Wednesday, December 28, 2011

When Construction Contractors Install Tangible Personal Property

I got a new project

This is part of a series of articles on construction contractors

In virtually every state, contractors pay tax on the equipment and supplies that they use to build a structure.  As with any business, they're using those items.  But what about building materials?  These are the ingredients that become a part of the structure.  They are tangible personal property when purchased by the contractor and, after being affixed to the building, become real property.  Examples would be structural steel, bricks, shingles, millwork, concrete, etc.  That's what contractors do: they turn tangible personal property into real property.

In most states, the contractor pays tax on the building materials as well as equipment and supplies and he (or she) doesn't charge his customers tax - either on the materials or his services*.  The materials transferred as part of the sale aren't taxable for two reasons:

1.  The materials were used by the contractor to provide the construction contracting service.  Therefore they are consumed by the contractor and he pays the sales or use tax.

2.  The materials, when transferred to the buyer, are no longer tangible personal property - they're now real property.  And sales and use taxes generally only apply to sales of tangible personal property.  The contractor is the last person to buy the building materials as TPP and therefore he pays the tax.

Now the customer isn't getting something for nothing here.  She (or he) does pay the tax; it's just buried in the overall price of contract as another cost of the contractor.  Note that there's a danger when the contractor shows the tax separately on his invoice. 

Sometimes a contractor does a job that doesn't involve major construction (eg. new or expanded building, or major remodel).  What if they do a minor remodel or repair, or a smaller project like install flooring, fences, signs, communications equipment, appliances or other machinery and fixtures?

The question then becomes: is the contractor still doing construction contracting, or are they selling tangible personal property, with installation?

If they're still performing a construction contract, they they don't charge tax to the customer - they pay tax on the building materials, as described above.

But if they're selling TPP with installation, they should be charging their customers tax and buying the building materials for resale.

Easy, right?  But how do you tell?  When, for example, does a minor remodel become a major project? 

In the absence of any specific rules, here's the general idea. If the contractor is installing something that is permanently affixed to the structure and integrated into the value or use of the structure, then the contractor has done construction contracting.  In that case, he pays tax on the building materials and doesn't charge tax to his customers.  But if he hasn't done all of those things, then it is considered a sale of TPP with installation and he buys the materials for resale and charges the customer tax.

White Building, Green Shutters, Red LeavesExamples:

1.  A telecommunications rack is installed in the wiring closet.  The installation is not permanent - everyone knows that it'll be replaced in a few years.  It's not affixed since permanent damage wouldn't occur if it was removed (it's just bolted to the floor).  And it doesn't have any affect on the value or purpose of the building.

One way of telling if an item has any affect on the value or purpose of the building is to ask, "if the building were sold, would the new owner care about the addition?" Other examples of this kind of thing would be signs, satellite dishes, draperies and blinds.

2.  A landscaping contractor plants a nice tree in the front of the building.  In this case, it is intended to be permanent, and damage would be caused if it was removed after a few months.  And the value of the building is enhanced by the landscaping.  So it's construction contracting and the contractor would pay tax on the tree when he purchased it and would not charge the customer tax.

Except it doesn't always work that way.

Many states will override the logic, or help it along, by simply declaring that certain types of contracting are sales of TPP with installation, and are taxable to the customer and purchased for resale for the contractor.  A typical project that is handled this way is carpeting and sometimes other flooring.  Why?

Well, the cynical Sales Tax Guy notes that the state gets more money.  Remember, if the contractor pays tax on his purchase of building materials (as a construction contractor) the state will get less money because the tax is based on his cost.  But if the state can figure out a way to call it the sale of TPP with installation, then the tax is on what the contractor sells it for, which would typically be higher - more money for the state.

The other reason is that, with certain purchases, the true object of the customer is to buy a specific type of TPP, paying attention to things like the brand, model, features, capabilities, and price.  They are really buying the TPP and the contractor is merely the installer.  So it would be appropriate to treat as the sale of TPP with installation.

In a normal construction contract, the customer is more concerned about the capabilities and service of the contractor than the materials they use.  I'm guessing that most customers don't really care about the brand of furnace (as long as it's a name brand) or the manufacturer of the bricks or shingles.  Color and appearance?  Yeah.  But they'll let the contractor worry about the details.

k110613pDSC_1977corrpspperHere's a stumper.  What about window installation?  In this case, appearance, features, brand and other attributes are very important to the buyer, probably as much as the ability of the contractor.  So wouldn't it be the sale of TPP with installation?  I'd say no, it would probably be construction contracting.  Why?  Because the windows are permanently affixed to the structure and integrated into the value or use of the structure.

