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1099 Independent Contractor vs Employee [Updated 2021]

1099 Independent Contractor vs Employee [Updated 2021]

Shop-Bays-AutoDetailGuide.com
Misclassifying detail shop employees as 1099 Contractors will only hurt your business and employees.

1099 Independent Contractor vs Employee [Updated 2020]

Many new business owners in the auto detailing and reconditioning industry pay their workers under the table. Obviously, this isn’t an issue limited to the car detailing industry. But it is a problem with numbers large enough to attract the attention of state and Federal tax agents.

The unfortunate result of cases like this is the obvious damage to the finances and reputation of their business. Sadly, it also creates an unfair perception with the public about the type of businesses that operate in this manner.

Since I often write about the business of auto detailing and reconditioning, taxes and insurance are two big subjects that I receive many questions about. Which is why I created this overview of 1099 independent contractors vs employees, updated for 2020.

Avoiding Taxes by Paying in Cash

There are many ways small business owners pay employees under the table. The most popular method is obviously cash. The person does the work and the business owner gives them cash.

The initial reaction by most people when they hear about cash transactions is that it’s illegal. It’s not. Cash, aka the almighty Dollar, is the official currency of the United States. You can pay for whatever you want with cash without raising an eyebrow anywhere.

The problem isn’t the cash unless you specifically choose to pay with it for tax avoidance purposes.

Cutting Corners or Raising Prices

This happens more often than you realize. Try requesting bids from contractors for any type of work on your house. You will no doubt have at least one or two that mention discounting the total cost for paying in cash. Why anyone would take that risk is crazy. But it still happens.

If you reach a point in your business career where the only way you can make a profit is by cutting corners in this manner, then you should raise your prices.

Or find a new career.

In the following sections, we will discuss 1099 Independent Contractors and how you can avoid misclassification of W2 employees.

1099 Independent Contractors

Many small business owners attempt to legitimize their payroll tax avoidance schemes by paying employees via check and calling them 1099 Independent Contractors.

Whereby the business owner treats the worker as an employee but pays them via check with no payroll tax deductions.

When the end of the year arrives, the business owner issues a Form 1099-Misc to the employee and the IRS. This form tells the IRS that the worker was paid via all those checks.

Why would the business owner do this to their valued employee? Most of the time it’s driven mainly by greed.

Only The Business Owner Wins

The only person that wins in this scenario is the business owner. They save having to pay the employer side of payroll taxes. And they avoid paying workers comp and unemployment insurance.

The largest win, by far, is the business owner can now deduct 100% of those 1099 contractor check payments as labor costs on their income tax return.

You should never treat your employees like this and let them work without workers comp or unemployment insurance. In my companies, we also provided disability and health insurance coverage.

Businesses should take care of their people.

Until the Tax Man Comes Calling

Unfortunately, now the worker/employee is liable for taxes on that income. So what do you think happens? Of course, they get angry. Maybe they get themselves fired.

Normally that wouldn’t be a big deal. People get fired every day. But this is the tricky part.

If you fire that independent contractor, they will immediately attempt to collect unemployment. You, the business owner, their boss, will be listed as their employer because let’s be honest, they had no idea how the 1099 independent contractor arrangement worked. And most wouldn’t care either way.

And that is the typical story of how many businesses get themselves on the radar of the taxman.

As you can see, paying anybody under the table is illegal and it hurts both your business and your employee. Plus, it opens a pandora’s box of legal issues with many departments within the State and Federal government.

When you pay your workers as 1099 contractors instead of W2 employees, you also make the IRS aware of this fact. They know auto detail shops are one of the many types of businesses that abuse the 1099 independent contractor classification. And all it takes is an audit to catch you. Then they tell their friends in your state revenue department and you have some sleepless nights ahead of you.

So how to you avoid these nightmare problems and properly classify 1099 Contractors vs W2 Employees?

How to Properly Classify 1099 Contractors

Two questions to ask in order to properly classify 1099 contractors are: who defines the end result; and, who controls the process?

From a business owner’s perspective, this means if your goal is to hire an independent contractor to complete a project, your involvement is limited to:

  • Define the details of the project and the timeline to complete it;
  • Negotiate a reasonable price for the work; and,
  • Establish exactly what you want as the outcome or end result.

