Sales and Use Tax News Links

The big sales tax news in Chicago is that the sales tax hike might get rolled back. For the rest of you, who cares? But what's interesting is the politics behind it. DailyHerald.com and others

A North Carolina spends $250,000 in fees to fight (and win) an assessment of $600,000. If you're in the graphic design business, you may want to look at this. And, if this is true, shame on the NC tax department. Bizjournals.com

Boeing gets a tax break in South Carolina. This is an example of states writing laws that don't mention a particular business by name, but write the rules in such a way that only one possible company could be involved. AP and others

Flu shots get taxed in Illinois Sabrix

Interesting way for an electric car manufacturer to avoid $320 million in sales taxes sfgate

Sales Tax Guy

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Is food really exempt?

I've seen this now a few times. So I thought it would be worthwhile whispering in your ears.

Grocery store food is exempt from tax in many states, and taxed at a lower rate in even more. The official wording is usually something like "food sold for off-premises consumption." But you and I know that basically means the kind of food you buy off the shelves at the Safeway.

I've now seen a couple of states that restrict the food exemption to individuals or for home consumption. In other words, if a business buys food, say for a company picnic or for the company lunchroom, the food was NOT exempt.

Obviously the grocery store isn't going to differentiate. Food's exempt as far as they're concerned. But your business may get nicked for use taxes on that food. So, if you're in a state that exempts food to some extent, make certain that there isn't an extra sentence that excludes businesses from the benefit of the exemption.

Otherwise, you'll get a surprise during the audit.

Sales Tax Guy

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Are You a Manufacturer?

In most states, if you take something that has one form and name, and turn it into something with another form and name, you're a manufacturer. For example, there was a court case where a quarry was able to qualify as a manufacturer, at least as far as their rock crusher was concerned. That machine took boulders and turned them into gravel. Different forms and different names. Viola! They're a manufacturer. Which is a good thing.

If you qualify as a manufacturer, then congratulations! There are all kinds of wonderful and delightful exemptions that you can enjoy.

But if you're not...well, sorry. If you read the rest of this article, don't blame me if you get ticked off. Because you're not a manufacturer.

What I want to cover for you are the laws that make life grand for manufacturers, at least as far as sales and use taxes are concerned. You need to check these opportunities for your state, and see which ones apply. Because there's a chance you're giving the state money they don't deserve.

1. Machinery. In most states, manufacturing machinery is either exempt from tax or taxed at a lower rate. There are restrictions, but this is a pretty common and money-saving exemption. Common restrictions (which vary enormously) include:

• The machine must be used to directly change the product from one form to the other
• The machine must be used predominantly in the manufacturing process
• The manufacturing process usually doesn't include the finished goods or raw materials inventory. It typically begins at the first machine and ends at the last machine on the line.
  
• The machine often must be depreciable or have a minimum purchase price.
• A few states require that the machinery expand production
  

For example, lift trucks are usually exempt if they are used in the manufacturing process to move WIP (work in process) from one machine to another. But if that truck is usually found in the warehouse moving raw materials, then it wouldn't be predominantly used in the manufacturing process. And therefore the lift truck would be taxable.

2. Repairs. In most states, repair labor and parts for exempt machinery aren't taxable.

3. Tools. In some states, smaller equipment, like hand tools, safety equipment, etc. are exempt.

4. Consumables. Generally, the ingredients that become part of the product are exempt. This really is just the resale exemption. But some states also grant an exemption for consumables (eg. like lubricants, drill bits, sand paper, catalysts, etc.) that are used during the process, but don't become an ingredient of the product.

5. Utilities. In some states, electricity, natural gas, propane, and other energy sources are exempt or taxed at a lower rate.

These are the big categories. And there are lots of complications and exceptions with each state being completely different. And these exemptions only apply to manufacturers. But if you are one, you owe it to yourself to get very familiar with the exemptions in your state so that you save every last dollar.

