Tuesday, February 14, 2006

Why not let my customer pay the use tax?

If my customer pays the use tax, why do I have to charge him tax. Can't I get a letter from him that says he'll take care of it?

The answer is, generally, NO! The state doesn't trust your customer (and with good reason, I might add) to pay the use taxes. You're the seller and you are primarily responsible to collect the sales (or use) taxes from the customers. Even if they "promise" they'll pay.

Most states have a "direct pay permit" which DOES get you off the hook. This is a state-sanctioned way for a customer to tell you, "we'll take care of the use tax ourselves." The customer has to apply for the permit, and they will generally go through more audits than the rest of us. That's because the state really DOESN'T TRUST anyone to pay their use taxes.

Bottom line, you have to collect the taxes from your customer.

Sales Tax Guy


Anonymous said...

What if the customer says "you charged us the tax, but we already paid it". This can happen over the course of a longer-term project where tax appears on the final bill only (not on "down payment" or "progress" billing). If the customer furnishes proof of payment, is the seller off the hook? And what proof would be sufficient to keep on file?

Jim said...

The customer paid use tax because tax wasn't billed by the seller as it should have been (even on progress billings). They should have discussed this with the seller before self-assessing, but this often happens.

This assumes that the sale is taxable and that the state doesn't allow absorption.

Sales Tax Guy

See disclaimer