Wednesday, August 19, 2009

Variations on Absorption Rules

This is the second article in my current "absorption" series.

Not all states have absorption laws. As we discussed in this article, some states may not put the burden on the buyer and leave it on the seller. So those states won't have the typical absorption rules. And some states are strict, and some not-so-strict. Here are the variations:

1. Some states don't have rules about this at all. If the seller wants to not charge the buyer the tax, no problem. These are usually states where the burden of the tax is intended to be imposed on the seller, not the buyer. And these states usually say that the buyer has no use tax responsibility if they purchased from an in-state seller.

2. States often provide an exemption when separately charging sale tax would be really inconvenient - bars, food vendors at sporting events, vending machines, etc. There may be requirement that a sign be posted saying that the price includes the sales tax.

3. There are a few states that say that if the invoice says "tax included", that's good enough.

4. Some states have no problem with the seller saying that they'll refund the sales tax, even though they have to charge the tax.

5. Many states are OK if the seller says something like "the state makes us charge you tax, but we'll give you a rebate of 6%." As long as the seller is not saying that they're refunding the tax itself.

Often times, the state doesn't really care too much about absorption for sales to individuals. Since the person won't pay their use taxes anyway, their having a receipt showing the tax isn't too important. See item 1 in this article. Although this kind of sign in the window may tick off even the laziest of revenuers.

Please remember that these rules are highly variable from state to state. You need to research the way it works in whatever states you are selling in.

More, on this fascinating topic, to come.

Sales Tax Guy

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