That is it. Then you step back and let the contractor do their work.

The contractor determines:

  • How to complete the project;
  • Which tools or equipment they need to use;
  • The length of time to complete the work;
  • How much to charge in order to cover their cost and earn a reasonable profit;
  • And finally, when that project is actually completed.

And when the project is completed, you pay the contractor.

As you can see from this definition, you control the results, but the contractor defines the process to get the work done.

The contractor should also own their own equipment, control their own schedule, and maintain their own insurance. That last one, insurance, is very important and I will expand on that in more detail below.

The IRS will reclassify your detail shop, 1099 contractors, to employees by simply asking a few somewhat general questions:

  • Do you tell these workers how to do their jobs?
  • When to do their jobs? Are workers free to come and go as they please as long as they complete the work you assign?
  • Who owns the equipment that workers use to perform their services? Do you provide equipment for them or do they arrive with their own tools, machines, and supplies?
  • Do you have signed and executed contracts with each worker specifying what is expected of them and how they are paid for their work?
  • Does each worker have their own liability insurance and worker compensation coverage? This is important if you are attempting to prove independent contractor classification during an audit.
  • Do you train workers to do things your way? There are many companies that do this with contractors, you just need to be careful how you follow-up after the training.
  • Do you set quotas, deadlines, or issue-specific instructions as to how long a worker is permitted to complete a project that you assign?

Did you answer yes to ANY of these questions? If so, then how many of your 1099 contractors are actually W2 employees? Most likely, all of them.

Learn the Rules or Hire a Professional

The ‘I didn’t Know’ defense is a bad idea. The Government won’t care. And it makes you look unintelligent for attempting to use that argument.

The IRS and State Revenue agents won’t care whether or not you understand the rules and regulations. That’s not their job. It’s actually yours.

As a business owner, you are expected to understand the rules, regulations, and laws that pertain to the type of business you own. If you don’t understand something, you hire a lawyer or accountant to explain it to you.

Or you can look it up on Google, which is most likely where you found this wonderfully informative article. Although as advice goes, it is always better to talk to a lawyer or accountant who knows your particular situation. Especially since I am neither.

My point is, you own a business so be professional and learn the rules or hire a professional to help you better understand issues that can ultimately cost you time and money to fix later.

Tax-Time-AutoDetailGuide
Taxes are one of those important things to do right.

The IRS Always Gets Its Money

You could be liable to pay ALL of the payroll taxes that both the employee and the business were required to pay for ALL the years that you did this.

They can also charge penalties and interest for all the years that you did it.

The really unfortunate part of this is in the majority of these situations the employee isn’t liable for those taxes, it’s on the business owner.

Even worse, if you can’t pay it or decide to shut down and declare bankruptcy, you’re still stuck. IRS taxes can’t be eliminated in bankruptcy. So they will still come after you for everything. The IRS always gets it’s money.

Correct Classification as W2 Employees

Pay your employees properly with the correct classification as W2 employees.

If that is indeed what they should be. You don’t want the stress of looking over your shoulder wondering when you might get caught.

If you can’t afford to pay the taxes that are due, then your costs are too high and the pricing model is wrong. Something is out of wack. So fix it.

You should be able to make money and run your business legally without having to cut corners like this. Otherwise it will end up being a huge problem for you down the road.

Continuing below is the criteria that the Federal Government uses to determine whether or not they are “employees” or “independent contractors”.  This is from the IRS website at: https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee

Independent Contractor (Self-Employed) or Employee?

It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors.

Generally, you must withhold income taxes, withhold and pay Social Security and Medicare taxes, and pay unemployment tax on wages paid to an employee. You do not generally have to withhold or pay any taxes on payments to independent contractors.

Select the Scenario that Applies to You:

  • I am an independent contractor or in business for myself
    If you are a business owner or contractor who provides services to other businesses, then you are generally considered self-employed. For more information on your tax obligations if you are self-employed (an independent contractor), see our Self-Employed Tax Center.
  • I hire or contract with individuals to provide services to my business
    If you are a business owner hiring or contracting with other individuals to provide services, you must determine whether the individuals providing services are employees or independent contractors. Follow the rest of this page to find out more about this topic and what your responsibilities are.

