and make a few $$$ on the paint they use. For one paint prices are in constant flux, as most SW users have found out i am sure. Every time paint prices go up there is a collective groan from all the painters who do a paint mark-up! Why do that to yourself?


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## jennifertemple (Oct 30, 2011)

*Discount People*

Do any of you people get the "discount?" people. I had areas of the city where no matter the bid, they always wanted a discount! I explained to one woman, "It is a fair price for a good job and you know my work. Look at it this way. I could ask $300 more, you ask me for a discount & I say sure, I like you so I'll give you 15-20% off. I give you a discount BUT I'm still gouging you!" She said "Oh, but you wouldn't do that!?" I said "No! I ask a fair and honest price." Her, "Discount?" 

I gave up and built in the 20% discount that those people always wanted. For them, I think, it was all just a matter of being able to say they got the painter to give them a discount. So, in those cases, I always built in the 20% off. Everybody was happy after that and I stopped trying to reason with the discount people.


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## Woodco (Nov 19, 2016)

jennifertemple said:


> Do any of you people get the "discount?" people. I had areas of the city where no matter the bid, they always wanted a discount! I explained to one woman, "It is a fair price for a good job and you know my work. Look at it this way. I could ask $300 more, you ask me for a discount & I say sure, I like you so I'll give you 15-20% off. I give you a discount BUT I'm still gouging you!" She said "Oh, but you wouldn't do that!?" I said "No! I ask a fair and honest price." Her, "Discount?"
> 
> I gave up and built in the 20% discount that those people always wanted. For them, I think, it was all just a matter of being able to say they got the painter to give them a discount. So, in those cases, I always built in the 20% off. Everybody was happy after that and I stopped trying to reason with the discount people.


Tell them you'll eat the sales tax.


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## RH (Sep 7, 2010)

jennifertemple said:


> Do any of you people get the "discount?" people. I had areas of the city where no matter the bid, they always wanted a discount! I explained to one woman, "It is a fair price for a good job and you know my work. Look at it this way. I could ask $300 more, you ask me for a discount & I say sure, I like you so I'll give you 15-20% off. I give you a discount BUT I'm still gouging you!" She said "Oh, but you wouldn't do that!?" I said "No! I ask a fair and honest price." Her, "Discount?"
> 
> I gave up and built in the 20% discount that those people always wanted. For them, I think, it was all just a matter of being able to say they got the painter to give them a discount. So, in those cases, I always built in the 20% off. Everybody was happy after that and I stopped trying to reason with the discount people.


Not really seen areas of our town where this seems to be prevelant. But I will say that certain ethnicities tend to try to haggle for a lower price. Not going to go into specifics but it seems to be an ingrained habit with some cultures.


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## Woodco (Nov 19, 2016)

RH said:


> Not really seen areas of our town where this seems to be prevelant. But I will say that certain ethnicities tend to try to haggle for a lower price. Not going to go into specifics but it seems to be an ingrained habit with some cultures.


Everything is a negotiation in some countries. Its not a bad thing, you just need to counter it by upping your bid a bit, and let them drive your price down, preferably to where you wanted it in the first place. Then you need to act like it hurt a little bit. 

At the same time, if you go to one of these countries, and you pay full price, the seller will think you are an idiot, because he already added a 20% buffer on his price to haggle with.

They arent being cheap, its just their cultural norm. They actually expect people to mark their price higher for the sake of negotiation. Just recognize it, and play along.


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## PNW Painter (Sep 5, 2013)

If someone really wants a discount I recommend T&M. Unless I screw up a bid T&M is the best deal I can give clients.


Sent from my iPhone using Tapatalk


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## Holland (Feb 18, 2011)

Repaint Florida said:


> Retail ... that's the point of a business
> 
> Should you charge them labor at cost? NO
> 
> ...


I couldn't agree more. SW sends a strong message to Contractors, when they will give a new customer who walks in off the streets a better price with their "sales" than they give to long-term "buyers" (ie., Contractors).

SW sales leave no room for the Painter to make a profit on materials, and in some cases the painter risks taking a loss if customer demands a sale price from SW. SW prices for the contractor are typically based on purchasing and pre-negotiated prices for certain brands (ie., I get better pricing on Cashmere and Super Paint, but not as good on other labels)
I have dealt with the "SW Sales" issue often, and in such cases I tell the customer that they will need to pick up the paint if they want the sale price- I am not going down that road anymore.


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## jennifertemple (Oct 30, 2011)

PNW Painter said:


> If someone really wants a discount I recommend T&M. Unless I screw up a bid T&M is the best deal I can give clients.
> Sent from my iPhone using Tapatalk



With that particular area of the city T&M would never get the job! There was no way around it but to build in the discount. AND! That was a really lucrative neighborhood & they had no qualms about spending real money; it was simply that no matter what the bottom line they had to haggle a discount. "I'll give 15%" "I'm sure you can give me a better deal than that!" Me, looking pinched, "OK, I'll give you 20 but that's it, I can not afford to go any lower!" I write it up & they sign it. The joy was they were cash in hand ready as I was packing up my gear! Never the slightest problem on the pay end of those jobs. I loved working that area!


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## Holland (Feb 18, 2011)

Materials (and pricing in general) is one place where it is important to be consistent. 
Current retail pricing is one method, and is fair. It is what the customer would pay if they go to the store themselves (except when dealing with SW sales). 

With that said, material pricing is also a place where you can sweeten the deal for any reason by offering slight breaks in the price. If for example your estimate runs over on another part of the project...then a slight break in materials costs may help to garner good feelings.


