Wednesday, July 20, 2005

Hurricanes and Sales Tax

With hurricanes in the news, it's worth noting that many of the states that often have natural disasters (such as hurricanes in the south and earthquakes in the west) will have permanent rules about sales and use tax exemptions for building materials, construction work and other related goods. If you unfortunately find yourself in the terrible position of having to spending money after such a disaster, check to see if there's an exemption. If the exemption doesn't exist, the government may create one so watch for the opportunity of refunds or credits, or consider timing your purchase to when the exemption is available.

And if you're a seller of such goods and services, make sure you handle the taxation of your customers properly.

And I hope this entry is never relevent for you.


Tuesday, July 19, 2005

Barnes and Noble charges tax in NV

I've been off for a few days and was driving through Reno, NV this week and noticed that Barnes and Noble has a warehouse by the side of the US 395. So I checked their web site and they charge tax in Nevada...obviously they have nexus.

See, always working for you folks, even when I'm on vacation!


Friday, July 08, 2005

FAQ: Should I worry about nexus if all my sales into a state are "for resale?"

FAQ: Should I worry about nexus if all my sales into a state are "for resale?"

Yes. If you have nexus in a state, you should be collecting that state's seller's use tax for any shipments into the state, of have a good explanation why not. If you don't have that explanation, then you will be held liable for the taxes. Don't make the mistake of assuming you're off the hook because you're shipping from out of state.

The best course of action, obviously, will be to get exemption or resale certificates from your customers for the state where delivery occurs. That way, if the state catches you, you can wave the exemption certificates at the auditor and say "hah, hah, hah!"


See disclaimer

Thursday, July 07, 2005

FAQ: Are fuel surcharges taxable?

FAQ: Are fuel surcharges taxable?

I'm in a state where delivery charges by the vendor on a taxable sale are taxable. In other words, delivery charges are "included in the basis of the tax." What if the vendor adds on a fuel surcharge?

I'd say it's taxable. A fuel surcharge is just an additional delivery charge, broken out separately because it's temporary. But it's still part of the charge for delivery and therefore it's probably taxable.


See disclaimer

Wednesday, July 06, 2005

Pitfall - Charging the wrong tax

Pitfall - Charging the wrong tax

As yesterday's article in the Chicago Sun-Times illustrates, one of the problems that sellers have is simply making sure that they tax their products properly. For most, this isn't a big deal. But if you sell certain types of commodities, like drugs, food or clothing, it becomes a problem - depending ont the state you're in. Other vendors who seem to have problems determining the taxability of their sales are contractors, services vendors, and equipment vendors selling to manufacturers.

How do you solve this problem? Go through your offering, go through the law in the state where title transfers, and figure out the taxability of your sales. This sounds simple, but if you've never thoroughly done this, being aware of how tricky this can be, then you're probably messing this up. If you're relying on an old cheat sheet hanging on the wall in the billing department, you're in trouble.

Remember that you're screwed in two different ways:

1. If you didn't charge the tax that you should have, then the state will want their money from you. Good luck getting it back from your customer.

2. If you charged too much tax, you're doing wrong by your customer. And if they find out about it, they will be ticked off at you, which isn't a good thing. And they may want their money back. Good luck with getting it back from the state.

Of course, the other complication is making sure you are following the laws in the correct jurisdiction, usually where title transfers.


Tuesday, July 05, 2005

Recent news: Chicago Sun-Times article

It's rare to see a front page story on sales tax on the newsstand, so I had to buy a copy of the paper. The article complains about the complexity of Illinois sales tax law regarding mostly food, non-prescription drugs and equipment. They sent reporters out to buy stuff to see if the stores computed the tax correctly based on what they bought. What a surprise - the stores didn't do it correctly all the time. What's actually surprising is that they did it correctly so often.

What would be more interesting is whether or not the cashiers were making the mistake about an item's taxability, or if it was the stores' systems that were incorrectly programmed. Naturally the reporters didn't ask that question.

Anyway, for your enjoyment, here's the story.

Friday, July 01, 2005

FAQ: Picking up goods in remote states for resale

FAQ: Picking up goods in remote states for resale

What if you are a reseller in your state, and you send a truck or use your common carrier to pick up goods for resale in a remote state? The title transfer is now probably happening in that remote state. Therefore, the seller in the remote state rightly needs something from you indicating the purchase is for resale, otherwise he'll have to charge you tax.

And your resale certificate from your home state may not work. It is, after all, not from the state where the sale is taking place.

But most states have a mechanism for allowing out-of-state dealers buying for resale but picking up in the state to be able to still buy without tax. Often the state will have a special form to be completed, or an affidavit. Or they may simply specify their usual resale certificate, but with some sort of explanation as to why you're not providing the remote state's registration number. Or maybe you can use the multijurisdiction form.

This sounds like an opportunity to email the remote state's tax department. Here's a way of phrasing the question:

We are a registered reseller in (pick your state). We have determined that we do not have nexus in your state and therefore do not wish to register in your state. But we do occasionally pick up products from your state that we resell. Since title transfer is happening in your state, please tell us what documentation to provide to the seller so that he can prove his sale was for resale? Do we:

1. Provide your state's resale certificate (with our state's number and an explanation)
2. Provide a simple affidavit?

3. Use another form?

4. Use the multjurisdiction form?

5. Use our own state's form?

If possible, please provide any additional reference material that may be helpful.