I install satellite dishs. I get paid $30 to do a job. If there is a problem after I leave. The company takes $35 from me. First is this legal and second do they have to report this as income?

What does your employment contract or agreement say?

As far as whether or how they report this for tax purposes, expenses are a setoff to income. This is a business expense for them. But are you saying if there is a PROBLEM which they must correct you lose $35 OR if there is a complaint - nothing that needs to be corrected - you lose $35?