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## Brushman4 (Oct 18, 2014)

PACman said:


> Paint sold tax exempt at a paint store must be used on a consumer good, and not a fixed location. You must be able to physically move the end product for the paint to be considered a raw material used in the manufacture of that product. Therefore if you make a profit off of that paint itself by selling it at a mark-up, in most states you are required by law to not only charge tax on your profit but have a retail vendor license. This is usually only checked on by the man for paint stores that sell OEM paints, as they represent a much larger portion of the paint industry as a whole than architectural paints and they must have proof that the paint they are selling is being sold to an OEM end user or in another country.
> 
> I have never seen any IRS or state tax people check on a painter in the field. They COULD, and i am sure there are red flags they may look for. I've never seen it though.
> The best thing to do is not do a line item on an invoice for "paint" itself, as this would be an obvious red flag if and when they decide to enforce that law. Just absorb the paint price(cost for you) into your labor or some other line item such as "supplies", which are technically tax exempt as they are "consumable goods" that are "consumed" by being used on the job. Tools are a tax deduction on your annual tax returns. If you charge your customer for "tools" on a line item they are technically "sales" taxable as well.
> ...


I'd have to disagree with you about tax-exempt paint, in Illinois, a painting contractor can buy paint, if working for a tax exempt organization ( non-profit) IL sales tax exempt if you give the supplier tax number to the seller!


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## RH (Sep 7, 2010)

Woodco said:


> Everything is a negotiation in some countries. Its not a bad thing, you just need to counter it by upping your bid a bit, and let them drive your price down, preferably to where you wanted it in the first place. Then you need to act like it hurt a little bit.
> 
> At the same time, if you go to one of these countries, and you pay full price, the seller will think you are an idiot, because he already added a 20% buffer on his price to haggle with.
> 
> They arent being cheap, its just their cultural norm. They actually expect people to mark their price higher for the sake of negotiation. Just recognize it, and play along.


Yeah, I could see doing it if you go to a country where the haggling of prices is the norm, but when they are now living here, where it typically isn’t, they should pick up on that fact and drop the game playing.

Most service providers I know would tell a customer to go “F” themselves if they began trying to negotiate a lower price.


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## PNW Painter (Sep 5, 2013)

Brushman4 said:


> I'd have to disagree with you about tax-exempt paint, in Illinois, a painting contractor can buy paint, if working for a tax exempt organization ( non-profit) IL sales tax exempt if you give the supplier tax number to the seller!




I’m guessing that every state is a little different when it comes to sales tax exemptions. 

In WA we can apply for a resellers permit so we don’t have to pay sales taxes on items we use for projects.

Heck, in OR they don’t even have a sales tax. 


Sent from my iPhone using Tapatalk


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## futtyos (Aug 11, 2013)

*Profit?*



Woodco said:


> Only if you invoice it that way. I just charge X amount of dollars to get the job done. I dont invoice for $***X for labor, and 13 gallons of paint at $XY per gallon.
> 
> I dont sell the client paint. I PROVIDE the paint. If I sold the clients their paint, I wouldnt have to pay sales tax at the store. Instead, I pay Income tax for any profit I make no matter what it is.


Woodco, how do you determine how much profit you make on any particular job?

futtyos


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## Woodco (Nov 19, 2016)

futtyos said:


> Woodco, how do you determine how much profit you make on any particular job?
> 
> futtyos


I use PEPcloud. I basically does it for me. I plug in the measurements, and what needs to be done. It calculates the amount of paint it will take. In the settings, I tell it the average hourly rate for employees. (I dont have any, but I have it set on 18 right now). It also asks how much overhead and profit I want to make off employees per hour. I have it set to the percentage, so it adds up to the amount per hour I feel Im worth. It also asks me what percentage for material markup I want. I have it set for 10%, because this program overshoots the materials for some reason. It thinks a bedroom takes 2.5 gallons of paint for two coats, and it really only takes 1.5 or so. It gives me a good buffer.

So, after I have everything plugged in, it calculates the hours the job should take, the materials and cost its should take, and calculates the profit, and gives me a number. Then I add a few hundred more, and try to make it a nice even number. 

But, before I had that program, I basically just did the same thing. estimated hours, and materials. It was when I was new, and I wasnt very good at it. This program makes sure I dont sell myself short like I used to do.


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## futtyos (Aug 11, 2013)

Woodco said:


> I use PEPcloud. I basically does it for me. I plug in the measurements, and what needs to be done. It calculates the amount of paint it will take. In the settings, I tell it the average hourly rate for employees. (I dont have any, but I have it set on 18 right now). It also asks how much overhead and profit I want to make off employees per hour. I have it set to the percentage, so it adds up to the amount per hour I feel Im worth. It also asks me what percentage for material markup I want. I have it set for 10%, because this program overshoots the materials for some reason. It thinks a bedroom takes 2.5 gallons of paint for two coats, and it really only takes 1.5 or so. It gives me a good buffer.
> 
> So, after I have everything plugged in, it calculates the hours the job should take, the materials and cost its should take, and calculates the profit, and gives me a number. Then I add a few hundred more, and try to make it a nice even number.
> 
> But, before I had that program, I basically just did the same thing. estimated hours, and materials. It was when I was new, and I wasnt very good at it. This program makes sure I dont sell myself short like I used to do.


Sounds like an interesting program for drawing up proposals. I think that what I am trying to understand is how you go about determining what your taxable profit is. Since you work for yourself currently, let me pose a situation as follows: 

Suppose a client accepts your $3,000.00 proposal for a painting job. Let's say that your costs (paint, caulk, sundries, travel gas, etc.) are 400.00. That leaves you with 2,600.00, which basically is what you are being paid for your labor. How would you determine, for income tax purposes, how much of this 2,600.00 is profit that is taxable as income?

futtyos


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## Woodco (Nov 19, 2016)

futtyos said:


> Sounds like an interesting program for drawing up proposals. I think that what I am trying to understand is how you go about determining what your taxable profit is. Since you work for yourself currently, let me pose a situation as follows:
> 
> Suppose a client accepts your $3,000.00 proposal for a painting job. Let's say that your costs (paint, caulk, sundries, travel gas, etc.) are 400.00. That leaves you with 2,600.00, which basically is what you are being paid for your labor. How would you determine, for income tax purposes, how much of this 2,600.00 is profit that is taxable as income?
> 
> futtyos


Its all taxable income. It doesnt matter if its profit, or what I designate my paycheck to be. The only thing thats not taxable is material receipts, overhead and what I pay someone else (assuming I 1099 them.) 