Determining Whether the Individuals Providing Services are Employees or Independent Contractors

Before you can determine how to treat payments you make for services, you must first know the business relationship that exists between you and the person performing the services. The person performing the services may be –

In determining whether the person providing service is an employee or an independent contractor, all information that provides evidence of the degree of control and independence must be considered.

Common Law Rules

Facts that provide evidence of the degree of control and independence fall into three categories:

  1. Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
  2. Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
  3. Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?

Businesses must weigh all these factors when determining whether a worker is an employee or independent contractor. Some factors may indicate that the worker is an employee, while other factors indicate that the worker is an independent contractor. There is no “magic” or set number of factors that “makes” the worker an employee or an independent contractor, and no one factor stands alone in making this determination. Also, factors which are relevant in one situation may not be relevant in another.

The keys are to look at the entire relationship, consider the degree or extent of the right to direct and control, and finally, to document each of the factors used in coming up with the determination.

Form SS-8

If, after reviewing the three categories of evidence, it is still unclear whether a worker is an employee or an independent contractor, Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding (PDF) can be filed with the IRS. The form may be filed by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.

Be aware that it can take at least six months to get a determination, but a business that continually hires the same types of workers to perform particular services may want to consider filing the Form SS-8 (PDF).

Employment Tax Obligations

Once a determination is made (whether by the business or by the IRS), the next step is filing the appropriate forms and paying the associated taxes.

Employment Tax Guidelines

There are specific employment tax guidelines that must be followed for certain industries.

Misclassification of Employees

Consequences of Treating an Employee as an Independent Contractor

If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker (the relief provisions, discussed below, will not apply). See Internal Revenue Code section 3509 for more information.

Relief Provisions

If you have a reasonable basis for not treating a worker as an employee, you may be relieved from having to pay employment taxes for that worker. To get this relief, you must file all required federal information returns on a basis consistent with your treatment of the worker. You (or your predecessor) must not have treated any worker holding a substantially similar position as an employee for any periods beginning after 1977. See Publication 1976, Section 530 Employment Tax Relief Requirements (PDF) for more information.

Misclassified Workers Can File Social Security Tax Form

Workers who believe they have been improperly classified as independent contractors by an employer can use Form 8919, Uncollected Social Security and Medicare Tax on Wages to figure and report the employee’s share of uncollected Social Security and Medicare taxes due on their compensation.

Voluntary Classification Settlement Program

The Voluntary Classification Settlement Program (VCSP) is an optional program that provides taxpayers with an opportunity to reclassify their workers as employees for future tax periods for employment tax purposes with partial relief from federal employment taxes for eligible taxpayers that agree to prospectively treat their workers (or a class or group of workers) as employees. To participate in this voluntary program, the taxpayer must meet certain eligibility requirements, apply to participate in the VCSP by filing Form 8952, Application for Voluntary Classification Settlement Program, and enter into a closing agreement with the IRS.

Proof of Insurance for Any Contractors

Another item that both Federal and State labor departments look for is whether or not the “contractor” has their own liability insurance. If they do that is a good sign that they have their own business and only work for you on a contract basis.

Your insurance company will also require you to provide proof of insurance for any contractors that you hired over the course of the policy term. If you can’t provide such proof then they will rate you and increase your premiums at the time of your annual insurance audit since you have exposed your insurance carrier to insuring “uninsured contractors” who work for you.

As I mentioned above, it’s also a nightmare if the government decides that the “contractor” is actually an “employee” resulting in you having to pay both your portion of the employment taxes and the “employee/contractor’s” portion plus penalties and interest. The Federal Government will also notify the local and state agencies and you will have to go through it all over again with them.

Be a Professional

Most of this is common sense. You are in business. It’s time to be a professional business owner. Otherwise, you will always be treated like a fly-by-night hobby instead of an actual business.

As mentioned previously, I’m not an accountant or an attorney, so you will have to consult with these experts to get details on how any of this applies to you and your business.

We just included this for information purposes so that you can ask your legal and tax people how to best incorporate these matters as it benefits you and your business.

The only advice I can offer from my own experience is to follow the rules and listen to the advice your legal and tax advisors offer you.  It will save you a lot of money in the long run.

Mobile Services

Mobile Services

Mobile Services for Auto Detailing

When I think back about how I started my detailing businesses, I did it the old fashioned way.

