Lori bought a lot of propane by the tank from a gas supplier. After hearing me say, in a seminar, that you should ask your intrastate vendors why they didn't charge you tax, she did.
"How come you're not charging me tax on this propane."
"Because it's not taxable."
"Yes it is"
"No it's not."
Lori then showed them the law in their state that says gases, like propane, are not taxable when sold for residential use. Her purchases were for business use.
"So you're going to start charging me tax, right?"
"Yeah, I guess so. If it'll make you happy."
Lori happened to be at my next class too, and she told me the above story. She was pretty proud that she had been able to kick a little vendor butt based on my advice.
I said, "Lori, let's think about this. This propane vendor obviously thought that all of his sales were not taxable."
Lori said, "Yep."
"If that's so, then they had no reason to be registered with the state, since none of their sales were taxable, as far as they knew. So if they're charging you tax to make you happy, how do you know they're actually registered and paying it. Couldn't they just be charging you an extra 7% and pocketing it? Would they really go through the registration process just for you?"
Lori, who is really a nice person, said, "Those b_____s!"
In my previous article, I recommended that you ask for proof that your interstate vendors are registered in the delivery state if they charge you tax. But asking for that proof for your intrastate vendors seems unnecessary. But in Lori's case, the situation smelled a little funny.
Her plan was to demand that permit from the propane dealer when she got to work the very next morning. Unfortunately, she has never been at another of my seminars. So I haven't gotten the next chapter in the story.
The morals of this story?
1. Don't assume your vendor knows the sales tax rules for what they sell.
2. If you're suspicious, demand proof that they're registered in the delivery state. Even if they're located in your state.
The Sales Tax Guy
See the disclaimer - this is for education only. Research these issues thoroughly before making decisions.
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