Let the other guy do it!

I wrote an article yesterday where the customer was insisting that they weren't taxable and I suggested that they were.  I also suggested that the customer provide the seller with proof that the purchase was exempt.  I wanted to link to an article I wrote on this narrow subject, but found that I never did write anything.  So here ya go.  And yes, I'm going back and adding the link to yesterday's article.

I've written many times about where to find answers.  Most of these resources require that you spend money, and all of them require that you spend your valuable time.  But here's the thing.  If you're a regular reader of this blog, or other sales and use tax publications, then you are probably much more well-informed on sales and use taxes than just about anyone else you're going to routinely meet.  

When you find yourself in a situation where a vendor or customer is insisting that the sales tax law is different than you believe, make them prove it.  Don't waste your time researching the issue when they are probably wrong.  Remember, you're smarter than they are.

By the way, proof isn't "well, that's what my boss said."  Proof is in writing with references to statutes, regulations, bulletins or court cases.  "Well, the auditor told us to do it this way," isn't enough either.  

Here's one way the dialogue might go:

You: "I understand what you're saying, but my boss and I have been to several sales tax seminars and webinars* and I read a lot about sales and use taxes and I've never heard about that rule.  Can you email me the statute that gives the details.  I'm going need something to show my boss."  

Remember to always use your boss's persnicketiness as an excuse.  

Them: "Well, I don't have that.  That's just what my boss told me to do." 

You: "And I appreciate that.  But I still have to charge you tax unless I can show my boss something authoritative that shows it's exempt.  You must have something like that in the files.  Maybe you can call your CPA." 

Let them pay the money to have the CPA research it.  Remember that you're smarter than them.  Relax.  Go fishing. **

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* an admittedly shameless plug 

** picture tie-in

The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details that haven't been discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Sales and Use Tax Books You Should Own - Redux

This article first appeared back in 2007 and I thought it should see the light of day again. 

These are sales and use tax books that I strongly recommend as reference tools. If you have to worry about a few states, you really should own them. If you are in only one state, they may be overkill, but are still worthwhile.  Both books cover all of the states.

Guide to Sales and Use Taxes (from Research Institute of America)
This book has an enormous amount of information for each state, with the material broken up into 15 subchapters within each state chapter. It also has an opening chapter which is basically "sales tax 101." If the book is weak, it is in two areas: there aren't any citations, and it sometimes provides too much data with too little interpretation. These deficiencies are made up for in the next book.

Sales and Use Tax Deskbook (from the American Bar Association)
Each state's treatment is written by an attorney who specializes in that state's sales and use taxes. While I've only met a couple of them, I heard of many more. So far, they have all been heavy SUT litigators and highly "plugged in."

The book actually provides less detail than the Guide (above), but does provide more interpretation of the laws, as well as citations. So you can read the basic information, then drill down to the statute, regulation, bulletin, court case, opinion letter, etc.

Here are two particularly useful items provided by the book:

1.  It gives you the rules for taxation of exports out of the state. Now you'll have ammunition for your discussions with vendors who are charging you their state's tax as opposed to the correct one (yours).

2.  For most states, the book shows the "drop ship" rules, which will, again, help with vendors who really don't understand this particular topic.

I actually recommend both books if you have the budget.

First of all, owning both books gives you the ability of second sourcing or even third sourcing your research. It's always helpful, on confusing issues, to see if the books agree.

The other reason is updates. By owning both books, you can flip-flop your purchases. One year get an updated version of the inexpensive book, next year get the expensive one, and so on.

Finally, you'll notice I'm not offering to sell you these books. That's because I want you to trust that I'm not biased here. I'm not recommending them to make money. Contact the publishers and they'll be happy to sell them to you.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Associations as a Research Resource

An information source that I frequently suggest is your industry association. You're already paying dues to them. You should check to see if they can help you.

Most importantly, there may be an sales and use tax exemption for your industry that they lobbied for and won. States don't hand out exemptions because they're feeling generous. They pass the laws because enough suits took them out for lunch and jawboned them to death. And the people paying for the lunches and the jawboning are the various industry associations.