Sales Tax Guy

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Sales and Use Tax News

These are gleanings from newsletters, etc. I have not included all of the events, nor have I provided much detail. As usual, the disclaimer applies - check this kind of thing out yourself. I just want to give you a heads-up.

Washington

Since manufacturers are starting to offer money-back guarantees, it's worth while taking a careful look at what the rules are. In WA, unless ALL of the purchase price is refunded, including the sales taxes, retailers can't get that money back from the state. Apparently this isn't always the case if the sale included dealer add-ons like undercoating, etc. While WA has clarified the rule, this is probably going to become more of an issue in other states pretty quickly. Be ahead of the curve here.

Ilinois

They have a "gasoline retailers' voluntary compliance program" which sounds a lot like a tax amnesty. It runs through 11/16.

DC

They're not going to have a sales tax holiday in November.

Louisiana

They have some new exemptions and rule changes including stricter requirements placed on ag dealers - they just can't take the farmer's word for it.

New Orleans has a tax amnesty running through 12/4/09

Oklahoma

Rate changes

Maine

They will be requiring efiling in 2010

Sales Tax Guy

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Some Recordkeeping Tips

1. Determine the state that has jurisdiction over the transaction. This will control the statute of limitations, which controls how long you should keep records. For most states, it's three or four years. You'll need to prove where control was transferred, so you're going to want to hang on to sales paperwork, purchase orders, shipping records, bills of lading, etc.

Remember, there is NO statute of limitations protection if you've never filed a return in a given state.

2. If you didn't charge tax on a sale, you need to substantiate the reason.

• Make sure you have a well organized and complete file of exemption certificates. And have a procedure to demonstrate how you get them.
  
• If you didn't charge tax because the sale was shipped out of the state, do you have the necessary paperwork (see above)?
  
• If the sale wasn't taxable, do you have sufficient backup if you are questioned. Keep a file of your research so that, when the auditor challenges you, you can whup it out. We used to call this a CYA file. If you don't know what that acronym means, email me.

3. If you didn't pay tax on a purchase, you need to substantiate the reason.

• If you've determined that the purchase wasn't taxable, show the reason on the invoice. This is likely to be because of how you will use the purchase (resale, manufacturing, agriculture, research, etc.) You're going to have to prove that exemption. Can you?
• Do you have sufficient documentation for your decision about taxability. You know, the CYA file?
• And if you've paid the use tax, you need to document this as well. Hopefully, you've coded the invoice so that the fact that you've accrued the tax is obvious to the auditor, and all they have to do is trace the invoice back through your system to the return.
  
• See this article for an idea to help with the above bullet points.
• On a practical side, remember that, if you're stapling paperwork to an invoice, this stuff tends to fall off - particularly the bottom items. The invoice is a good place for transaction specific backup, but be careful.
  

A couple of more general items...

4. If you've gone through a system conversion, keep your old software and data if the newer system doesn't support the old one. You need to be able to provide the auditor with the information, even it presents a technical challenge. And make sure you keep sufficient hardware and documentation to be able to get at the data when you need it (this is a very common mistake).

5. If you acquire a company, make sure that the technology and skills remain intact to get at the records that come with the acquired company. People leave and their knowledge departs with them.

6. Finally, remember the fundamental concept. The audit won't be tomorrow. It'll be two or three years from now. You're never going to remember.

Nutty Rules

In SC, rental of portable toilets is considered the rental of TPP and therefore taxable. Included in the taxable amount are any other charges for service. But fear not! SC also provides an exemption for 70% of the total charges for rental of portable toilets. That's a relief.

In IA, automobile racetrack owners can get a rebate of the sales tax they paid on purchases ofTPP.

In TX, data processing services are taxable. That means that spam filtering services are taxable too.

In WI, there's an exemption for snowmobile trail groomers and attachments for snowmobile clubs. I've never seen this one anywhere else. So the rest of you in other snow states have every right to feel jealous.

