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Subcontracting, insurance, licenses...in NJ

Discussion in 'Business Fundamentals' started by shovelracer, Nov 8, 2011.

  1. shovelracer

    shovelracer Senior Member
    Messages: 525

    I have been poking around for a little bit and I am finding all sorts of bad information all over this site. Seems there are a lot of guys trying to get into plowing the last few years, and I can tell you that 9 out of 10 plows I see during a storm are not lettered trucks. As a fully licensed and insured company this is frustrating for us, but if the state is not enforcing the rules than it certainly isn't my job. However, new guys are looking for accounts. This is where I come in as a potential source for work. Sooooo....

    you want to be a subcontractor. These are the things you should consider:

    A subcontractor is only an independent contractor, hired, not employed, by another contractor. The hiring company is not paying employment taxes on you and you are responsible for carrying workers comp and withholding taxes on anyone you pay to have with you. Employ. You are responsible for your own taxes usually with a 1099. Since you are an independent contractor and not an employee, in NJ you would have to do the following. Register a business name with the county. Get a business registration certificate from the state. Register your vehicle as a commercial vehicle. Carry commercial auto insurance with plow rider. Vehicle needs to be marked as per commercial vehicle law. Appease all state tax collection and withholding requirements. Workers comp is required if you hire anyone and now you need an EIN. General liability is not required strictly for snow plowing by the state, but you will have a hard time finding work without it. If you do anything other than just plowing additional laws and licenses might apply. If you do any work outside of your hired gig, you are now playing the role of a primary contractor. Now you need to be collecting sales tax.

    There are lots of different forces at play here, and lets face it our state is too busy trying to choke out our teachers, cops, and firemen to have anything left over to actually enforce small operation plow outfits.

    However, there is something you should be concerned about. The other guy. It is no secret that there are lots of shady individuals running around, and that even your best friend can turn on you to protect themselves. It should be no surprise that if there is even a chance, many people will seek the opportunity to try and come up a notch or two at the businesses expense. So this is why you have insurance. If people did not sue other people there would be no need for it. Not having all your credentials proper as well will only hurt your credibility should it come to blows. So what happens if you are involved in a serious problem as a result of plowing and do not have insurance. You could be named and sued. Now we are not talking about $100 here. Loss of income, pain and suffering, medical expenses you could easily find yourself on the losing end of a million dollar stick. You do not have a million you say. Well you can just give up or have repossessed by the sheriff everything in your life that has any value. Good credit, not after a bankruptcy. So is a few thousand a lot to spend for a small guy to plow, sure is. One thing to consider though, the established businesses you might look for a job at are paying tens of thousands, and even then 1 claim decided in the contractors favor can make it all worth it.

    Still haven't made up your mind. Read last seasons rant:


    Oh, I just have to add. If you think it wont happen to you you are wrong. I once had another driver intentionally hit me instead of going off the road because she knew we had insurance and she did not have collision, so she figured it better to take her chances crying for the cop. We did not have to pay her out, but in a no fault state I got stuck with the deductible to repair mine as well. Somehow I was the one that got yelled at for being within the law and she walked free away after admittedly doing 15MPH over in a residential zone. Lesson learned, crying for a cop works. Later learned that the cop also plows and would not be in compliance with this threads suggestions.
    Last edited: Nov 8, 2011
  2. lilweeds

    lilweeds PlowSite.com Addict
    Messages: 1,178

    Good post with one or two exceptions. As a sole prop you DO NOT need to register a name with the state so long as you are doing all the work in you personal name.

    Your state is not out to get teachers, cops, and firemen. They are trying to get ahold of the out of control expenses (including those pensions worth triple the average citizen) being paid out to union workers. I congratulate your state on finally getting it's head out of it's a** after all these years and trying to help taxpayers.
  3. tjlands

    tjlands Senior Member
    Messages: 574

    Your correct about the Name of the business, as long as it the same,
    you must register with the state as a Business and fill out an application,

    Every business in NJ needs to be registered with the state,
    get a state registration number and sales tax id,
    there are no exceptions,
  4. shovelracer

    shovelracer Senior Member
    Messages: 525

    It's called DBA - Doing Business As. All you would need to do is add plowing to the end of your name and you have a business.

