When operating a car wash business, it’s part of your responsibility as a business owner to understand how taxes affect your accounting and finances. Consequently, a previous post discusses ‘What You Need to Know About Taxes for Car Wash Businesses’ by differentiating between taxable and non-taxable car wash services, as well as explaining other taxes your business may be subject to besides employment and income tax. However, another tax-related concern you should familiarize yourself with is the possibility of car wash services being a tax-deductible business expense for your customers. Whether an individual person or a business looking to wash their fleet, customers may ask you about tax deductions for your services. Here’s how to determine when car wash services are non-taxable and how your business can incorporate the concept of deductible business expenses into its overall strategy.
When are Car Wash Services Tax-Deductible?
Cars are a significant investment, which is why many car owners look for ways to offset repair and maintenance expenses with tax deductions. Fortunately, an Investopedia article explains how, besides buying an electric or hybrid car, car owners may qualify for tax write-offs by deducting fees for gas, tires, insurance, and registration under business use. This principle also applies to car wash services, as long as they are business-related and distinct from personal car washes for routine maintenance.
Company Vehicles and Fleet Services
To start, you can deduct taxes when the vehicle is a company vehicle or part of a business fleet. This also explains why Convenience Store News notes that subscription services for car wash services are growing in popularity. Aside from allowing company vehicle or fleet owners to file taxes accurately as a monthly, quarterly, or yearly expense, subscriptions provide significant value through tiered packages that include unlimited washes and add-ons like waxing and internal cleaning. EverWash is a go-to company to partner with if you’re offering memberships, with a number of ways to tailor packages to your preferences. Softrax’s subscription billing software is another option to automate processing for customers’ recurring payments. Even when they transition from simple to complex subscription billing scenarios to cater to fleets and company cars, the software can track billing cycles to minimize revenue loss and leakage.
Personal Vehicle Used for Business
As previously mentioned, business-related expenses may include a car wash, hence making it eligible for tax deductions. So, if a car is personally owned but used when working as a driver for a ride-sharing company, it can qualify as a deductible business expense. This also applies to other jobs where you have to use and clean your car to accomplish your roles and responsibilities, such as a traveling salesman meeting clients, a surveyor visiting construction sites, or a small business owner delivering products.
However, being self-employed means your business must be registered as a sole proprietorship to qualify car wash expenses as tax deductibles. Keeping meticulous records, such as receipts, is crucial to filing your taxes accurately. So, car wash businesses must also be responsible for issuing tax receipts and providing customers with sufficient copies, as some would need separate receipts for their employers and their tax records. Knowing this information about car wash services as tax deductibles can also present business opportunities if you involve it in your accounting and marketing strategy, as discussed in the next section.
How Can Car Wash Businesses Develop their Strategy Around Non-Taxable Services?
Create a targeted marketing campaign!
As you market your car wash services to prospective subscribers, it helps to create a campaign that targets their unique needs and preferences as car owners who use their vehicles for business functions. Examples of targeted marketing campaigns include a referral program that can incentivize existing subscribers to refer their coworkers to the business. Meanwhile, you can also offer discounted subscription fees to local companies that encourage their employees to use your services and count it as a deductible expense. If a business is on the fence about instituting an organized plan for washing their vehicles at your business, noting that it’s tax deductible is an excellent way to sway their decision.
Ultimately, knowing your way around taxes and what’s a deductible business expense enhances customer experience and also brings your business lifetime value — as long as you know how to market and strategize your way around it.
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.