By old fashioned I mean I opened my own fixed location shop with a bunch of overhead. Those ‘hard’ costs that are difficult to adjust or eliminate because you need them.

I’m talking about things like building rent and utilities.

When you have an auto detail shop, you need the fixed location shop part to actually do business. And all the utilities are a cost you incur while doing the work.

Things like electricity to run the tools and lights. Water for basically everything.

And gas… Can’t forget about the damn natural gas bill. Pittsburgh winters are brutal. And heating garage bays and offices are expensive in winter.

Overhead Can Kill a New Business

Overhead can kill a new business. And building rent and utilities is second only to employee payroll as far as the largest numbers in the expense column of your P&L (profit and loss) statement.

They say hindsight is 20/20, but if I had to do it all over again I would skip the fixed the shop location and go straight to offering mobile detailing services.

The obvious place to start in this industry is by offering mobile detailing just based on the lower cost of equipment and easier training.

You really need to consider some of the other mobile services that the auto reconditioning industry has available though.  Going from simple detailing and car washing to high-end auto reconditioning services will amaze you when you see the difference in profits.

I’m talking about the really profitable mobile services such as:

Mobile Detailing Services – the obvious first place to start

Commercial Fleet Cleaning – when you are ready for higher volume and more profits

Heavy Equipment Cleaning – a fantastic niche business that some do exclusively

Pressure Washing Services – expand your services using your existing equipment

Specialty Cleaning Services – another way to profit from your existing skills and tools

These mobile services are a great place to start.  This is also a great way to add profitable mobile services to your existing detailing business if you already have one.  Either way, reconditioning mobile services is a fantastic way to add profits and expand your skills in your community.

Mobile Detailing Equipment

Mobile Detailing Equipment

Your mobile detailing truck and trailer along with your mobile detailing equipment is referred to as your “Mobile Rig” or simply a “Rig”.

The mobile rig is the single most important part of the mobile detailing business. If you don’t have the equipment to get the job done, then you can’t do the work.

So naturally, mobile detailing equipment is going to be a subject that you focus on frequently if you are offering these services.

Some mobile detailing equipment companies promote the open trailers with the water buffalo, pressure washer and other equipment out in the open.

If you live anywhere cold or near any areas that aren’t exactly secure, then this will end up being a real pain for you.

In the cold weather, open trailers need anti-freeze dumped into the water supply and the pressure washer needs anti-freeze in all the plumbing just to keep from freezing. If you park your truck somewhere in a city or near a construction site the chances of something turning up missing when you get back are very high.

When we first added mobile detailing equipment to our detail shop business as an add-on service, we went the open trailer route because of the cost savings and we already had a pickup truck and a box-type mini-van that were both large enough to pull the trailer with water.

Closed trailers are another option for this type of work, but not the best choice.  You still have to drag a trailer around with you everywhere you go.

Try backing up a closed trailer in a parking garage without hitting anything. The only nice feature about the close trailer is if you use your pickup truck for personal business then you simply unhitched from the trailer and go. In the overall big picture a closed trailer is a good choice, but the best one. Your mobile detailing equipment will be enclosed and protected and it is easier to keep everything from freezing in the winter this way, but you still have the other issues I’ve mentioned above.

By far the best choice for hauling mobile detailing equipment and making the perfect mobile rig is a cargo van.  Preferably a 1-ton cargo van.  Our shop really loved the 1 Ton Chevy Express Cargo Van.  It was large enough to haul everything and had the power we needed to haul the ever-important water buffalo.  A measurement that will become very important to you when you start mobile detailing and cleaning is 8.34 lbs per gallon.  That is the weight of a gallon of water.  So when you are shopping around for mobile detailing equipment and you add your water buffalo, you need to keep this figure in mind.  It is very easy to exceed your max weight capacity on your 1 Ton Cargo Van if you aren’t careful.  Here are some things to consider when thinking about weight issues with your Mobile Detailing Equipment:

Mobile Detailing Equipment Weight Capacity Issues and Ways To Calculate

When it comes to mobile detailing equipment, weight is something that you worry about every day.  If you are adding a 200-gallon water buffalo, then you need to figure that weight when full which would be 200 gals multiplied by 8.34 lbs per gallon for a total weight of 1,668 lbs.

