There’s no doubt about it — the US is a car-centric country. The 2022 Vox piece “Too Many Americans Live in Places Built for Cars” notes that commonplace infrastructure like “stroads” (a street-road hybrid), strip malls with parking lots, and extensive highway networks mean it’s nearly impossible to traverse the US without a car.
This means that America is one of the best places to run a car wash business. In fact, 58,664 car wash businesses currently operate in 2023. Expectations are that this number will grow steadily in the next few years. Some factors influencing this growth are the increasing number of vehicles per household, the demand for car washing convenience, and car washing prohibitions in residential areas for environmental purposes.
Given these reasons, it’s a great time to start a car wash business because you’re sure to have customers. However, you should prepare well to ensure its success. One of the things to consider when establishing a business is the taxes you have to pay. For car wash businesses, there are several things to note regarding taxes. Below are a few.
Certain Car Wash Services are Non-Taxable
Car wash services vary from one to the other. There are car washes with personnel that wash, wax, and vacuum a car or assist customers during these processes. These are taxable, and we’ll go deeper into these services in the following sections.
On the other hand, coin-operated or self-service offerings are non-taxable. This is the type of car wash where customers use the provided equipment to clean their cars, or fully automated equipment does it for them. If the coin-operated equipment accepts debit or credit cards, car wash businesses are only exempted from coin, currency, or token sales tax. Consider these before you start a self-service or coin-operated car wash business.
Taxes for Car Wash Businesses Vary by Type
As mentioned above, car wash businesses with personnel are taxable, including full-service and exterior conveyor types. A full-service car wash is when trained staff handle the whole car-cleaning process. Meanwhile, exterior conveyor car wash refers to those businesses where an employee pre-washes the car before it is pulled through an automatic washing process.
While this is the current rule, it can change without notice. If you’re planning to offer these services in your own business, it’s thus vital that you stay up-to-date with the latest rules regarding how they should be taxed. Self-awareness is key to a successful business—external factors like new tax considerations from the government can happen anytime. For instance, local governments could impose a bigger sales tax to boost the economy. Failure to collect this can result in fines, so stay updated with new taxing procedures by reading the news.
Non-Business Taxes for Car Wash Businesses You May be Subject To
Most people are aware of the taxes that businesses must pay. Some business taxes include employment tax (federal income taxes from employees) and income tax (tax depending on your profit). Aside from these, there are other taxes your car wash business may be subject to.
Among these is property tax. Starting a car wash business obviously requires a location unless you plan to be mobile. Property tax is imposed on land or buildings where your car wash is located. Another tax you might need to cover is gross receipts tax, which depends on your gross sales. Some states—such as Delaware and Ohio—require this from businesses, so always be on the lookout for your location’s specific tax laws.
Don’t Forget State Tax Requirements Specific to Your Location
On the topic of state-specific taxes, many states have unique tax laws for car wash businesses. For example, Florida has a particular taxing procedure: only car wash jobs that use silicone, wax, or any product added to water are taxable. As such, plain car wash jobs using only detergent or water softener are tax exempt. In Minnesota, coin-operated car washes are taxable, despite our previous discussion. This shows that business owners must thoroughly read state-specific business tax laws because each place varies.
Taxes for car wash businesses will vary depending on your service type and location. Always read up on your state’s tax laws and keep up with the news to ensure that you’re paying the proper taxes for your future car wash business.
Jenelle Brickman is a freelance writer whose interests lie in current economic trends. She strongly believes that everyone should have access to sound financial advice. When she isn’t researching on her next article, she enjoys going to the beach and hiking through nature trails.