Sales Tax Guy

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Sales and Use Tax News Links

I love this one. California vet beats Sacramento. Yay! latimes.com

Felony watch! Cape Girardeau restaurant allegedly collected sales tax for 14 months but didn't pay it to the state. semissourian.com

Sales Tax Guy

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Is it that time already?

Part of a series on essential actions you need to take

As I go through the newsletters, there is one thing I repeatedly see that makes me shake my head. People lose appeals, refunds, and are assessed penalties constantly, And there is one thing that happens way too often. It may not be the only problem, but it is certainly one way to lose money. They were late!

The company either filed their sales tax returns late (sometimes years late, but that's not what I'm talking about here). Or they didn't file for the refund* until after the deadline. Or that appeal notice got sent in a few days late.

And nothing probably brings more joy to the revenuers back at the office than to get a refund request, look at the date, and realize they can easily throw it in the "tough luck" pile. They don't have to think, they don't have to fight it. The taxpayer simply screwed themselves out of the opportunity.

Now, I don't expect you to memorize the due dates for all of the things you have responsibility for. But we're accountants! Well, most of us, anyway. This should be relatively easy for left-brained people like us to organize. If we were all sales and marketing folks, I could see the problem. But we're accounting types. This should be easy! Create tickler files. Set up a due date calendar. There's this thing called Excel that may work too!

If you're filing a return, when is the due date? Will the postmark date be sufficient? Not always, by the way.

If you have to file advanced deposits, when are they due?

If you need to file for a refund, when does it have to be submitted? How many years do you have? If you're going to do self-audits, figure out how frequently to do them to meet the refund deadlines.

If you've been audited and you're going to file an appeal, when does the state need to have it in their paws?

Now, you all know I hate to offend CPAs and attorneys, so I'll try to be gentle here. The thing is, in many of the cases where the taxpayer lost money or the opportunity for a refund or an appeal, the filing was the responsibility of, ahem, those outside professionals. Now, it's not necessarily because their bad people. It's just that, well, have you seen their offices? It amazes me, whenever I visit my CPA to give him our income tax** paperwork, that he's able to find anything. I have to be careful where I step! One twist of an ankle, and Mr. Johnson's medical deductions become a scuff mark.

So you need to take the responsibility. This is the easiest thing to screw up, and the easiest to solve. Make sure your professional files on time. Heck, call them and ask! Remind them! And if you really want to be a snot, demand proof that they did, in fact, mail the paperwork on the correct date.

This is possibly overkill, but I'm beginning to see the benefit of sending key returns and paperwork via certified mail. That way you have proof you mailed it. I wouldn't bother with the "return receipt" though. I just want to have proof it was mailed. It costs a little extra but it gives you proof in the unlikely event that the state busts you. But the real benefit is that it makes everyone a little more careful when they know they can't get away with, "well, I'm pretty sure I dropped it in the mailbox on August 31."

Bottom line? This problem is too easy to avoid. Watch your deadlines and make sure the paperwork gets filed on time. Geez.

Sales Tax Guy

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*Don't assume that a state's statute of limitations is the same as the time for you to file an appeal. The statute of limitations may be three years in your state, but the time to file for a refund may only be one year. So check it out!

**Yes, I have a CPA do my income taxes. I really hate income taxes. All those dang forms to fill out.....


..

Sales and Use Tax News

Gleanings from newsletters, etc...

Promotional specialty items for Mardi Gras in Louisiana can be exempt. You know, the stuff they throw from the floats.

Pennsylvania, [awash in budget problems], has granted an exemption for helicopters and parts. Interesting.

In California, do you have two or more garage sales a year? You need a sellers permit. But thrift store sales on military bases are exempt from tax.

You now have one year to file for a refund in Kansas.