The water buffalo itself doesn’t weigh much, but for easy math let’s figure about 32 lbs for the actual water buffalo to set our total water weight at 1,700 lbs.

One ton equals 2,000 lbs, but this is not your safe hauling weight.  That would be a newbie mistake to just take 2,000 lbs and subtract your mobile detailing equipment and water weight from that.

What you need is the GVWR from the door jamb of the cargo van, truck or whatever you are using to haul EVERYTHING.  GVWR is Gross Vehicle Weight Rating. The thing about the figures from the manufacturer is that they are figuring on an empty van. So according to Chevy here’s how they calculate maximum hauling capacity:

8,600 GVWR (Gross Vehicle Weight Rating)

5,291 Subtract Curb Weight also referred to as GVCW (Gross Vehicle Curb Weight) – be careful here though, this doesn’t include you or anything else but the empty van

3,309 Max Payload Capacity – According to Chevy this is what you should be able to haul safely.

A more accurate calculation includes you, your equipment and your water weight, then add that to the GVCW (Gross Vehicle Curb Weight) and that will give you the real number.  As long as you don’t exceed the GVWR number, then you are within your safe hauling capacity.

Another way to do this is trying to stay within these numbers and then call a nearby weigh station and ask if it is possible to take your fully-loaded vehicle to their weigh station to check it and make sure it is within safe hauling weight.

We did this with all of our vehicles and made sure the driver and the one or two additional workers that were on that job were included in the trucks when they were weighed.

The officers at the weigh station were more than happy to help with this and the supervisor at the station that I brought our trucks to each year complimented me on being proactive with my vehicle safety program.

We never ran into any issues on the road, but I’m sure developing a relationship with these state officers would have helped us prove that we were proactive in our safety and maintenance program if we ever had any problems while out in the field.

Another consideration when looking at Cargo Vans to haul your mobile detailing equipment is simple things like being able to lock your equipment inside.

If you park your van in your driveway when you’re at home during the winter you can run an extension cord to the van from your garage and plug-in a small electric heater to keep everything from freezing.

Plus, and this is a very big plus if you have ever returned home after doing a ton of fleet cars you know how tired you are. Imagine how excited you’ll be to have to unload the entire pickup truck or open trailer when you’re that tired.

With vans, you don’t have to do any of that. Vans work great. Plus, if you go to lunch on the worksite, simply throw everything inside the van and lock it up.

There’s a “ton” of different mobile detailing equipment you can get for your mobile rig.

Right off the bat, you’ll be excited to get everything you can afford, but don’t waste money at this point. You need all the operating capital you can get.

Your first mobile detailing equipment purchases should include the following:

  • 2000 PSI Pressure Washer
  • Hose – 3/4″ industrial garden hose – 100′
  • Hose reel with 3/8″ high-pressure hose – 100′
  • High-speed buffer – Makita 9227C, the most reliable and lightest
  • High-speed orbital buffer – Porter Cable 7424 is the best
  • Generator – at least 5,000 watts

That’s a good start to your mobile detailing equipment needs. Please check back and I’ll be updating this page with more specifics as to smaller things you need to carry with you to job sites to get work completed faster.

Good luck with your Mobile Detailing Equipment setup and we look forward to hearing about your success on our Auto Detailing Guide Community Forum page.

Detailer Transporter Plates

Detailer Transporter Plates

Transporting cars is an easy thing to do as long as your customer has their own license plate on the vehicle.

Unfortunately, doing business with individual customers is much different from wholesale or commercial work. When you start doing commercial detailing services for auto dealerships, car auctions, and even corporate fleet detailing, your needs change quickly in one major area of business – transporting vehicles.

Adding detailer transporter plates to your business sounds like a great idea until you start working on it. It’s expensive, complicated, expensive, and did I already say expensive? Yes, it’s going to cost you.

Commercial detailing work is a great profit center for any shop or mobile detailer. Provided you are able to ramp up your ability to do higher volume work and maintain consistent quality at the same time.

So let’s discuss the first step in the long process of getting started doing commercial or wholesale detailing work – obtaining detailer transporter plates for your business.

And don’t worry if you don’t understand a part of this. I explain everything in detail and start with the basics.