Want to know more about the manufacturing exemption? It's not a bad idea to contact your state's manufacturers' association. Want to know more about any exemptions for photographers? Well, maybe not.

Some associations are better at this than others. It's a function of the amount of dues that members pay, the existence of any dedicated full-time staff, and the leadership of the organization. And whether the industry is taxed or regulated enough to make it worthwhile to do some research or hire lobbyists.

I used to belong to an state association, and while, looking back on it, there were some sales tax issues that the industry faced, the organization was more about networking, having meetings and conferences, putting out a nifty newsletter, and producing publications on how to build business. Even if they did something about sales and use taxes, the members were so intent on growing their businesses (mostly entrepreneurs) that they would not have paid attention. There was at least one publication about income taxes, but there's always a publication about income taxes.

So don't have high expectations, but check with them anyway. See just what you get for all those dues you pay. Here are some ways they might be able to help:

1. They may have published a book or pamphlet about how sales and use taxes relate to your industry.
2. They may have an SUT attorney or CPA that they can refer who has a lot of experience in the industry.
3. They may have put together a link list on their web site to sales and use tax resources
4. They may even offer seminars on sales and use taxes with a focus on your industry. If they're not, they might be open to doing something like that. Ahem.
5. You might be able to network with other folks through meetings and online forums to discuss any sales tax questions.

There's another benefit. If you're in accounting (and most of you are), you probably haven't had much interaction with your association. Usually it's the operations. executives, and marketing people who go to the meetings, read the newsletters, etc. You'll receive new-found respect in your organization if you start asking about how the association can help. OK, I'm lying in that last sentence. No new-found respect for you....sorry. But you still might find it rewarding to see what your industry association has to offer.

Finally, chambers of commerce probably won't be much help. They're not industry specific, which is what you want. And most of them are more interested in networking and boosterism rather than something as crushingly boring as sales and use taxes. Although you never know. They just might be willing to sponsor a sales and use tax seminar for their membership. Again, ahem.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. It's actually got nothing to do with associations, but it's got a relatively funny caption.

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Private Letter Rulings

If you are stumped and there isn't a rule, bulletin, regulation, law, court case, or interpretation that addresses your particular question, you've looked in all the places we've talked about here, and you can't get anyone to give you an authoritative answer, there may be help.

Most states will give you a private letter ruling, opinion letter, or something similarly named. The idea is that you formally ask the revenue department about your situation and they give you a formal, take-it-to-the-bank answer. It's not a guess, it is, for you, the answer. And they have to honor it when you get audited, assuming you didn't fib when you gave them the information, and things haven't changed.

Sometimes these letters are published so that others can find some guidance if they're in similar situations to yours.

Yay! Why didn't we do this before???

Because, to do it right, it is expensive. You want to do this anonymously so that the state doesn't know who you are, and send auditors out in the night to ambush you. You want to go through an attorney or CPA. They'll ask the question, keeping your name out of the discussion. In addition, if the professional specializes in sales and use taxes, they might even be able to answer the question without having to get an opinion letter.

This ain't gonna cost you a couple of hundred bucks. This will probably cost a couple of thousand. But if you're looking at a big issue, involving lots of money and risk, this is a very good way of getting a good, reliable answer.

Sales Tax Guy

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Use A Local Consultant

I constantly tell people to use a sales and use tax expert. I mention it in the disclaimer as well as in my seminars and in these various articles.

You need an adviser familiar with local issues. You need someone who knows your state's laws really well, through a regular practice. You need someone who knows the people at high levels of the tax department; someone who goes to the annual barbecue that the state's chief counsel throws. You need someone who knows what the auditor thinks, and the unwritten customs and written procedures she follows. You need someone who knows the sales and use tax ropes.

Frankly, you need someone who knows where the bodies are buried.

And it isn't your typical attorney or CPA.

And where do you find this sales tax god?