Since I am a sole proprietor, profit, and salary are one in the same. If I had a partnership, there would have to be some sort of hourly wage or salary designated to all part owners, and profit would then be split between, but it would still be income. 

In your example, say me and helper both worked 20 hours to complete that job. I pay helper 20 an hour, so thats 400. (To keep it simple lets say I will 1099 him) Also, lets say I designate $600 as company overhead. This will be written off on taxes. This leaves $1600 as income and profit, however I want to look at it. Its all the same to the IRS. If I had a partner, I could pay myself $40 an hour for 20 hours, ($800) leaving 800 for profit, that me and my partner would split 50/50, leaving me with 1200 of taxable income, and my partner $400. This is a very simplified scenario, obviously, since my partner basically $400 for nothing, but the point is still there.


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## futtyos (Aug 11, 2013)

*Questions*



Woodco said:


> Its all taxable income. It doesnt matter if its profit, or what I designate my paycheck to be. The only thing thats not taxable is material receipts, overhead and what I pay someone else (assuming I 1099 them.)
> 
> Since I am a sole proprietor, profit, and salary are one in the same. If I had a partnership, there would have to be some sort of hourly wage or salary designated to all part owners, and profit would then be split between, but it would still be income.
> 
> In your example, say me and helper both worked 20 hours to complete that job. I pay helper 20 an hour, so thats 400. (To keep it simple lets say I will 1099 him) Also, lets say I designate $600 as company overhead. This will be written off on taxes. This leaves $1600 as income and profit, however I want to look at it. Its all the same to the IRS. If I had a partner, I could pay myself $40 an hour for 20 hours, ($800) leaving 800 for profit, that me and my partner would split 50/50, leaving me with 1200 of taxable income, and my partner $400. This is a very simplified scenario, obviously, since my partner basically $400 for nothing, but the point is still there.


I am trying to understand your reply, but before you try to explain it any further, let me go back to my original situation where the total cost to the client for the paint job is $3,000.00, your total expenses and overhead are 
$400.00 (your real overhead might be more, but for sake of discussion I am using the figures above.).

After you get paid for the job, you have $3,000.00 minus the $400.00 in expenses and overhead, namely $2600.00. What you have actully done here is trade one form of property to the client for a different form of property from the client.

You traded your labor (which is property in its most fundamental form) for monetized labor (check or cash) that represents the labor of the client. This was an agreed upon exchange whereby both you and the client gave equal consideration for the paint job being done. You gave up your property (labor) for the client's check (monetized labor). You expended 2600.00 worth of your labor, but gained an equal amount of monetized labor back from the client. The client gave you a check for the paint job and gained a paint job that is worth 2600.00 in labor plus 400.00 in materials. Since there was a mutually agreed upon exchange of equal value, which one of you made a profit or gain?

futtyos


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## PACman (Oct 24, 2014)

futtyos said:


> I am trying to understand your reply, but before you try to explain it any further, let me go back to my original situation where the total cost to the client for the paint job is $3,000.00, your total expenses and overhead are
> $400.00 (your real overhead might be more, but for sake of discussion I am using the figures above.).
> 
> After you get paid for the job, you have $3,000.00 minus the $400.00 in expenses and overhead, namely $2600.00. What you have actully done here is trade one form of property to the client for a different form of property from the client.
> ...


sherman williams did! Duh!


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## Woodco (Nov 19, 2016)

futtyos said:


> I am trying to understand your reply, but before you try to explain it any further, let me go back to my original situation where the total cost to the client for the paint job is $3,000.00, your total expenses and overhead are
> $400.00 (your real overhead might be more, but for sake of discussion I am using the figures above.).
> 
> After you get paid for the job, you have $3,000.00 minus the $400.00 in expenses and overhead, namely $2600.00. What you have actully done here is trade one form of property to the client for a different form of property from the client.
> ...


Well, thats getting into the "taxation is theft" argument.... 

Personally, I dont think a straight trade in labor for money is actually "income" but the boys at the IRS STRONGLY disagree.... And I dont think thats a subject we should get into here...


I guess this is kind of the same subject here, but this thread has got me thinking about when I got my brakes for my work van done last week. The labor was not bad at all, but I got absolutely RAPED on material markup. I think thats part of their tactic. Claim low labor rates, pay their guys peanuts, and make tons of profit off of material markup alone.

I had one rotor that was ground down by brake pad. They charged me $200 for it, even though you can buy one at Napa for about $80. What pissed me off though, was that they charged me $140 for the PARTS cost of bearings for the one tire. Worth $30 TOPS.

But, we have no choice in the matter. Thats their policy, and most repair shops policy as well. Either I pay WAY too much for parts, or I do it myself. I have no problem with the labor charge though. BUt, I guess, thats why I was able to come in on a sunday and get my brakes done in three hours, so whatever....


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## futtyos (Aug 11, 2013)

*tit for tat*



Woodco said:


> Well, thats getting into the "taxation is theft" argument....
> 
> Personally, I dont think a straight trade in labor for money is actually "income" but the boys at the IRS STRONGLY disagree.... And I dont think thats a subject we should get into here...
> 
> ...


Interesting reply. Before addressing any tax issue I would have to say that I have been fortunate over the years to have found auto mechanic angels along the way that have helped me to get my beaters back on the road.

That being said, I am not trying to post anything that smacks of "taxation is theft." I am just curious as to what those here (mostly those in the USA) think about certain things, like what the definitions of various terms that are commonly used in connection with governmental goings on are.

There is an old rabbinical saying that "the beginning of wisdom is to call everything by it's right name." This definitaly holds true especially in law. When you talk about "profit" I am interested in what you think that this is in regards to the Internal Revenue Code. When you say that the boys at the IRS STRONGLY disagree, I am interested in why you think that this is so.

You hit a nerve with me when I read about you trying to "fugure out" what your "profit" was on any particular job. In my mind, if there is an equal and agreed upon exchange between 2 parties on a business deal that only involves labor, where is the profit or gain?

