Legal Definitions - service-occupation tax

A service-occupation tax is a type of tax levied by a government authority (such as a state, county, or municipality) on businesses or individuals who provide specific services. Unlike a general sales tax that applies to the sale of goods, this tax specifically targets the revenue generated from, or the privilege of engaging in, service-based activities. It can be calculated as a percentage of gross receipts from services, a flat fee per service transaction, or an annual license fee for operating a service business within a particular jurisdiction.

• Example 1: Landscaping Business

  Imagine "Green Thumb Landscaping," a company that offers lawn care, garden design, and tree trimming services in the city of Oakwood. The city council of Oakwood passes an ordinance requiring all businesses providing landscaping and gardening services to pay a 1.5% tax on their total annual revenue derived from these services. This 1.5% charge is a service-occupation tax because it is specifically imposed on the income generated from providing landscaping services within the city's jurisdiction.

• Example 2: Professional Consulting Firm

  "Strategic Solutions LLC" is a management consulting firm operating out of its office in Capital City. Capital City has a local statute that mandates all professional service providers, including consultants, accountants, and architects, to pay an annual "professional services occupation fee" of $750. This $750 fee is a service-occupation tax, as it is a fixed charge for the right to operate a professional consulting service within Capital City.

• Example 3: Home Cleaning Service

  Consider "Sparkle & Shine," a company that provides residential and commercial cleaning services across several counties in the state of Riverside. Riverside County, one of the areas where Sparkle & Shine operates, implements a 0.75% tax on the gross receipts of all cleaning and janitorial services performed within its borders. This 0.75% tax is a service-occupation tax because it directly targets the revenue earned from providing cleaning services in that specific county.