Sales Tax Guy

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Where can I find information on Sales and Use Tax

The information just isn’t out there on the Internet in an easy-to-find way. Every state has a web site which provides some information, but many are abysmal and others are fantastic. And you have to wade through each state’s page – none of them are organized in the same way.

In order of priority and value, here are your best resources for getting answers:

1. A lawyer, professional or consultant who specializes in SUT. This resource is also, without question, the most expensive.

2. An online subscription service from RIA or CCH (this is what the pros use). Which one you use is probably a function of what service your company already subscribes to for income taxes, etc. I'll bet you a nickle that your company does NOT subscribe to the sales tax portion, so you want to get that fixed.

3. Sales and Use Tax books (I like the ones from RIA and the ABA – these are also what the pros use)

4. State industry associations may be able to help, particularly if they are well funded and are in tricky industries, like manufacturing or construction. Give yours a call and see if they can help you.

5. State sales tax sites

One other thing to keep in mind. As you peruse the Internet, you will find reference sources. Folks, if it’s FREE, then it probably isn’t complete. This is a topic that requires a LOT of effort to keep up to date. So take information you find in a FREE resource with a big grain of salt, like this blog. ;-)

Another source of information to be wary of is information summarized and presented in table form or list form. Again, the information on this topic is complicated. Rarely does a table or list do justice to the material – it’s usually just too much to summarize like that.

In summary, the good information on this topic is going to cost you money. Other than state Web pages, there really isn’t any FREE, comprehensive, up-to-date and good resource available on the Web.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Here's information on our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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FAQ: How do I find a sales tax professional?

I get a fair amount of questions from people who are in need of a sales and use tax professional, particularly one who can handle multiple states. I don't do that type of work, so I give these suggestions:

Talk to your current tax firm.  They're probably more oriented towards Federal income tax than sales and use taxes, but they can refer you.  By letting them make the referral, they can then stay in the loop.  But don't let them take on the work themselves unless you're comfortable that they ARE sales and use tax specialists.  Most SUT folks don't do much Federal income tax and vice versa.

By the way, while there are sales and use tax specialists, you'll also see consultants who are SALT experts.  SALT stands for "State and Local Taxes."  They're cool too.

Go to a BIG CPA or law firm.  They'll probably have folks on staff who are multi-state experts and can deal with your issues in most, if not all states.

Check your industry association. 

To find specialists in any given state, another source is the American Bar Association Sales and Use Tax Deskbook. Each state chapter is written by an attorney specializing in SUT in that state, so obviously we're talking about serious expertise. The authors, and their contact information, are listed in the front of the book.

Contact the state bar association or the state CPA society for a referral.

You can take potluck and do a Google search on "sales tax" and the state you're interested in and see what pops up.  Take a look at the sales tax articles they've posted on their web site.  If there are many such articles, and they seem to be in depth, the firm is probably be worth an email.

Finally, drop me a line.  I know people.   

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details that haven't been discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: any images above are hosted on Flickr. If you'd like to see more, click on the photo. 

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obg

Use Local Experts

I periodically get requests from participants in my seminars and webinars for consulting services. When it comes to questions of the application of sales and use tax law to their specific situations, or dealing with local revenuers, I strongly encourage folks to use local consultants. And I can always refer them to somebody.

When I say "local," I don't necessarily mean someone located locally, but someone who is an expert in the relevant state.  Simply because of a twist of fate, a consultant in Houston may have become an expert in Hawaii tax issues.  

Here are the reasons for using "local" experts:

1. They are much more intimately familiar with state and local sales and use tax laws.

2. They are familiar with the players  They may even go to the annual Department of Revenue picnic!

3. Tied in with number 2, they know the unwritten enforcement positions, the willingness to negotiate, the customs, etc.

How do you find a "local" consultant?  The best way to start is to ask your CPA or lawyer to refer you to someone.  Or email me.  I can put you in contact with someone.

Why don't I do consulting?  Because of the above three reasons and one more...I don't want to.  It's WAY too much work.  ;-)

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details that haven't been discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
obg

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