If you were to hire several painters and charge 40.00 per hour for each painter to the client, but only pay each painter 25.00 per hour, then you might be making a "profit or gain" on the labor of each painter as you did not do the work they did, but you charged the customer for 15.00 more per hour than what you paid you painters for.

It all goes back to the name of the tax.....income. What is the definition of "income" as that term is used in the IR Code in USC 26?

futtyos


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## jennifertemple (Oct 30, 2011)

*Definition of Income*

Definition of Income for Tax Purposes:

https://pocketsense.com/definition-income-tax-purposes-7802318.html


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## Woodco (Nov 19, 2016)

futtyos said:


> Interesting reply. Before addressing any tax issue I would have to say that I have been fortunate over the years to have found auto mechanic angels along the way that have helped me to get my beaters back on the road.
> 
> That being said, I am not trying to post anything that smacks of "taxation is theft." I am just curious as to what those here (mostly those in the USA) think about certain things, like what the definitions of various terms that are commonly used in connection with governmental goings on are.
> 
> ...



Theres only two things in the accounting and tax world: Income, and expenses. You deduct the expenses from gross income, and thats your net income, which you get taxed on. It doesnt matter if its salary, profit, or bonus. I guess 'profit' would be the considered the companies income, after materials, overhead and labor, which the IRS taxes. I have an LLC, but since I am a single owner, I have to file as a sole proprietor, which means the companies income and my own, are one. In other words, I dont file my personal income tax, and then my companies separately, which makes things relatively simple. Yeah, I guess, I could actually pay myself a salary or wage, and leave the profits to my company account to buy new tools/vehicles with, but I dont. So, you could look at it as either 100% of the income after expenses is my profit or that 0% is, cuz it all goes to me anyway. So MY definition of profit, would be when I make more money than I expected to. If I plan on buying 20 gallons of paint, but it only takes 15, then the price of that 5 gallons is profit to me personally, but to the IRS, its just income. 

OTOH, if there are more than one owners of the company, It gets handled very differently. The company has to pay the owners out whatever system they agree on, and any leftover (profit) is in the company account, to be filed as its own tax entity.


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## futtyos (Aug 11, 2013)

*Source*



jennifertemple said:


> Definition of Income for Tax Purposes:
> 
> https://pocketsense.com/definition-income-tax-purposes-7802318.html


Jennifer, what you posted does not give any governmental authority for defining "income" as far as I can see. It only gives an opinion of what someone "believes" income to be and gives no citations to what the law actully says regarding what the legal definition of "income" is, at least in the U.S.. Correct me if I am wrong.

futtyos


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## Woodco (Nov 19, 2016)

futtyos said:


> You hit a nerve with me when I read about you trying to "fugure out" what your "profit" was on any particular job. In my mind, if there is an equal and agreed upon exchange between 2 parties on a business deal that only involves labor, where is the profit or gain?


Okay, let me explain this further:

When an established company bids a job, there are several things to consider:

A. Material cost: paint, sundries, etc.

B. Overhead: a partial breakdown of all other expenditures such as insurance, tool wear and tear, accounting, marketing, etc. Lets say you figure $10 an hour covers the cost of operations, administration, etc.. (obviously MUCH more complicated than that IRL)

C. Labor and Labor Burden: If you are running an over the table operation, and you pay a guy $20 an hour, you also have to pay quite a few more dollars an hour for things like workers comp, unemployment insurance, as well as any benefits you are giving them. So, it may cost the company $30 an hour to pay a guy $20. That $10 an hour is labor burden.

Now, your hourly rate is $10 overhead + $30 labor and labor burden. $40 an hour is the companies break even cost.

D. Labor profit: lets say you want to make $10 an hour profit off of each of your employees. Now, your per hour cost is $50 an hour.

You land a job that you project will take 100 man hours, and $1000 in materials. You add a 10% material markup which is $100 of profit.

So, you charge $6100. ($1100 for materials + $5000 labor). This will result in $1100 in taxable company profit, and 1000 goes to labor burden, and $1000 goes to overhead, and $3000 goes to someones paycheck and will be taxed as income. If it were me, and I did it myself, I have no labor burden, and I am the sole company owner, so I get $4000 plus the 1100 in profit, that I have to pay taxes on. If I had helpers do ALL the work, I keep the $1100 company profit as income.


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## futtyos (Aug 11, 2013)

*What is income?*



Woodco said:


> Theres only two things in the accounting and tax world: Income, and expenses. You deduct the expenses from gross income, and thats your net income, which you get taxed on. It doesnt matter if its salary, profit, or bonus. I guess 'profit' would be the considered the companies income, after materials, overhead and labor, which the IRS taxes. I have an LLC, but since I am a single owner, I have to file as a sole proprietor, which means the companies income and my own, are one. In other words, I dont file my personal income tax, and then my companies separately, which makes things relatively simple. Yeah, I guess, I could actually pay myself a salary or wage, and leave the profits to my company account to buy new tools/vehicles with, but I dont. So, you could look at it as either 100% of the income after expenses is my profit or that 0% is, cuz it all goes to me anyway. So MY definition of profit, would be when I make more money than I expected to. If I plan on buying 20 gallons of paint, but it only takes 15, then the price of that 5 gallons is profit to me personally, but to the IRS, its just income.
> 
> OTOH, if there are more than one owners of the company, It gets handled very differently. The company has to pay the owners out whatever system they agree on, and any leftover (profit) is in the company account, to be filed as its own tax entity.


Woodco (and everyone else, at least here in the USA), how is the term "income" defined within the Internal Revenue Code (26 USC)? Here is a hint: it isn't defined within the IR Code according to the SCOTUS, but the SCOTUS does define the term "income." And I don't think that this definition will be the same as what you or anyone else here might think it is, but i could be wrong.

futtyos


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## Woodco (Nov 19, 2016)

How the IRS defines it is irrelevant. They see any increase of money as income.


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## Woodco (Nov 19, 2016)

Nevermind.