In Missouri, tool sales from a mobile store (your mechanic knows about these things) use the tax rate from the location where the truck is when the sale is made. Which makes sense. And also makes the bookkeeping interesting.

In New York, there's a new sales tax on transportation services, like limos.

Rhode Island has a new epay requirements

South Carolina has their second amendment holiday again this year.

Big overhaul of Wisconsin laws.

Rate changes
DC
Kansas (local)
North Carolina (state and local)
Pennsylvania (local)

Note that these are just changes that I have gleaned from newsletters, blogs, etc. and that I have not included all of the events, nor have I provided much detail. As usual, the disclaimer applies - check this kind of thing out yourself.

Sales Tax Guy

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Sales and Use Tax Links

The Tax Foundation has published a report summarizing the sales and use tax rates for all of the states. This is a very interesting link (to me, anyway).

Some observations:

It's nice to see an acknowledgment that the effective rate, combining local and state rates, is the relevant number. Too many ignorant general media stories focus on the state rate, not factoring in the local taxes, which often are higher than the states'. The Tax Foundation gets it right, as they usually do. They give us a good way to compare sales and use taxes from state to state.

Colorado has the lowest rate in the country at 2.9%. But when you add in the local component, they work out to have the 13th highest at 7.24%.

The highest rate in the country is in Tennessee at a combined rate of 9.41%. But there are a few places in Alabama (Brookwood, Coaling, Coker and Vance) where the rate hits 11%.

How does my state rank? Illinois comes in with a state rate of 6.25%, which is pretty good. But then you add in the local taxes and we come out at the 6th highest rate in the country. Yay, Illinois!

Who's got the lowest rate of a state that actually has a state sales and use tax? Hawaii! Go figure.

See how your state ranks. You're probably going to be depressed. Have a nice weekend.

Sales Tax Guy

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Motor Vehicles

There are a couple of special rules regarding motor vehicles and sales and use taxes that bear mentioning.

1. In some states, motor vehicles are exempt from sales and use tax! This isn't a windfall for you; they just have a separate motor vehicle tax that looks and smells like a sales tax. Sometimes the rates are different. And the rules are certainly different.

2. Let's say you are a resident of state A and you're buying the car in state B. Many states, including B, will not charge you their sales tax, if you provide reasonable assurance that you're going to take the car right back to state A, where you live. State B knows that you're going to register it there, so it's not like you're evading sales taxes. And this gives the car dealers in state B more potential customers in state A.

You often see this in states with cities right along the border with other states. And usually state B's sales tax rate is higher than state A's. If this exemption didn't exist, then nobody in his right mind would leave state A and go over to state B to buy a car. So by giving this exemption, the car dealers in State B are now on a level playing field with the car dealers in state A.

3. Most states will recognize that it would be mean to tax you again on a car that you bought in another state. Let's say that you bought a car in state T while you were living there. Then you move to state W. When you go to get the plates for your car in state W, they're going to want to assess you use tax on the car that you have brought into their fair state. But if you've saved the paperwork, you'll be able to show that you already paid sales tax on the vehicle in state T. State W will usually give you a credit for the taxes you've already paid.

Example: You bought the car for $20,000 in state T and the rate was 7%. So you paid $1,400 sales tax. The rate in state W is 9%. So you'll pay 2% (the difference in the rates) of $20,000 - $400. That's some money, but it's better than paying the full 9%. And you really haven't been double taxed. You just made the mistake of moving to a state where the taxes are higher.

4. Finally, we come to occasional sales. If Mike sells a car out of his driveway to Jane, Mike is making an occasional sale. Mike doesn't have to charge Jane sales tax because he's not a retailer of cars. However, Jane is going to have to register this car. When she does, the clerk at the counter will ask to see the bill of sale. And he'll notice that no taxes were charged. Jane will have to pay the use tax on her car, since she didn't pay sales tax when she bought it.

