What is a reasonable % discount for cash payments (GC)
We are starting a sizable renovation and a few contractors have said they would offer us a cash discount (they will provide us with receipts.) What is a reasonable percent discount for an all-cash payment on a large project?
hmartha
in Brownstoner Renovation 10 years ago
5
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5 replies
Green Mountain | 10 years ago
We have consumer protection laws, not to make our work cheaper, but to protect consumers from unscrupulous contractors. Your example shows the failure of our system. Home Improvement Contractors licensed by the NYC Dept of Consumer Affairs (I am no. 1130473) like other businesses, are obligated to pay our employer’s share of payroll taxes, about 20%, and workers’ compensation insurance, which in our classification is also close to 20% of payroll. Add that to the employee’s personal income taxes, also about 20%, and the cost of fully compliant labor is about 60% higher than with full payroll tax evasion and workers’ compensation insurance fraud. For many consumers, who pay cash, including some on this list who express themselves openly, complicity is normal operating procedure. 60% higher labor costs is more than they are able or willing to pay. Why should an individual accept the blame for undermining society? “Everybody is cheating.” Bypassing the DCA, home owners go to websites like this, Angie’s List, and others to find good contractors, but we often read here about disasters, where consumers have no recourse. The DCA can hardly be blamed for the failure of their system, when consumers refuse to hire more expensive, but legitimate contractors, who accept checks, pay in to a fund to compensate aggrieved home owners, and keep our home and business addresses on file with city hall. For consumers who pay by check, but also want low prices, contractors can easily cash checks at non-bank financial businesses, for a low fee of about 2%, so as to pay workers in cash, without auditors or regulators ever seeing the transactions. As Sarah Maslin Nir told me: “After the vans pick up the nail salon workers at 8:00 AM, they return to pick up the construction workers at 9:00 AM. If you are getting a “cash discount” you are almost definitely complicit in workers’ compensation insurance fraud and payroll tax evasion.
thetinkerswagon | 10 years ago
I suspect and actually know of contractors who have always played this game and most are legitimate. When I was younger I recall contractors who were doing work for someone they knew making this kind of deal and I suppose if i were working for cousins or a very good friend I might do the same. But as a business practice, no. And this type of thing was always done quietly, not out in the open. In so far as what I said earlier, I do believe everyone should pay taxes and I believe we should all work to that end – but, It does not really surprise me or bother me to read this here. We all have our boundaries and limits and mine are set where they are. That said, I would pose the question to the contractor and see what they offer. Some may not be able to as maybe they are on the radar of the IRS. Also, keep in mind, self employed people may hide money this way to dodge child support- now that is an instance where I find this behavior repulsive – let’s see if there are any divorced moms out there who agree. And contractors who refuse to break the law may not like reading this as the act of avoiding taxes creates an unfair competitive advantage. Steve
newtomehouse | 10 years ago
It all depends on how “sizable” your renovation really is. If it really is a large renovation similar to a gut renovation then you are talking hundreds of thousands of dollars. As the previous posters have already implied I can’t see any legitimate company taking payment in the form of cash on a large project.
thetinkerswagon | 10 years ago
I am a contractor and I only accept checks. I am not saying that somewhere along the way once or twice a year someone does not offer me a couple of hundred dollars to do something small at the end of a job, but as a rule it is by check. I believe in filing taxes and paying my taxes for the benefit of society, our children’s schools, clean streets, libraries, the social security system which I will someday depend on. Why be complicit in something as serious as tax fraud and the undermining of society as a whole?
Augustiner | 10 years ago
An all cash under the table deal for a ‘large project’ does not sound right to me. Also the contractor needs something to show to the IRS unless he is not licensed and used only unskilled day laborers.