Service Tax Expansion Sparks Confusion for Babysitters, Others

Updated: 03/01/2013 8:01 PM By: Stephen Tellier

Babysitting, lawn mowing, snow shoveling -- if you pay a neighborhood kid a few bucks to take care of those tasks for you, would that teen have to pay taxes on it under Gov. Mark Dayton's proposed service tax expansion?

There has been some confusion over the past couple of days over the answer to that question. The confusion stems from a house committee hearing on Wednesday, when a representative asked whether paying a neighbor to mow their lawn would be subject to taxation.
Some people interpreted the response from Myron Frans, commissioner of the Department of Revenue, as meaning that all babysitting, lawn mowing, and snow shoveling would now be taxed. But on Friday, Frans said that's not the case.
There's currently an exemption for services that are "occasional or isolated," and that exemption isn't going anywhere. So if your child does off-and-on work for some extra cash, they're not going to have hire an accountant.
Frans said services that start to look like a business would be taxed. For example, people who advertise, have a car with their name and number on it, or hand out business cards would not be exempt.
But Frans admitted that would still leave a gray area.
"There are always areas you have to interpret, but I think the key thing for young people or parents out there who are concerned about it is: Is your child or sibling really involved in a business where they're advertising, they have contracts, they have a place of business?" Frans asked.
If you answer yes to those questions, you're likely going to have to pay taxes.
As for enforcement, Frans said the department typically focuses on the most egregious cases of tax evasion, and the cases that involve the largest amounts of money. That means cases involving teenagers doing a little too much lawn mowing likely would not attract their attention.