The state normally has no way of capturing sales tax revenue in occasional sales. So they just make occasional sales exempt. But when it's an occasional sale of an item that has to be registered, then they can now get their money when Jane registers it. Yay!

A word about terminology. While the tax that Jane will have to pay is really a use tax, the states almost invariably call this tax sales tax. I'm pretty sure it's just so they don't have to have an argument with Jane about this weird tax she's never heard of. But Jane knows all about sales tax so she's less like to ruin the poor clerk's day.

Also, there is a big exception in most states for intra-family transfers of vehicles. In an occasional sale between the parents and children, the transaction is almost always exempt. Some states also include grandparents, uncles, siblings, step parents, etc. But at a minimum, the exemption will include parent to child.

As always, check your state laws to see what the specific rules are that apply to you.

Sales Tax Guy

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Sales and Use Tax News Links

Indiana thinking about taxing services
They're one of those states that taxes the minimum of services. But it's been proposed. Betcha a nickle it won't happen. Michigan tried a couple of years ago and that didn't work out for them. The voters generally don't appreciate having to pay sales tax when they get their hair cut. And businesses that have sold purely services (like CPA firms) would have to set up entirely new systems to be able to handle the tax. Fox59.com and ibj.com


After clunkers tax rush, states come down hard
The rush to buy cars helped the states in the short term, but apparently all it did was move the sales around. The states still lost revenue in the subsequent months. msnbc

Sales Tax Guy

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Coupons

This is one of a series on how to handle items that affect the "basis" of tax.

There are two types of coupons (in the sales and use tax world, anyway): manufacturer's coupons and store coupons.

A manufacturer's coupon is one of those things you get in the mail, typically issued by the manufacturer, giving you some discount on your purchase.

A store coupon is also a piece of paper, and you may get it in the mail. But it's fundamentally different.

The difference is that the store coupon essentially acts as a price or quantity discount. The store (the seller) is actually giving you a discount, just like a mark-down in the store. You just have to do a little coupon clipping to get the discount. But the key thing is that the store is incurring the cost of the honoring coupon.

In the case of a manufacturer's coupon, you hand them the paper, and they give you the discount. But the store (seller) will be reimbursed by the manufacturer for the discount offered by the coupon, plus a little extra for processing. The key thing here is that the store incurs no cost to honor the coupon. That cost is born by the manufacturer.

In effect, the store is receiving the full amount of the selling price! They're receiving some money from you. And they're receiving the rest of the money from the manufacturer. So they really sold you the item for the full amount, as far as they're concerned.

While there are exceptions, most states consider manufacturer's coupons to operate the same way as rebates - they do NOT reduce the basis of the tax. The tax you pay will be on the original selling price before the coupon.

But store coupons are almost universally treated just like price and quantity discounts. They reduce the selling price.

Don't believe me? Next time you're in a big store, like Target, or your local chain grocery store, see how they handle that manufacturer's coupon on the receipt. The tape will show that they gave you the discount, but they charged you tax on the original selling price.

That is, unless you're in one of the few states that treat both types of coupons the same. In those glorious places, both coupons reduce the selling price.

Sales Tax Guy

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News Links and An Editorial (more or less)

Philadelphia's local tax went up, bringing them to 8%, while the suburbs are at 6 and Delaware, which is basically a suburb of Philadelphia, is still at 0. The mayor says there will be no "material impact." Like he knows. He also says that it's just temporary- for five years. OK, who's willing to bet? In six years, that "temporary" tax will still be there. There really are no "temporary" taxes. It also looks like some retailers will eat the tax rather than pass it on. Which is absorption and illegal in Pennsylvania. Wonder if they're going to enforce that? kyw1060 philadelphia.bizjournals.com and others

Oh, and without comment, the Virginia energy efficient sales tax holiday starts on 10/9 taxfoundation and newsadvance.com

Sales Tax Guy

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Nutty Drop Ship States

Part of a continuing series on drop ships

[listed revised on 5/26 - not completely overhauled]

This is one of those things that has been rattling around on my articles-to-write list for a while. And I needed to update the list I use in my seminars and webinars

Herewith is, as of today, a listing of the "nutty drop ship" states. These are states that are either explicitly "nutty" or I failed to have the necessary language (in RIA's sales tax database) that makes them "not nutty." In other words, my default is that a state is "nutty" unless I can find enough information to make them "not nutty." This article explains "nutty."

