What about Canada???

What about Canada? Yours truly knows about US sales and use tax - I don't want to even think about Canada, or (deep inhale) Mexico. Yet I get questions frequently on these two countries. So here's some advice:

1. Do a search on the following terms (or some variation that you like) :

canada
vat
sales tax
seminar
training

I did that and several items popped up that looked promising.

2. If you have a relationship with a large CPA firm (or law firm) like E & Y or Deloitte, check with them. They probably offer seminars that may be helpful. I know this because, when I did the above search, their names popped up.

So give it a try!

Sales Tax Guy

PS, you may have noticed a picture. Since I'm into photography, I thought I'd start making this blog more interesting by throwing a picture from my Flickr collection into the post that's relevent to the topic. That one is from the Columbia Ice Fields in Alberta. Click on the picture to see a bigger version of it on Flickr.

MN Computer Contracts

Greetings all - told ya I'd give you an update...
Here's the MN bulletin on this topic
http://www.taxes.state.mn.us/taxes/sales/publications/revenue_notices/content/93-17.shtml
Combined support and upgrade contracts are taxable at 20% of the total.

Jim

For Seminar Participants - New Handouts Available

If you've been waiting for the latest version of the handouts to be posted, they're now available at the URL you were given in the seminar.

Jim

NC Manufacturers - A Clarification

For those of you in the seminar this week from NC, manufacturers DO get an exemption from the tax. They don't have tax collected from their purchases, and they don't have to remit use tax. BUT there IS that derned privilege tax.

Jim

More on leasing with an operator

Here are a couple of more points to consider, which are VERY objective and may help with determining this transaction's taxability:

1. Was the equipment bought by the lessor for resale?
2. Is the lease payment based on how long the equipment is leased for as opposed to the successful completion of a job?

Sales Tax Guy

Leasing TPP with an operator

With the help of some folks in a recent seminar, I think I've hit on a useful "rule of thumb" for dealing with the question of leasing equipment with an operator.

In most states, leasing of TPP is taxable. But the question is, if I get an operator for the equipment, two different taxation situations arise:

1. Am I still leasing a piece of equipment? If so, it's taxable (in most states); or
2. Am I hiring the services of an operator (which may or may not be taxable) and the equipment is just incidental to her service.

The problem is knowing when you've gone from situation1 to situation 2.

Here's the rule of thumb:

When the operator ONLY has control over the actual operation of the machine (pushing buttons, pulling levers, etc.) and has NO control over what is actually done with the equipment, then you're in situation 1; you're still leasing a piece of equipment and it's taxable (in most states).

When the operator not only has control over the operation of the machine, but decides how and where to use it, then you're probably hiring the services of the operator, and then you look at whether her services are taxable.

To summarize, if their control is limited to the console or cab of the machine, you're still leasing a machine. But if their control extends outside of the cab to the actual use of the machine, then you're probably hiring the services of the operator and the machine is something THEY use to perform that service. Then the question is: is that service taxable?

Of course, the specific rules in every state will be different.

Clear? Yeah, right.

Sales Tax Guy

The usual disclaimers apply

Golden Rule - Which state has jurisdiction over the sale

The state that has jurisdiction over an interstate sale will be the state where delivery occurs.

This is usually where physical control or the right of control transfers from the seller to the buyer. Since, in an interstate sale, the only thing that can be taxed is the buyer's use of the TPP, and since use involves control over the TPP, then the delivery point determines, for all practical purposes, the state that gets to impose the use tax.

In other words, where is the delivery point?

Another way to look at it is where the seller completes their duties. This is particularly helpful when you're dealing with a situation involving a long installation.

A few (and I do mean a few) states use FOB points to determine the state that has jurisdiction. That can be overcome by the buyer negotiating FOB destination.

Use of this Golden Rule will help you resolve complex transactions to the specific state whose rules need to be followed.

There's a corollary to this rule

There's a little mini-course on this rule.

The Sales Tax Guy