Don't use zip codes for sales tax rate lookups

Don't use zip codes for sales tax rate lookups.

Happily, at lease two of the rate lookup services use the actual street address. This is the best way, short of the actual GPS coordinates.  But zip codes? Alas, there are couple of sites that use zip codes for look-ups.

Here's an example.  I looked up the rate for my zip code of 60510.  The problem is that there are locations in 60510 that are NOT within the boundaries of the city of Batavia.  So the rate provided isn't accurate unless the "looker-upper" knows that the particular location is inside or outside the city limits. However, using the actual address will give you the accurate information you need.  But the zip code won't work.

As an aside, one particular site says that freight charges aren't taxable. Hmmmm (drumming fingers)...in fact, they ARE taxable in Illinois, depending on several conditions.

Remember that zip codes have no relationship to taxing districts.  The purpose of zip codes was to speed the delivery of catalogs and flyers to your house.  I forgot the name of the organization that does that...they drive little white trucks.  Dang, can't remember the name.  Anyway, zip codes were not intended, nor are they usable, as an accurate means for determining political subdivisions.  And sales taxes are all about political subdivisions.

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

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

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Sneaky Taxes

Just because there's no sales tax on a particular item or service, doesn't mean that there might not be another tax lurking around the corner.

States seem to come up with them to trip you up.  Here are three situations that should worry you:

1.  In Illinois, some home rule jurisdictions are trying to tax self-storage.  Generally, there's no state tax on services, or even rentals, in Illinois, so this would be the kind of thing you wouldn't expect.  Sneaky.

2.  In Indiana, there's a very obscure rule on rental of space for massages, dancing etc.  I'd be willing to bet the rule was created as a way to shut down massage parlors.  They probably don't know about it, so the state can get them the way they got Al Capone - taxes!  It's probably easier to do this than to use undercover cops.

3.  But the top of the sneaky pile comes from Rosemont, Illinois (Illinois again...hmmm).  Here's a city that refused to tell a tax professional what the laws were in their fair city.  Think about that for a second.  A city passes a law, and then refuses to tell people about it.  How do you comply with that?  I should also say that Rosemont has a certain "reputation" in the Chicago area.

So, be on the lookout for taxes that might be lurking, ready to trip you up.  Do as much research as you can, but always be prepared to find something else.  I'd also suggest staying in touch with others in your industry and local jurisdiction to get a little advanced warning.

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

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
    http://www.salestax-usetax.com
    and there's more sales tax news and links here http://salestaxnews.blogspot.com
   

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

Sales Tax Tip - Freight Charges in Illinois

While this is specific to Illinois, it will help the rest of you understand how damn tricky these laws can be.  And don't take my word for the following - read the articles mentioned, and do your own research.

By default, freight charges on taxable purchases are taxable in Illinois.  However, they are not taxable if:

the charges are separately agreed to and

the charges are reasonable.  This means that the billing for the freight charge can't exceed the amount that was actually charged to the vendor.  In other words, the vendor can't make money on the "freight charge."

What the hell do we mean by "agreed to?" Based on this court case (beware - it's a PDF file), an indicator of "agreed to" is that the charges not just be separately stated, but that the customer has the ability to pick up the goods on that purchase.  Internet purchases generally don't give you that option, so freight is taxable on most internet purchases.

 Remember, don't take my word for it - there are more details.  Read the court case, read this article, and take a look at this one which is even more complete.

Still murky, right?  But if it makes you feel better, the option to pick up the goods is part of the rules in a few other states too.

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

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

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

Sales Tax Tip: "When did you decide about nexus?"

"Do you have nexus in Minnesota?"

"Nope" 

"When did you decide this?"

"Oh, about 5 years ago." 

"Has anything changed in the last five years?"

"No, I don't think so."

"Have you added any sales staff in the last five years?"

"Oh, yeah, sure."

"Are any of them visiting Minnesota once in a while?"

"Yeah, there's Tony.  He covers that part of the country.  He really whines about it in the winter, too."

"Ahem."

"Oh.  Right.  Excuse me, I have to make a call."

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This small drama presented by The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

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

Sales Tax Tip - Don't put your faith in the vendor

When a out of state vendor is charging you tax, you should make sure they're legally charging the correct tax.

1.  They might be flat-out lying and charging you tax, with the plan to pocket the money (they're evil)
2.  They might be charging the wrong state's tax (they're messed up)

You probably won't get credit from the state if this happens.

To prevent this:

1. Ask the vendor which state's tax they're charging
2. Check the rate to make sure they're charging the correct rate
3. Ask for proof they're registered in the state.

Here's a recent link to a discussion that should show you why

http://community.ebay.com/t5/Auction-Listings/how-can-a-seller-charge-12-9-sales-tax-when-no-State-in-the/m-p/21480782#U21480782

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The Sales Tax Guy
http://salestaxguy.blogspot.com
See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com
and there's more sales tax news and links here http://salestaxnews.blogspot.com