What are Detailer Transporter Plates?

Every vehicle on the road needs to be registered and insured. Each state has a DMV or Department of Motor Vehicles that regulates this process and issues a license plate to identify each vehicle. The DMV’s also have temporary commercial license plates for businesses that need to transport vehicles without the hassle of obtaining new license plates each time a car is moved. These license plates have names like Dealership, Repair/Towing, Transporter, and Detailer/Transporter.

Differences Between Transporter Plates and Standard License Plates

There is an insurance term called Care, Custody, and Control or the 3-C’s. In a standard vehicle license plate, the registration and insurance are tied to that vehicle owner and identified by that license plate. With a Transporter plate, the 3-C’s move with that plate, and subsequently the registration and insurance also go with that license plate. So it does not matter the vehicle, as long as that license plate is properly maintained and current, while also being used by an employee of the business that owns the plate, then that car is legally allowed to be driven.

Car Salespeople Use Dealership Plates Every Day

If you’ve ever visited a car dealership and took a vehicle on a test drive, then you’ve seen these commercial temporary license plates in action. Auto dealerships don’t have license plates for each of their cars. It would be a nightmare to keep track of everything.

So you pick out a car you like and the salesman grabs a dealer or dealership plate and puts it in the back window. Then you take the car for a spin around the block. Car salespeople use dealership plates every day.

The dealer plate is convenient because it allows car salespeople to use multiple vehicles without needing individual license plates and insurance on each.

The Insurance Goes with the License Plate

Since the insurance goes with the license plate aka dealer plate, it’s easily transferable between vehicles. Move the license plate and you move the insurance to another vehicle.

That’s the point of these types of license plates. That dealer plate insures that vehicle while the salesman is driving it.

So how does this help you? It doesn’t. You can’t secure dealer plates because you don’t own an auto dealership. I’m using it as an example for you to understand how the plates are utilized.

No, You Can’t Borrow Dealer Plates

I know you are thinking that. Right? I asked myself when I first went down this road. Why can’t I just borrow one of their plates? I’m moving cars for the dealership after all. But no, you can’t borrow dealer plates. It doesn’t matter that you are working with them, it only covers dealership employees.

None of the benefits of the dealer plates cover you as a contractor doing services for the dealership.

So what are your options? As a professional detailing business, you can choose to bring your equipment to the dealership in the form of a mobile detailing rig or van.

Or you can transport the vehicles to your detail shop to complete the work. To do so you need to insure the vehicles you are transporting.

Care, Custody, and Control

This is why most dealerships want you to have either “Repair/Towing” license plates, or “Detailer Transporter Plates”.

Both license plates serve to temporarily transfer your garage keepers liability insurance to the vehicle you are driving while you are in care, custody, and control of the vehicle. Remember the 3C’s from the above section and when I mentioned it on our business liability insurance page?

Insurance is tough when transporting cars. It depends on the state you reside in.

Detailers and Repair/Towing Plates

I’m not kidding when I say that DMV’s don’t like auto detailers. They don’t want you transporting vehicles.

For example, in Pennsylvania, you can’t get a Repair/Towing plate if you have the word “detail” in your name.

The government has its reasons for this. I’m simply relaying information.

Specialized Transporter License Plate

Although repair/towing plates are preferred, there is an option for detailing and reconditioning businesses. Most states have a specialized transporter license plate or a detailing transporter plate.

So why, if you own an auto detailing shop, would you want a repair/towing plate? Especially if states already make a special plate for detailers?

Let’s first start with this comment. If you only do car detailing, then you should get a detailer transporter plate.

If you also do other vehicle services, like reconditioning, paint repair, interior repair, dent pulls, bumper repairs, etc., then you should be able to utilize a repair/towing plate.

Ultimately, the repair/towing plate is better and more flexible for your needs.

Talk to Your State DMV Office

Either way, talk to your state DMV office that handles these types of license plates. They will tell you exactly which plates you are eligible to obtain.

Here are a few reasons the Repair/Towing plate is preferred if you can get it:

  • You can use them 24 hours a day versus transporter plates being limited to use only during your business hours. A big problem if you happen to be driving a car beyond your regular hours of operation;
  • They are easier to get since the DMV is much more stringent on detailing applications than they are for mechanics shops and towing companies who use these plates most of the time;
  • Many states are phasing out the transporter plates and just telling detailers not to move vehicles. Amazing how bureaucrats can think their solutions are so easy to live with, isn’t it?

