CHICAGO — Self-service laundry operators can attest to the various challenges of operating a laundry business.
A part of this equation is realizing the amount of income your laundry business has to report on a quarterly and yearly basis to your state’s revenue department and to the Internal Revenue Service (IRS).
Though there are certain tax exemptions for self-service laundry operators, properly calculating and reporting your laundry’s income can be a cumbersome process.
Daryl Johnson, owner of Giant Wash Laundry, Clear Lake, Iowa, and president of the Iowa Self-Service Laundry Association (ISSLA), faced this situation at his Laundromat.
He, and other self-service laundry operators in the state, were imposed with an additional sales tax on revenue that they collected from their washers and dryers, with some paying up to a 9% sales tax on the revenue.
“We had bought our first store in Iowa and we realized that we were, through our accountant, obligated to pay sales tax on the revenue that went through the washing machine,” says Johnson.
“That was a bit of a shock for us because we didn’t know it going in.”
The discovery paved the way for the ISSLA to seek legislative action toward repealing the state’s existing sales tax on revenue operators collected from their self-serve washers and dryers.
With the help of a lobbyist, ISSLA was able to draft and introduce the bill HF 603 to the Iowa Legislature, which called for an act “exempting from the sales tax the sales price for the use of self-pay washers and dryers.”
Through their efforts, the bill passed unanimously (50-0) in early June in the Iowa Senate, as well as the Iowa House (76-14). Iowa Gov. Terry Branstad signed the legislation on June 18.
RENEWED ENERGY
The recent win in Iowa has sparked the national Coin Laundry Association’s overall nationwide campaign, “Stop Laundry Tax,” in preventing a sales tax from being imposed upon self-service laundries in other states.
“Daryl’s success, and the folks at Iowa’s success in doing that, has, in essence, energized all the folks in trying to make sure we get our voices heard,” says Michael Finkelstein, president of Associated Services Corp., and a CLA board member.
Among the CLA’s goals for its campaign is to educate its membership on how a sales tax truly affects not only operators, but customers, as well.
“It hurts working families … because self-service laundries serve primarily low-income renters … who really can’t afford to [buy] washers and dryers on their own,” says Finkelstein.
Another argument, among others, is that it’s uncollectable, says Johnson.
“Washing machines and dryers are set up to take quarters, typically … and, let’s say you have a 7% tax, and it’s a $2 vend on a washer. You can’t charge $2.14; you have to charge $2.25. Now, you’re either overcharging or undercharging your customers if you couldn’t collect the tax.”
A ROAD MAP
Another pillar in the CLA’s campaign is to create an overall strategy for when, or if, other states decide to implement a sales tax on self-service laundry operations.
In addition to creating awareness, the association is also accepting donations from its membership to fund its efforts.
“We need to not only fight it where it is, but we have to have some kind of, call it a war chest,” says Finkelstein.
Currently, only three states impose a sales tax on self-service laundries—Hawaii, New Mexico and West Virginia.
But, according to Finkelstein, threats of such a tax have come up in states like Minnesota, Ohio, Louisiana and North Carolina, among others.
SB1260
Though laundry operators in Iowa no longer have to worry about a sales tax on their laundry business, operators in Illinois are facing this possibility.
“SB1260, basically, expands the sales tax in Illinois to a number of services,” says Paul Hansen, president, Illinois Coin Laundry Association (ILCLA).
Among the services listed in the first amendment of the bill is “laundry and dry-cleaning services,” which concerns Hansen.
“First of all, what is the definition of ‘laundry and dry-cleaning services’? Are they speaking of … drop-off, wash-dry-fold laundry, or are they talking about self-service laundry, or coin-op?” asks Hansen.
“If their intention is just to cover the luxury service ... of drop-off laundry, that’s fine [but] they need to make sure that that writing is more precise so that it’s clear that a coin laundry is exempted.”
The ILCLA is working with a lobbyist in Springfield to monitor the bill.
Although Hansen and ILCLA’s lobbyist believe that the bill won’t be going forward, the group has other related concerns.
According to Hansen, during the state’s 2014 gubernatorial election, then-candidate Gov. Bruce Rauner included an “expansion of a sales tax” in his blueprint.
“Although his specific proposal did not include laundries in that list, our concern is that service tax is on the table now.”
“As it stands right now, everything is kind of up in limbo down there,” he adds.
“There are negotiations, but our lobbyists feel pretty strongly that when an agreement is made, there will be some form of service tax in the state, some sort of expansion. And what that will look like, they don’t know. We’re doing everything we can to make sure we’re not included in that.”
DON’T SIT BACK
The current movement that the CLA’s campaign is gaining shows “a trend in vended laundry being tax-free, or … laws in place that charge sales tax on laundry is being repealed,” according to Johnson.
Though the Iowa battle was hard-fought, Johnson is confident that the task can be accomplished elsewhere.
“When they say, ‘All politics is local,’ that’s an absolute truth. We did this because we had the right people,” he says. “... It was we, as local operators, talking to our local legislators that made it happen.”
“It’s just very important that people in our industry … don’t just sit back and wait for other people to do this,” adds Hansen. “If it happens, it’s going to hit … especially the smaller operators, [who] are going to get hit very hard.”
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Have a question or comment? E-mail our editor Bruce Beggs at [email protected].