Wednesday, March 25, 2009

Doing business in another state?

Part of a series on essential actions you need to take

Most businesses have out-of-state business. If the extent of your sales is that you ship products, then your primary concern will be whether you have nexus in the remote state and should be charging that state's tax.

But the other problem, that can be even trickier, is when you perform services in that other state. Many states tax a wide variety of services including professional services, recruiting fees, insurance adjustment services, information services, contractors, and my favorite, the labor associated with the repair of tangible personal property. And the list goes on. And nexus isn't the issue if you're performing taxable services in a state. You must be charging sales tax on your sale of taxable services.

You must do this:

Whenever you perform services in another state, check to see if what you're doing is taxable in that state.

This infomation is not that hard to find. Most states will show, in the publications section of their web sites, what are considered taxable services. And the sales tax books that I recommend both cover the issue.

If what you do isn't specifically listed, don't assume you're safe yet. Look a little deeper at the interpretations of the taxability of the service. Check as many resources as you can before deciding. And, if necessary, punt.

For example, whenever I do a seminar in a new state, I always double check to see if speaking fees are taxable (they are in a couple of states). But the law rarely specifically mentions "professional speakers," so I look under training, consulting services, business advisory services, etc. And if there's a hint of a whiff of the potential for taxability, I'll keep looking until I'm sure.

It wouldn't do for a guy who trains on sales and use taxes to get busted by a state for not charging sales and use tax.

Sales Tax Guy
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