Note that some of the states listed offer wiggle-room. Some will accept special paperwork or certificates. Several differentiate between interstate and intrastate shipments. FOB points may come into play. However, the states marked with an asterisk* appear to offer very little wiggle-room, if any.

You always need to do some research to determine the drop ship rules in the delivery state.  Also, remember what I've said about information in tabular format. Check everything out yourself before making any serious decisions. See the disclaimer.

NOTE: This list is for illustrative purposes.  It's out of date.  Do your own research.

Alabama
California*
Connecticut
DC
Florida*
Hawaii
Illinois
Louisiana
Maine
Maryland*
Massachusetts*
Mississippi*
Nebraska
Nevada*
North Dakota
Oklahoma
Pennsylvania (new rule in Feb 2010)
South Dakota
Tennessee
Virginia

Sales Tax Guy

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Sales and Use Tax News Links

North Carolina did a last minute increase to the tax rate, but they haven't gotten the revised forms to retailers. So retailers may not be charging the right tax and may not remit the right tax. This is a frequently a problem with fast tax changes - there's sometimes not enough time for retailers to implement the change. And they may not even know about it in time. And whose fault is that?
newsobserver.com

So, is the sale of marijuana taxable? In Colorado, which allows medical marijuana, the question is whether it's medicine or an herbal supplement. vaildaily.com

Felony watch: Jeweler didn't collect sales tax for over 3 years totaling $102,729, and has to pay $207,926. jckonline

So what makes a retailer?

As promised, let's talk about what the states usually use as criteria for determining that someone is a retailer. As we saw, this is an important thing to determine because, if the seller is a retailer, then they must charge tax - the sale is taxable. Which means that if the seller doesn't charge tax, then the buyer must pay use tax (as we saw in this loophole).

Some states make it pretty easy. Their laws say that anyone in the business of doing anything is a retailer of anything they sell. So businesses in these states can't make occasional sales at all.

Other states use some sort of numeric test. For example, you might become a retailer when you have had three sales events in a year; or if you make sales of more than $5,000 a year.

But other states will use a mix of the following tests. Some of them are "mushy" and subject to interpretation, others are not so mushy:

1. Does the seller generate a great deal of revenue? This is relevant concern if you're trying to decide if a sale outside of the seller's normal line of business qualifies as a retail sale. If a retailer of structural steel components generates $500,000,000 in revenue every year, and they also sells $100,000 worth of computers, this is a pretty small percentage of their total revenue. But as an absolute number? $100,000 is a respectable amount of computers and would very probably qualify them as a retailer of computers just on that number alone. Let's say it was $5,000 worth of office furniture. Now the number becomes almost irrelevant. But read on.

2. Does the seller keep books and is she able trying to make a profit on the sales?

3. Does the seller hold herself out as a retailer, with advertising and signage? Does that steel company have a sign out in front saying "surplus computers for sale?" Not good.

4. Does the seller have staff assigned to selling the items? If our structural steel manufacturer was just getting rid of surplus computers by selling them only to employees, that $100,000 number might not be a problem. But if the company has staff assigned to make the sales, deliver and install the computers, then they're probably a retailer.

5. Is the item sold related to the seller's business? Let's say that the steel company has written software to help bridge-builders calculate how much steel they'll need. And they sell this software along with the computers. That's pretty seriously related to the business. Now the sales are unquestionably made by a retailer, and therefore taxable.