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## futtyos (Aug 11, 2013)

*Question*



Woodco said:


> How the IRS defines it is irrelevant. They see any increase of money as income.


The largest tax in the US is the income tax. There are also excise taxes on things like alcohol, tobacco and firearms. Most people know what those things are. My question is: how does the law define "income" such that I might know whether or not I produced any of it?

I am not trying to be a pain. I am just trying to understand how someone who works by themselves can figure out the amount of "profit" he or she makes on a $3,000.00 job after deducting all expenses, leaving only the amount for the property (labor) that the client compensated the painter for. If the painter and client both agree that the paint job was worth $400.00 in expenses and $2600.00 in labor, then there is an equal exchange and no profit was made. If one were to say that the painter made a profit it would follow that the client incurred a loss, but as we can see, the client got what she agreed to pay for and there was no loss on her end to balance any profit on the painter's end. If the painter employs other painters to assist in the job and pays them a lesser rate and ends up making money on their labor, then we might be talking about some kind of gain or profit being made on the labor of those assistant painters, but I cannot see that in the case I have described above.

I guess that what I am asking is how can one determine how much income one has made if one does not know what the legal definition of "income" is and specifically where in the law that definition can be found.

As to how the IRS defining income as being irrelevent, it might call anything "income" and if one did not know any better, they might get fooled into paying a tax on something that really is not taxable or not taxable in their case.

I guess my bottom line question is how can I figure, using the lawful guidelines and definitions that have to exist somewhere, how much profit the painter made on the $3,000.00 job mentioned above?

futtyos


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## Woodco (Nov 19, 2016)

futtyos said:


> As to how the IRS defining income as being irrelevent, it might call anything "income" and if one did not know any better, they might get fooled into paying a tax on something that really is not taxable or not taxable in their case.
> 
> I guess my bottom line question is how can I figure, using the lawful guidelines and definitions that have to exist somewhere, how much profit the painter made on the $3,000.00 job mentioned above?
> 
> futtyos


I thought you were trying to make a point about IRS laws or something. Income is pretty self explanatory. Did your money increase? Thats income. 

Client pays you $3000. Thats income. 

Client tips you $100: Income

Grandma sends you a $100 check for you birthday: Income

You find $20 on the ground: Income

You sell a ladder for $50: Income. 

Whats not to understand?


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## jennifertemple (Oct 30, 2011)

"INCOME" = IN COME that means ANY money that came in to a person. After one counts all the money that was incoming, then they get to deduct any expenses it took to acquire that in coming money and may deduct any amounts IRS / CRA say are not taxable.

IE: Canada has no gift tax, so you can give any amount of cash, and it is not taxable as income or deductible as an expense. Giving away cash in your lifetime may save taxes against your estate after you die. SO if Mom or Pop or Uncle Bob gave you a gift of $5000000, it's yours, free and clear in CANADA. That is an example of nontaxable income.

I'm sure all the details are different in the US and I know the tax forms are he!! on Earth but the basic principals apply in both countries. (My hubby is a Yankee) It gets a lot more complicated if you are landed in another country and a non US resident with duel citizenship.

P.S. I think both governments give the citizens credit for having enough intelligence to know when they have income (incoming) money. It is a self explanatory term. What more definition could be required?

The IRS might just as easily ask you to define what you mean by definition.


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## futtyos (Aug 11, 2013)

*Definition of income*



Woodco said:


> I thought you were trying to make a point about IRS laws or something. Income is pretty self explanatory. Did your money increase? Thats income.
> 
> Client pays you $3000. Thats income.
> 
> ...


Woodco, I understand that you believe that income is what you say it is above. My question is where in US law is this definition found?

futtyos


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## SemiproJohn (Jul 29, 2013)

This question of how income is defined is rattling my brain. I'm in Woodco's situation, and I let my CPA work his magic. What he says is income, is income! haha


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## jennifertemple (Oct 30, 2011)

It is not really a question about what income is because income is ANY money you take in. It is really about what is taxable, nontaxable and what credits one is entitled to claim. A good CA is worth their weight in gold on that front (and the CA is a DEDUCTIBLE business expense!)


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## SemiproJohn (Jul 29, 2013)

jennifertemple said:


> It is not really a question about what income is because income is ANY money you take in. It is really about what is taxable, nontaxable and what credits one is entitled to claim. A good CA is worth their weight in gold on that front (and the CA is a DEDUCTIBLE business expense!)



Absolutely.


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## Vinyl 54X (Mar 12, 2019)

Paint should be marked up if you are providing it, As well as tape, spackle, sandpaper, caulk & spray primers. If you can figure wear & tear on spray rigs, brushes & roller sleeves. If it has value why not bill for it.


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## jennifertemple (Oct 30, 2011)

Vinyl 54X said:


> Paint should be marked up if you are providing it, As well as tape, spackle, sandpaper, caulk & spray primers. If you can figure wear & tear on spray rigs, brushes & roller sleeves. If it has value why not bill for it.



I would never dream of invoicing the expenses of doing business! I build it into my basic rates. I never charge for specific sundries. I simply write them off as expenses of doing business at tax time. I certainly don't want the headache of sales tax. If I am supplying at cost I need not declare any sales. I just charge the amount for the job that I want to walk away with. I really like the KISS principal and a straight forward tax filing.


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## PACman (Oct 24, 2014)

Vinyl 54X said:


> Paint should be marked up if you are providing it, As well as tape, spackle, sandpaper, caulk & spray primers. If you can figure wear & tear on spray rigs, brushes & roller sleeves. If it has value why not bill for it.


The depreciation on large equipment is deductible i believe. I think you get a one time deduction on the purchase price as well. This is one of those things that really requires a tax accountant. I know i deduct the depreciation on my tint machines every year. I don't know for sure what the depreciation rate is but i think its 10 percent of current value every year.


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## Woodco (Nov 19, 2016)

Someone just told me yesterday, that you can donate one item per year to Goodwill, and no matter what its worth or condition, you get a $500 tax credit. Its little late for this year, but good to know, nonetheless.


