Does a self-employed house cleaner with no employees need a Texas sales tax permit?

Subject

Maid/Housekeeping Services — Independent Contractor Vs. Employees Of Private Household

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9401018L

Plain-English Summary

This is an internal Comptroller policy memo, written to resolve field confusion about when residential house cleaners need a Texas sales tax permit. Real property services (which include building cleaning) became taxable in Texas on October 1, 1987. But Texas Tax Code Sec. 151.057 excludes from taxation services performed by an "employee" for an "employer" in the regular course of business, where the employee is paid a regular wage or salary.

The Comptroller's longstanding policy, based on earlier internal rulings (cited here as "microfiche documents"), treats a self-employed individual who cleans residences only — and who has no employees of their own — as an employee of the homeowner, even though the homeowner typically doesn't withhold federal taxes. Because that arrangement is treated as an employer-employee relationship, it falls within the Section 151.057 exclusion, so no sales tax permit is required and no tax is charged on the cleaning services. The memo confirms that this holds true even if the individual advertises their cleaning services to the public (for example, by putting flyers on doors, mailing flyers, or placing want ads) — advertising doesn't change the outcome.

The analysis changes in two situations. First, if the individual has employees who help clean residences, the business is instead providing taxable real property services (building cleaning), and a permit and tax collection are required. Second, if a self-employed person with no employees cleans both residences and commercial buildings, they must obtain a sales tax permit and collect tax on the commercial cleaning — but the residential cleaning portion of their business remains nontaxable.

What This Means For You

If you are a self-employed house cleaner with no employees who cleans homes only: You do not need a Texas sales tax permit, and you should not charge sales tax on your services, even if you advertise. You are treated as an employee of each homeowner under Section 151.057.

If you clean both homes and commercial/business properties (and have no employees): You must obtain a sales tax permit and collect sales tax on the commercial cleaning work. You still do not need to charge tax on the residential cleaning portion.

If you hire employees to help you clean residences: Once you have employees, you are providing taxable real property (building cleaning) services, and you must have a permit and collect tax — the "employee of the homeowner" treatment no longer applies to your business.

Q&A

Q: I'm a self-employed maid who only cleans private homes and I don't have any employees. Do I need a sales tax permit?
A: No. Under Texas Tax Code Sec. 151.057, you're treated as an employee of each homeowner, so residential house cleaning by a self-employed individual with no employees is not a taxable service and no permit is required.

Q: Does it matter that I advertise my cleaning services with flyers or want ads?
A: No. The memo specifically states that advertising to the public is immaterial to the analysis — you can still be treated as the homeowner's employee for tax purposes even while marketing your services.

Q: I clean both houses and office buildings, and I don't have employees. What's my tax obligation?
A: You must get a sales tax permit and collect sales tax on the commercial building cleaning, since that is a taxable real property service. However, you still don't need to charge tax on the residential house cleaning you do — that portion remains nontaxable under Section 151.057.

Citations

• Texas Tax Code Sec. 151.057 (excluding from taxable real property services those performed by an employee for an employer for a regular wage or salary)

Original ruling text

DATE: January 28, 1994

TO: David Cain, ** Enforcement Office (**)

FROM: Eddie C. Washington, Tax Administration Division (**)

SUBJECT: Taxability of House Cleaning Services

SITUATION: There seems to be some confusion in the field regarding the
taxability of residential house cleaning services and whether a sales tax
permit is needed in certain situations.

It is my understanding that real property services became taxable in 1987, but
a few years later a policy was made to exempt individuals without employees
from needing a sales tax permit If they did only residential house cleaning.
The sales tax ruling was never changed to reflect this policy. I assume the
intent of the policy may have been to consider these individuals who cleaned
houses as "employees" of the homeowner even though, in most cases, federal
taxes are not withheld by the homeowner.

There is a lot of inconsistency in the way house cleaning services are being
handled for sales tax purposes by our agency and better guidelines are needed.

My question is this: If a person claims they are "self-employed" and may be
advertising his or her cleaning service to the public, would the person need a
sales tax permit even though the person does not have employees and does only
residential house cleaning?

ANSWER: Real property services became taxable October 1, 1987. When the
legislature first defined and taxed taxable services in 1984, it included an
exclusion [Texas Tax Code Sec. 151.057] from taxation services that are
performed by an employee for an employer in the regular course of business for
which the employee is paid a regular wage or salary.

Microfiche documents 8802L0862D13 and 8802L0865A11 establish the Comptroller's
policy on individuals who clean residences only. An individual who cleans
residences only and who does not have any employees is considered the
homeowner's employee. Thus, the wages or salary paid to the individual are not
taxable under Section 151.057.

Microfiche documents 8712L0852F08 and 8710L0834D01 state that an individual who
has employees who clean residences is providing taxable real property services
(building cleaning). Microfiche documents 8806L0904D10 and 8909L0957G13 do not
tax the receipts paid to individuals who clean residences. The individuals are
not employees of a maid or janitorial service.

TR 1295 (microfiche document 9202T1153C11) taxed the services provided by a
taxpayer to clean residences. The taxpayer advertised to solicit customers by
putting flyers on doors or by mailing them. The taxpayer also advertised in the
want ads for house cleaners (employees or independent contractors).

A self-employed person who has no employees advertises to the public, but
cleans residential houses only, is not required to have a sales tax permit. The
person is considered to be an employee of the individual homeowners. The fact
that the person advertises is immaterial.

If a self-employed person cleans both residences and commercial buildings, the
person must have sales tax permit and must collect sales tax for cleaning
commercial buildings. The person, having no employees, still is not required to
charge sales tax on the services to clean residences (see microfiche document
9210L1201A11).

SUMMARY

An individual who is not an employee of a maid or janitorial service and who
does not have employees is considered an employee when he or she cleans the
homeowner's home. This is so even if the individual advertises to attract new
home cleaning business. If the individual also cleans commercial properties,
the individual must be permitted and collect sales tax on the services to clean
the commercial buildings; the cleaning of homes remain nontaxable.

cc: Jim Teaver, Manager, Enforcement Division Tax Assistance