Part of a series on essential actions you need to take and this is the third article in my current "absorption" series.
Normally, you don't see absorption laws being enforced too often. I'm guessing that this is largely a function of the state figuring:
1. The seller is dealing with individuals as customers, and as long as the seller remits the tax to the state, the state is OK with it. Since the odds are long that the individual is going to pay the use tax anyway, the buyers don't need the receipt that is one of the purposes of absorption laws. Or,
2. The state gets the tax from both the seller and the buyer. Incorrectly I might add. Why? Because the seller builds the tax into the price (absorbing the tax). The buyer, not even realizing this is a possibility, sees no tax on the invoice and goes ahead and pays the use tax. The state gets the money twice. Pretty cool, huh? Buyers can avoid this by contacting the vendor.
A variation occurs when this issue comes up during an audit. The buyer gets audited and the auditor pulls a taxable invoice where no tax was charged. Obviously, the buyer will be assessed use tax. Even if the auditor realized that the taxes may have been absorbed by the seller, he or she isn't going to mention it. And when was the last time you heard of a buyer, during an audit, going back to a seller, and complaining about why they didn't charge sales tax?
By the way, it's a good bet that the auditor will put the seller on the list of companies to audit. He'll be hoping to get the sales tax from the seller since it wasn't apparently charged. He'll be disappointed when the seller shows that she did pay the tax. But she didn't pay enough. And that will be the subject of my last article (for a while) on this subject.
Sales Tax Guy
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