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## jennifertemple (Oct 30, 2011)

Woodco said:


> Someone just told me yesterday, that you can donate one item per year to Goodwill, and no matter what its worth or condition, you get a $500 tax credit. Its little late for this year, but good to know, nonetheless.



:sad:Someone was blowing smoke your way! You need to get a donation receipt "And it's not a tax credit, but is a deduction if you itemize. A credit comes off your taxes dollar for dollar. A deduction reduces your income that the tax is calculated on. You would need to have a receipt listing the particular items that you donated. Yes we are an accounting firm. Yes we have seen the same 10k or more times. Yes we have seen receipts like this. Yes we have put down on forms best guess estimate considering deprecation market value etc etc. Yes at times they questions, yes at times they accept. Not every situation will be the same. Link for IRS Type in search 1040 Schedule A or something to that affect and have fun reading. "

You would need to have a receipt listing the particular items that you donated. Clothes, electronics, furniture, appliances, linens and other household wares must be in gently used or better condition. Broken items, clothes or furniture with holes or tears and non-working electronics likely won't qualify. The IRS has an exception to its good condition rule if you deduct more that $500 in non-cash contributions and can furnish an appraisal for the item. Ask your local Goodwill chapter for a donation guide, or see the organization's online guide (see Resources), for a suggested range of values, especially for items such as dresses, shoes, pants, shirts and suits.


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## Vinyl 54X (Mar 12, 2019)

PACman said:


> The depreciation on large equipment is deductible i believe. I think you get a one time deduction on the purchase price as well. This is one of those things that really requires a tax accountant. I know i deduct the depreciation on my tint machines every year. I don't know for sure what the depreciation rate is but i think its 10 percent of current value every year.


Did you ever have to buy an expensive tool that you only had to use once in a lifetime?


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## PACman (Oct 24, 2014)

Vinyl 54X said:


> Did you ever have to buy an expensive tool that you only had to use once in a lifetime?


No. But that would be a one time "consumable" tax deduction on 100% of the purchase price i believe. At least in Ohio. Then you wouldn't be able to do a 10% annual depreciation deduction.

And as far as i know, and you should maybe check this with your accountant, but items such as brushes and rollers, tape, masking paper, etc are deductible as consumables up to your purchase price, but if you "sell them" as a separate line item on your invoicing at a profit they are not deductible. That would actually be double dipping and you should pay a sales tax on the profit. I believe. Otherwise i would be able to deduct all the paint i sell, which i can't. I can deduct a percentage of "interest on inventory" though.

I'm sure there are some differences between a retailer with a resale license like myself and a painter. It might be something to ask your tax accountant about. Next time i see mine i will ask her what Ohio's codes are just out of curiosity. I just give her my info off of Quickbooks and she does the rest, so i don't really ever look at my returns that closely. (I know, I should. But I've literately known my accountant since kindergarten and i trust her 100%!)


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## Woodco (Nov 19, 2016)

If I buy something for work, It gets written off. IDK about depreciation write offs...


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## futtyos (Aug 11, 2013)

*gross vs net income*



jennifertemple said:


> I would never dream of invoicing the expenses of doing business! I build it into my basic rates. I never charge for specific sundries. I simply write them off as expenses of doing business at tax time. I certainly don't want the headache of sales tax. If I am supplying at cost I need not declare any sales. I just charge the amount for the job that I want to walk away with. I really like the KISS principal and a straight forward tax filing.


Jennifer, how do you deduct all your expenses (paint, primer, sundries, etc.) from each job to avoid having any expenses appear to be income? Perhaps I am not understanding what you are saying.

futtyos


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## Woodco (Nov 19, 2016)

futtyos said:


> Jennifer, how do you deduct all your expenses (paint, primer, sundries, etc.) from each job to avoid having any expenses appear to be income? Perhaps I am not understanding what you are saying.
> 
> futtyos


She is talking about what she charges the customer for, not tax stuff. She's also in Canada, so she's on a different deal as far as that goes.

To answer your question from MY standpoint, though, its as simple as adding your actual receipts and invoices, and subtracting them from the check the client writes you. you dont add up every single dime worth of sundries for a particular job though. 

The paint store will usually ask for a 'job name' If Im buying 22 gallons of swiss coffee plus a bunch of sundries for Mrs. Jones house, I take the receipt total and just call it "Mrs Jones." and deduct it from the total. It doesnt matter if I buy a box of tape and only use three rolls on that job. I bought it for work, and its deductable. Also, if I use half a box of caulk that I already had, its already been deducted... 

The job names and what goes where is really only for your personal/business records. Its up to you how you classify your expenses. You can keep it simple, or go crazy documenting where every roll of tape goes. Im sure you've worked for people on both sides. I have. 

If you buy a box of caulk, it doesnt have to have a job name to be deducted from your taxes, and you dont need to specify where it goes. You can classify it as "materials" "misc," "basic sundries" whatever. It doesnt matter. You take the amount on the receipt, and add it to your pile of deductions.


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## jennifertemple (Oct 30, 2011)

Woodco It is really simple. I charge the client enough to cover both labor and materials. They pay one all inclusive price. I keep all receipts and at the year end I total all my invoices and all receipts are deductible at the full receipt costs, that is deducted from the total income and as such, are all costs of doing business. I only pay tax on the balance left AFTER deductibles. My receipts are not calculated on a per invoice basis. All materials purchased for painting, stripping, masking, application and repairs are just one total amount for the entire year.


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## jennifertemple (Oct 30, 2011)

Woodco said:


> The paint store will usually ask for a 'job name' If Im buying 22 gallons of swiss coffee plus a bunch of sundries for Mrs. Jones house, I take the receipt total and just call it "Mrs Jones." and deduct it from the total. It doesnt matter if I buy a box of tape and only use three rolls on that job. I bought it for work, and its deductable. Also, if I use half a box of caulk that I already had, its already been deducted...
> 
> The job names and what goes where is really only for your personal/business records. Its up to you how you classify your expenses. You can keep it simple, or go crazy documenting where every roll of tape goes. Im sure you've worked for people on both sides. I have.
> 
> If you buy a box of caulk, it doesnt have to have a job name to be deducted from your taxes, and you dont need to specify where it goes. You can classify it as "materials" "misc," "basic sundries" whatever. It doesnt matter. You take the amount on the receipt, and add it to your pile of deductions.



