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
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See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
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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

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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

In which I sweep up more than just janitorial services in a discussion about online resources

See what I did there....

This inquiry was received recently.  It's a pretty frequently asked question so I thought I'd take a stab at it again. 

"Do you have any articles that deal with the taxability of janitorial services for all states?"

Nope, I don't have anything like that and wouldn't publish it anyway.  I don't typically write articles with that level of minute detail.  That's what online databases are for.  I use Thomson Reuters* as my research tool (although CCH has the information as well), and I can research janitorial services for any state in a matter of moments.  Well....maybe not "moments" if there are some interesting complications.

Even if you could find such an article somewhere on a free web site, you probably can't count on it unless you're paying for it.  Let's say you find a page where someone has put together a table about the taxation of janitorial services for every state.  

My questions would be: 

1. How often is it updated?
2. Are there citations to specific statutes, regulations and court cases?
3. Is the information in the list detailed enough to cover the possible exceptions and gotchas...like the interesting complications I mentioned above?

You're probably going to have to pay for that kind of reliability.

When we do a state-specific seminar, we re-research the state every time.  We don't just rely on the material we have from the last event.  We review our grid on what is taxable or not, change things where necessary, and review any updates to the sales and use tax laws since the last time we did a seminar for that state.  So when we do the seminar, we can feel comfortable that we're using the latest information.  That's one of the reasons why we don't provide recordings of these seminars.  We don't want people relying on information that can so easily go out of date.

On the other hand, I frequently find articles written by attorneys and accountants to be useful.  They are usually handy for covering a topic that isn't covered as well as I'd like on either the state's web page, or in the databases.  But they are detailed, dated and usually well-cited.  But I still have my salt-shaker nearby.

*By the way, I'm not endorsing Thomson Reuters.  Inertia keeps me using their service.  Although sometimes I wistfully think it might be more fun with CCH.   

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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. 

Surveys? Freaking Surveys??? (warning - snark attack)

I just saw a  survey sent to state revenue officials regarding sales tax nexus. I've also seen one that involves enforcement of drop-ship rules.  There are others around. 

I'm not going to discuss the survey results - I'll leave that to the publishers.  The point is that, when it comes to some topics, we have to figure out how the state is going to enforce the law based on surveys!  Really?

My admittedly naive philosophy is that the laws should be written in some official place.  They should be in statutes, regulations, bulletins and court cases.  These are things that someone can look up.  They shouldn't have to be compiled by a publisher doing a survey.

I'm not blaming the publishers.  I'm blaming the states for coming up with nutty positions about gray areas based on stupid and complex laws that they created.  The publishers are just trying to provide us with some useful information.  I get that. However, I can see some problems.

Let's say that you take a position, based on the latest survey done by Joe's Sales Tax Consultants and Tattoo Parlor.  The survey measured the amount of time you must have a service person in a state before you have nexus.  It mentions Frank Derp as the source of the information for that state, and says that you would need a repairer in the state 10 days in order to have nexus.  Therefore you've carefully managed your visits to the state so that you're only there 9 days.

When you get audited, the auditor says you have nexus.  "But wait!" you splutter, "we kept it to 9 days and this survey (which you triumphantly slam on the desk) says it's 10 days."

There are at least three unpleasant ways this can go for you: 

1.  The auditor says, "I don't care what some survey says.  I talked with my boss and he said you've got nexus.  So that's it."

2.  The auditor says, "Oh yeah, that answer was given by Frank Derp.  I heard about that.  When the survey came in, they brought it up at the staff meeting.  Nobody wanted to fill it out, so Frank got stuck with it because he was sick that day.  We all laughed when we saw the answers he gave.  He was high on Dayquil."

3.  The auditor says, "Oh yeah, that answer was given by Frank Derp. He was an idiot.  He got fired a month after that survey came out."

This is the problem with surveys.  They're not official.  I agree they're necessary to be able to get some feel for the squishy enforcement positions of the state.  But if it's a gray area that requires a survey because the official laws aren't specific enough, proceed carefully.  Because the only laws that really count are the official ones.  And if it's gray enough to have to do a survey, how can you be sure the auditor will stick to the survey and not use his own, or his supervisor's judgement?

Your option, if the auditor sticks to his guns, is to fight it...which is going to cost you money.  And do you really think, if you wind up fighting this all the way to court, that the judge is going to pay much attention to what Frank Derp said?

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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. 

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I predict a sales tax holiday in Illinois in 2014

Warning - snark attack coming.  Remember, you were warned....



I live in Illinois.  Our motto is (or should be) "Three of Our Last Six Governors Have Gone to Jail"

So allow me to be a little cynical about something that I think will happen this year.  Illinois traditionally doesn't have sales tax holidays.  However, we had one (just one) in 2010.  We didn't have one before and we didn't have one after.  But, by a pure, sheer, and amazing coincidence, it was an reelection year for our beloved governor.

So, I'm making a prediction, right now, that we'll have one in 2014 - or at least there will be significant talk of one.  You see, our governor is facing reelection again and it looks like it might be a close race.  A sales tax holiday fits right into his wheelhouse. 

Gee, can I be MORE of a curmudgeon?

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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. 

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