The Controversial Self-Service Laundry Tax
- Sales Tax News
- Sep 4, 2015 | Gail Cole
Clean laundry costs. Ecological impacts aside, you have to purchase and maintain the washer/dryer, detergent, electricity and water to clean laundry at home, or you have to pay to do (or have done) laundry elsewhere.
In most states, self-service laundry is exempt from sales tax: No sales or use tax is imposed on the quarters you feed into coin operated washers and dryers. Prior to July 1, 2015, four states subjected those quarters to sales tax: Hawaii, Iowa, New Mexico and West Virginia. Today only three states do because coin operated laundry sales are now exempt in Iowa.
The Iowa exemption is the result of the enactment of House Bill 603, “A bill for an act exempting from the sales tax the sales price for the use of self-pay washers and dryers.” It reads, in pertinent part:
“The sales price of any of the following enumerated services is subject to the [sales and use] tax imposed by subsection 5: ... dry cleaning, pressing, dyeing, and laundering excluding the use of self-pay washers and dryers” (Emphasis mine).
The legislation was drafted by the Iowa Self-Service Laundry Association and introduced by Sen. David Johnson (R). Their win is encouraging the national Coin Laundry Association to preserve existing exemptions. Threats do exist, as evidenced by Illinois Senate Bill 1260, which proposes expanding sales and use tax to dry cleaning and laundry services. Although the current version of the bill (a work in progress) adds “except coin-operated,” you never know what will be included in the final version.
Read on to learn how sales tax applies to coin operated laundry services in Hawaii, New Mexico and West Virginia.
“Where a coin operated device produces gross income which is divided between the owner or operator of the device, on the one hand, and the owner or operator of the premises where the device is located, on the other hand, the tax imposed by this chapter shall apply to each such person with respect to the person’s portion of the proceeds, and no more” (HRS §237-18).
Gross receipts tax applies to the sale or lease of property and the sale for performing services in New Mexico or outside of the state when “the product of which is initially used in New Mexico.” Coin operated washers and dryers are considered vending machines and “[a]mounts received from allowing the vending machine to be placed in a location as well as amounts received from use of or sales from vending machines are gross receipts and are subject to the gross receipts tax. The vending machine owner is responsible for reporting the receipts and paying the gross receipts tax” (NMAC 18.104.22.168).
“All sales and services … are presumed to be taxable unless a specific exemption exists. … In transactions where the price includes the consumer’s sales and service tax: such as movie tickets, vending machines, coin operated laundry or car wash machines, etc. you must divide the total sales by 1.06. The result will equal taxable sales. Multiply that amount by .06. The result will equal the tax due.”
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