:biggrin: *BINGO!* That makes the case quite nicely. Thank You!


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## RH (Sep 7, 2010)

And a good accountant is worth their weight in gold, or at least whatever their bill is. 

I am fine not having a bookkeeper (but would if we were larger); keeping track of the expenses on each job, working out quarterlies, and sending in the payments to the IRS is not terribly difficult. But having an accountant at tax time to be sure we are maximizing our deductions easily pays for her service.


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## futtyos (Aug 11, 2013)

*Deductions*



jennifertemple said:


> Woodco It is really simple. I charge the client enough to cover both labor and materials. They pay one all inclusive price. I keep all receipts and at the year end I total all my invoices and all receipts are deductible at the full receipt costs, that is deducted from the total income and as such, are all costs of doing business. I only pay tax on the balance left AFTER deductibles. My receipts are not calculated on a per invoice basis. All materials purchased for painting, stripping, masking, application and repairs are just one total amount for the entire year.


Okay, I can see that you deduct the value of all your receipts for materials. Do you also deduct the value of your labor (otherwise known as property) that you expended to get the jobs done?

futtyos


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## jennifertemple (Oct 30, 2011)

futtyos said:


> Okay, I can see that you deduct the value of all your receipts for materials. Do you also deduct the value of your labor (otherwise known as property) that you expended to get the jobs done?
> 
> futtyos



Again, all labor is included under the one invoice. After all, labor IS the product I sell.


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## 804 Paint (Jan 31, 2014)

Futtyos - there is no definition for income. I know where you are coming from. Tax is theft and the “income tax” we all pay is illegal. And I agree. However, it has not turned out so well for those who have challenged it. 

Also, the 16th Amendment was actually never ratified. 


Sent from my iPhone using Tapatalk


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## RH (Sep 7, 2010)

futtyos said:


> Okay, I can see that you deduct the value of all your receipts for materials. Do you also deduct the value of your labor (otherwise known as property) that you expended to get the jobs done?
> 
> futtyos


The cost of _*your*_ labor on a job is not deductible. That is your income and is what you pay income tax on. However, all of the costs of doing business are deductible at one degree or another. Those are what you want to be fully taking advantage of with the assistance of an accountant. Also, the cost of paying someone that you hire to assist you on a job is also deductible - assuming you are paying them and they aren’t being paid directly by the HO. Just make sure the person you hired has all the necessary paperwork filled out and you have it in your possession at tax time.


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## Vinyl 54X (Mar 12, 2019)

RH said:


> And a good accountant is worth their weight in gold, or at least whatever their bill is.
> 
> I am fine not having a bookkeeper (but would if we were larger); keeping track of the expenses on each job, working out quarterlies, and sending in the payments to the IRS is not terribly difficult. But having an accountant at tax time to be sure we are maximizing our deductions easily pays for her service.


I have missed a quarterly payment here and there over the years. My own fault always forgot or thought I did, Still it crippled me come April.


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## jennifertemple (Oct 30, 2011)

RH said:


> The cost of _*your*_ labor on a job is not deductible


 Of Course not, my labour is also my income, or profit!

I might add, I like paying tax! To quote Oliver Wendel Homes, "I love paying tax, it buys me civilization!" OR in my case it buys me schooling for my kids, roads to drive on, health care, hospitals, fire fighters, police, parks, public libraries, search and rescue services, armed forces, water & sewage treatment, street cleaning, garbage pick up, free public concerts and the right to live in one of the most civilized countries on earth.

Every time there is a decrease in income tax they reduce or kill some public service. We started in a world with no tax and had to pay private, unregulated companies for all of the services noted above. Armed forces were a voluntary and unpaid for activity. Some such reductions caused the loss of publicly paid for physio therapy, reduced services for autistic children, regular reductions in health care services, fewer regulators for food and water and much more. I cringe every time a politician talks about reducing my "tax burden"! It costs far more to pay for every service privately.


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## futtyos (Aug 11, 2013)

*What?*



804 Paint said:


> Futtyos - there is no definition for income. I know where you are coming from. Tax is theft and the “income tax” we all pay is illegal. And I agree. However, it has not turned out so well for those who have challenged it.
> 
> Also, the 16th Amendment was actually never ratified.
> 
> ...


804 Paint, if there is no definition for "income," how can one know whether or not one has come into possession of, acquired or produced any income such that they would incur a liability for a tax on income? 

Before you answer that, remember that there is a maxim of law that states "The law does not compel a man to do that which is impossible."

There is also the principle that a law is void if it is to vague. https://en.wikipedia.org/wiki/Vagueness_doctrine

I don't see the Supreme Court ruling that the income tax is void for vagueness, at least not after Pollock v. Farmers' Loan & Trust Company, 157 U.S. 429 (1895), so I have to assume that there is an explanation for all of this somewhere.

That being said, I am not trying to debate anything about taxes, I am just trying to understand how one would go about determining how much "profit" a painter who works by himself would make on any particular job. Is there a formula in law that one can go by to determine this or can one just make this determination by oneself?

Theoretically, If I could determine on my own just how much profit I made on a job so that I could know how much tax I would have to pay on it, I probably would never figure that I made any profit at all.

futtyos


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## jennifertemple (Oct 30, 2011)

I don't get it! INCOME is self explanatory. Income, it came in: incoming. How on earth could if be better defined? It can be broken down into types of value that was in coming but it's still all income: gifts, payments, money found on the street, money received on the sale of an object. I really don't see what kind of definition you would be expecting them to supply. There is nothing vague about income, it came in. That seems to be all there is to say about it. If you, yourself can better define what is meant you could write the IRS and suggest such a more concise definition. How do you suggest it could be improved?