6. Do they compete with other sellers of the same products? In other words, do the other computer vendors in town look at the steel company as a competitor? If the steel company merely sold the computers to their employees as surplus, the computer dealers in town might not even notice what's going on. So this might not be a problem. But if they put that sign out by the road and sold to anyone who had the cash...problem.

But here is the final, and absolute test:

7. Does the seller buy items specifically for resale? If the steel company is merely selling surplus computers to their employees, that they had purchased for the company's use, this test isn't met. But one of the others listed above might be, so the company's not off the hook yet. On the other hand, if the seller is buying those computers with the specific intention of selling them to others, than no other tests are necessary. The seller is a retailer of computers and they're making taxable sales.

Remember, if a seller meets the test of being a retailer, then they are making a retail sale. They have to charge tax to the buyer, and, if they don't, the buyer is on the hook for the use taxes.

But if the seller isn't a retailer, then there's no tax. Period (subject to the wrinkles mentioned here).

As you can see, it's in the state's best interests to make you a retailer. So they'll interpret those above tests in ways you won't like.



Sales Tax Guy

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Sales and Use Tax News Links

Georgia SUT holiday this weekend! examiner.com and northfulton.com

More on protests over the "arts" tax in PA philly.com, myfoxphilly.com and a whole lot more

Refreshing to see someone getting creative about collecting use tax. Too bad it's a city and not a state. MohaveDailyNews.com

Commission recommends overhauling CA taxes, eliminating SUT and imposing a gross receipts tax. Yeah. Sure. AP

Sales Tax Guy

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Occasional Sales

As I've talked about in this golden rule, "generally [in order to be a taxable sale], the sale must be made by someone who is in the business of selling the product or service. If they're not in the business, then they're making an occasional sale." Occasional sales will sometimes be called casual sales - same thing.

So if Joe sells this piano out of his living room to Marlene, Joe doesn't have to charge Marlene sales tax. Joe is not in the business of selling pianos, and therefore the state doesn't require him to collect sales tax.

However, what about Marlene? You might think that this loophole would be the state's justification for going after Marlene for the use tax, since the Joe was not required to collect the sales tax. But remember this golden rule - in order for there to be any tax, the item must have been purchased in a retail transaction. This piano wasn't, because it wasn't sold by a retailer. Therefore, Marlene doesn't have to pay the use tax to the state

So, even if the piano is a $5,000,000 antique that Mozart owned, as long as it's sold in an occasional sale, the seller doesn't have to charge sales tax and the buyer doesn't have to pay use tax.

There are some wrinkles though.

1. Remember that it's only an occasional sale if the seller isn't normally in the business of selling the item (in this case, a piano). But the states' rules are usually pretty broad in defining what is "in the business." So if you sold a couple of pianos in the same year, and the state was missing out on a LOT of sales tax revenue, the auditor could get pretty aggressive about whether you're "in the business" or not. Soft, mushy rules make for interesting audits. I'll cover this more in a future article.

2. In a some states, the effect of the laws is that a business can't ever make an occasional sale. Therefore, if that piano was sold by a sludge manufacturer who simply had it in their lunch room for the employees' entertainment, they would still have to charge sales tax.

3. There are a couple of states where, in an occasional sale, if the buyer is a business, then the business would have to pay use taxes, even though Marlene (not a business) would not have to pay the use taxes. Yes, businesses aren't treated the same as individuals. What do you expect? Businesses don't vote so they're fair game for the politicians who really only care about votes. Oops, I put on my editorial hat for a second.

4. Finally motor vehicles and other purchases that are required to be registered are handled differently (this will be the topic of a future article).

As usual, you need to check the rules in the delivery state.

The moral: if all the conditions are met and the t's are crossed and the i's are dotted, an occasional sale causes zero tax liability - no sales tax and no use tax. Remember this when you hit the garage sales this weekend. You don't have to worry about paying use tax on your purchases. Because I'm sure you were.

Sales Tax Guy

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