Detailer Transporter Plates

The concept of auto detailer transporter plates was specifically designed for transporting cars between auctions and dealerships.

Auto Detailers picked them up when the state DMV’s didn’t think they were actually considered repair shops. So they rejected the detail business applications for repair/towing plates.

Unfortunately, this means that many detail shops with these detailer transporter plates use these plates beyond their intended purpose when they transport cars between dealerships and their own shops.

Transporting Cars

Unfortunately, the only way you can get auto detailer transporter plates is to convince a dealership to do a contract with you that says you will be transporting cars for them.

The application specifically says that you can’t be driving their cars between your shop and the dealership. So essentially, the DMV doesn’t want the auto detailers moving cars.

Denying car detailing shops the use of these plates is their way of making it more difficult for detail shops to do their work.

Auto Mechanics shops have repair/towing plates.

Auto Dealers have dealer or dealership plates.

Automotive auctions have transporter plates that they use to transport vehicles between dealers and the auction warehouses.

Commercial Profits Come with a Price

Unfortunately, those profits come with a price in the form of new insurance, equipment, and a host of additional headaches if you don’t know what you are doing.

From scaling the volume of cars you can complete per day to increasing the number of employees to be able to handle that volume. It takes an organized approach to expand your business in this way. And the first step is to start the process to obtain detailer transporter plates.

It’s absolutely not easy to get these types of commercial license plates. But I’m going to give you some background, teach you about the different types of license plates, cover insurance requirements, and the step-by-step process for getting your own detailing transporter plates.

The Key to Profitability with Car Dealers

Commercial detailing can be rewarding if you are careful to focus on providing solutions for the pain points of your potential customers.

For example, with car dealerships, a major issue with them is where you plan on detailing their vehicles. Space is a premium and they won’t just hand over a repair bay. Those make too much money for the dealership.

Once you see the problem, you realize the solution. The key to profitability with car dealers is the ability to transport their cars.

This creates the need for your shop to obtain specialized license plates. And that just opened another Pandora’s box of issues for your business.

We Qualified as a Body Shop

So auto detailers are in a weird limbo area between these other types of automotive businesses.

My company didn’t have as many problems because we did so many types of reconditioning services that we qualified as a body shop.

We also got around a lot of these issues by simply building up our mobile detailing crews and sending them to the dealer locations to do the work at their facility.

If you do get transporter plates you need to make sure you are insured with garage keepers and vehicle transport insurance on EACH and every plate you own. That will run you about $1,400 to $1,800 per plate.

Plus the state makes you get the insurance BEFORE they even look at your application. That makes it fun since it takes them over a month to process it.

You Can’t Be In Business Without Being Properly Insured

The auto detailing business is like any other. You can’t be in business without being properly insured. The reason you have insurance is to make sure you are covered in the event something bad happens.

So by cutting corners like many detail shop owners do, eventually you will get burned in some scenario that you might have thought sounded good but in reality just doesn’t work.

When securing auto detailer transporter plates for your shop, you need to make sure the insurance part is set up and maintained correctly.

When Naming Your Business, Don’t Use The Word Detail

***TIP*** When naming your business, don’t use the word detail anywhere in your legal name.

Call your business something along the lines of Joe’s Vehicle Reconditioning or Auto Recon Experts. Or many other variations that don’t include detailing in the name.

This way when you apply for a Repair/Towing plate and they ask you what you do you can honestly tell them that you recondition vehicles, which is entirely true.

Set it Up Right From The Start

Too many detail shops start out just detailing, but by the time they get big enough to need something like detailer transporter plates, only a small portion of their business is actually performing actual car detailing.

So keep this in mind early on when you are naming your business or when you eventually incorporate, consider slightly changing the name.

I hope you have success in securing your transport plates. They are hard to get but definitely advantageous. Most of your competition won’t have the knowledge or the financial resources to get these plates. So they offer you a definite competitive advantage in your local area.

I hope this overview of detailer transporter plates is helpful and informative. As I said, it’s a long and expensive process, but it’s so worth it if you can manage it.