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## RH (Sep 7, 2010)

futtyos said:


> 804 Paint, if there is no definition for "income," how can one know whether or not one has come into possession of, acquired or produced any income such that they would incur a liability for a tax on income?
> 
> Before you answer that, remember that there is a maxim of law that states "The law does not compel a man to do that which is impossible."
> 
> ...


I feel you are trying too hard to outthink this. The concept of profit is pretty basic; what you get paid for your jobs minus your expenses, including taxes. What those expenses are is where an accountant comes in. The idea is to legally minimize your profit (for tax purposes) by accounting for all the expenses you have. The IRS had formulas that allow them to red flag deductions that are out of whack with the income one is making and of course they have limits on other types of deductions. Once you determine what your income after expenses is for a quarter, you make your estimated tax payment to the IRS. Again, an accountant will help you determine what a good amount is and keep tabs on where you are so they can advise you to raise or lower your estimated quarterly payments as they come due.


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## Woodco (Nov 19, 2016)

Take the word "profit" out this. Its confusing you. Call it 'adjusted income.' 

If you have 1000 more dollars than you did the day before, you have $1000 of income. Its doesnt matter where it came from. The IRS wants their cut, BUT if $200 of of that is business expense/deductions, you get to subtract that, so your ADJUSTED INCOME is $800, so thats what the IRS is gonna tax 20% or whatever. Theres no need for a 'definition.'


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## futtyos (Aug 11, 2013)

*Outgo*



RH said:


> I feel you are trying too hard to outthink this. The concept of profit is pretty basic; what you get paid for your jobs minus your expenses, including taxes. What those expenses are is where an accountant comes in. The idea is to legally minimize your profit (for tax purposes) by accounting for all the expenses you have. The IRS had formulas that allow them to red flag deductions that are out of whack with the income one is making and of course they have limits on other types of deductions. Once you determine what your income after expenses is for a quarter, you make your estimated tax payment to the IRS. Again, an accountant will help you determine what a good amount is and keep tabs on where you are so they can advise you to raise or lower your estimated quarterly payments as they come due.


RH (and others here), for the sake of this discussion, let me create a word to create a balance to the term "income." Since some here feel that "income" = whatever comes in, there must also be "outgo" or whatever goes out.

In my $3000.00 paint job above, I had $400.00 in expenses and $2600.00 in labor, all agreed to and signed by both parties, the HO and the painter.

The HO labored (digging ditches, teaching school, stocking shelves, or whatever) to be able to acquire a tradeable store for his labor, cash. The HO didn't print this "cash" up or create it out of thin air (OTA), but rather had to trade his or her labor to get it. The cash, therefor, is a convenient store for the value of the HO's labor, which labor John Locke, Adam Smith and many others have considered to be the highest form of property a human can possess.

The $3000.00 payment for the whole job "goes out" (outgo) from the HO and "comes in" (income) to the painter after the painting job (outgo) is done. The painter uses $400.00 of the $3000.00 to cover all expenses (outgo) for the job.

That leaves $2600.00 to cover the value of the painter's labor. This labor was the property of the painter. He used that labor to "go out" and complete the painting job. The $2600.00, over and above the $400.00 that went to covering expenses, now comes in (income) to cover the value of the labor that went out (outgo) from the painter in order to complete the painting job.

I assume that everyone here would agree that there is an agreed upon "value" to the $2600.00 that went out (outgo) from the HO and came in (income) to the painter. What was the value of the painter's labor that went out (outgo) to get the painting job done? To figure this out, all one has to do is look at the signed agreement wherein the HO agreed that the painter's labor would be worth $2600.00 to the HO. This means that there was an equal and agreed upon exchange of value.

If we were to define "profit" as the gain someone makes upon a business transaction, where is the gain in the above scenario? The HO took his/her stored labor (in the form of cash or check) and made an even trade (outgo) with it to acquire a painting job that altogether cost the HO $3000.00. The painter took in (income) $3000.00 and used $400.00 of that to cover the value of the expenses that went out from the painter (outgo) as well as $2600.00 to cover the outgo of his property (labor) to the HO.

How is profit determined in the above transaction? Did the painter make a profit? What if the painter realized after the job was done that he bid it way too cheap? Would this mean that the painter not only made no profit, but that the HO actually made a profit on the paint job, something that would be very possible when selling a house. The value of a paint job has been known to more than offset the cost of it when getting a higher sales price for the house than if the painting were not done before selling the house.

I suppose that it would be possible for either the painter or the HO to make a profit on the paint job, but not both at the same time. Some HOs will try to bargain a painter down so low that it is not worth it for the painter to take the job. Experienced painters whose services are in demand will usually just take a pass on such a job. If the painter is continually too high in his/her bids, they might find that they are out of work too often.

When a price for a paint job is agreed upon by both the painter and the HO, how does each determine how much profit was made.

If $2600.00 of the above $3000.00 comes in (income) to the painter in exchange for his/her labor that went out (outgo) to complete the job, doesn't that mean that the value of the painter's labor is equal to the $2600.00. Where can one possibly find the "profit" or gain in this scenario? True, the painter did not have the $2600.00 in hand before the paint job was done, but he/she was minus $2600.00 worth of property (labor) after the paint job was done and before they were paid.

Does labor have no value such that all that comes in (income) could be all profit? The only way I can see this happen is if someone paid me $2600.00 for doing nothing. Labor has value. Think about what happens when one cannot work (labor) and earn something with which to pay the bills and buy food and gas. Think about those who are homeless and hold signs that say "will work (labor) for food." Labor is the only possession of value that these homeless have.

Enough for now.

futtyos

P.S. The SCOTUS had defined what income is if anyone is interested.


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## RH (Sep 7, 2010)

futtyos said:


> RH (and others here), for the sake of this discussion, let me create a word to create a balance to the term "income." Since some here feel that "income" = whatever comes in, there must also be "outgo" or whatever goes out.
> 
> In my $3000.00 paint job above, I had $400.00 in expenses and $2600.00 in labor, all agreed to and signed by both parties, the HO and the painter.
> 
> ...


I have a headache now.


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