    I would not say that the state is out to get them, despite what she and her coworkers think. Yes the problem started a long time ago with a system that allowed people in the state jobs to take advantage of the way it was structured. At the same time though they are being robbed of a pension fund that they paid into and where contractually promised. They have taken pay freezes and seen an increase in witholdings. The state wants them to have the highest level education, but they have stopped tuition reimbursement. Then they want to pay the new employees dirt wages. It is hard to pay for $100K+ of schooling when you take home less than my landscape laborers. Meanwhile you have more students, and stricter performance policies, but are given less of everything to work with. Does the super need 200K to manage a small district school, no. But, a teacher with a bachelors and masters can't live off pennies either.
  5. gutter21

    gutter21 Member
    Messages: 68


    You don't have to be a business to file a 1099.
  6. shovelracer

    shovelracer Senior Member
    Messages: 525

    Correct, I do not think that was questioned. A 1099 is used for taxable income. Could be Investment Dividends, Real Estate Sale, etc. However, an independent contractor who subs would also receive a 1099 which they must declare. The 1099 is separate from state business licensing. That said at the least in NJ a plowing sub is an independent contractor. This person is providing a service and being paid. This makes it a business transaction. Therefor they must be a registered business, have commercial vehicle reg & ins., etc. They also will receive and file a 1099 if they sub for someone else. The only thing the IRS cares about is that the taxes are paid on the 1099.
  7. bigviclbi

    bigviclbi Junior Member
    from 08008
    Messages: 12

    Question. If I have a machine, can I plow under someone else's plowing insurance if I'm a sub? I have gen liability for landscaping but not for snow removal. The person who I talked to said I can be under them, but I really would like to make sure of this since they want a copy of my general liability policy. Why would they want that if it doesn't apply? Thanks.
  8. tjlands

    tjlands Senior Member
    Messages: 574

    Your machine needs to be covered for snow work, check with your agent
    I do not think their insurance would cover you if you knocked down a light pole,
    which fell on someone or someones car....just an example
  9. shovelracer

    shovelracer Senior Member
    Messages: 525

    Like TJ mentioned your best bet is to check with your carrier. GL though is for liabilities resulting from the work performed, not damage or the like. It would be possible for them to carry insurance on you, but they are only protecting themselves. If your machine is damaged in an accident it is on you.
  10. bigviclbi

    bigviclbi Junior Member
    from 08008
    Messages: 12

    They actually want your machine to be covered so that would be thecase shovelracer. I dont have my machine covered and its something id like to do anyway. Problem is I dont want to put plowing on my landscape policy. If I put seperate coverage on my machine and can get under someones ins that would be the best case scenario. Since you guys are in nj I appreciate the advice. What should I expect moneywise for my machine? No box just loader. I really dont want to sit around all winter this year. U can pm me going rates if thats better. Thanks.
  11. shovelracer

    shovelracer Senior Member
    Messages: 525

    So you want to have your equipment covered for what? If you have it listed on your equipment policy than it should be covered for theft, vandalism, etc. You just need to look into whether your coverage for operational damages extends to street cleaning. You really need check with your agent.

    What size loader? I see as low as $85 for a smaller skid to $300 for a big boy.
  12. Ramairfreak98ss

    Ramairfreak98ss PlowSite.com Addict
    Messages: 1,885

    Old post here.. but some contracts i've seen this year "sub-contracts", now state right at the top, you MUST include all applicable taxes.. so be careful. What you don't know, is that in the state of the main contractor, they may NOT be required to collect the tax because its out of state. If they ever get audited, YOU would have to then pay it, or moreso, you should "know" that you need to collect it and pay it for the plowing you do in your home state. Its tricky, since some prior contracts the parent company billed it to say "walmart" and then they pay it to their own state because thats who is billing them. In some states, its the sub-contractor that pays it individually because say the main company that billed walmart, didnt bill them their states sales taxes.

    I'm going to assume here, but if say NY's sales taxes are 8 or 8.5%, they certainly don't want to charge sales tax when the sub-contractor plowing for them in say Delaware at 0% "no sales tax state", can cut the bill down 8-8.5%, or sometimes just the difference of 6-7% etc.