So, when you're trying to figure out if it's a sale of TPP with installation; as opposed to a contruction contract, you can use logic, as I've described above.  But check to make sure that the state doesn't have their own ideas.  These are usually shown in the regulations, and sometimes, if you're lucky, in a publication on the state web site.

There are other ways that some states will determine if the sale is treated as the sale of TPP with installation.  One is if the deal is billed as a time and materials contract where the labor is separated from the materials.  Another is if the customer takes title and possession of the materials before the actual work is done (eg. a roll of carpet delivered a week before the installers arrive).

To summarize:

When contractors do construction contracting (eg. new or expanded building or major remodeling) they typically pay tax on the building materials and do not charge their customers tax. 

But when the contractor does a job that is more of a sale of tangible personal property with installation, then it's likely that the materials will be taxable to the customer and the contractor will be able to buy for resale.

*Remember, the rules are different in your state.  Probably.



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

Wednesday, December 21, 2011

Restaurant Container Exemptions (or the Sales Tax Guy talks McRibs)

Lunch

It's time to talk about containers again, for several reasons.  First, this article gave me an excuse to take the above picture.  Second, I therefore had a reason to visit McDonald's for a McRib.  Third, how often do you get to write off a McRib as a business expense?

Most importantly, in my previous articles about containers, I didn't really talk about restaurants.  But lately, I've started using McDonald's in the container section of my Taxing Policy webinars, so I thought it was time for a picture to illustrate the PowerPoint presentation.  And, well, I haven't written an article in a while.

I put my crosshairs on the target, took careful aim, fired the shot and hit the bullseye.  It was a satisfying shoot.Most states have container exemptions.  These allow the vendor to be able to purchase containers tax free if the containers will be sold, with the product, to the customer. Basically it's an extension of the resale exemption.  The seller is essentially buying the containers for resale.  Even though they're not billing the customer separately, they are billing them for the containers as part of the cost of the actual merchandise sold.  In other words, Target didn't have to pay tax on the bag.  Just like the socks inside the bag, they bought the bag for "resale."

So let's take the top picture apart and talk about each item.

1.  The bag for the delicious fries, cup (and lid) for my iced tea, the box for the holiday pie, and the clam-shell for the wondrous McRib are all clearly containers.  McDonald's doesn't expect them back from you.  You bought them with the food.  Therefore, they are containers that generally qualify for the exemption.

2.  What about the napkins and straw?  In most states, disposable items like these that are available for the customer to take, are also exempt.  They obviously aren't containers, but they are clearly part of the selling price of the food and, once you've taken a straw, the restaurant would really prefer you not put it back.  This kind of "free for the taking" rule is only for restaurants.

3.  What about the brown tray?  Did you buy it with the food?  Can you take it with you?  No.  They didn't sell you the tray with the food.  That tray was purchased by McDonald's to use over and over again (after they've cleaned it, of course).  Unlike the above items, it was not sold to you with your food.  It is a "returnable container."  Therefore the restaurant paid sales tax for the tray.

4.  Finally, what about the "place mat" on the tray?  That's a stumper and I can see it going both ways.  It is certainly something that has value to the customer providing a clean place for your fries to spill out of the bag.  But it's also usually a marketing piece for the restaurant.  I personally would take the position that it meets the test for a disposable item and therefore is not taxable.  But the auditor might argue that one.

So there you go.  Containers for restaurants. Remember, every state is different.  Some states have broader rules, some are stricter.  Do your research and don't take my word for it.  See the disclaimer.  And it's almost lunch time as I write this.  Hmmm.  Wonder if they still have McRibs at my McDonald's?

Merry Christmas and/or Seasons Greetings.  May all your holidays be glad and let there be McRibs available at your McDonald's. 




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

Wednesday, November 23, 2011

Great Article: "Food or Candy? Milk or No?"

"Hey, Jeff.  You know those Wild Turkeys that we've been seeing?  Well, there was a Revolutionary War encampment here last night and....."

from avalara.com

More in the adventures of trying to figure out the food exemptions.  This little exercise will show you how to calculate tax on a Twix candy bar and a Frappuccino.  Heck, if you're buying a Frappunccino, sales tax isn't going to be on your mind.

Enjoy the article anyway.  And Happy Thanksgiving.  And I'll be honest - I just wanted an excuse to use the picture.


This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
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. 

Tuesday, November 22, 2011

Sales Tax on "Software as a Service" / SaaS / Cloud Computing

Clouds

"How do we tax SaaS* services"

This question came up in a webinar yesterday (thanks, Heather) and, after Googling it, I thought I'd share the tiny bit that I've learned, my brilliant solutions, and some relevant articles.

Essentially, there isn't much published on this.  There are some articles that pretty much say the same thing: there isn't a lot of law to get your teeth into.  As with most new technology, the states are taking their time catching up.  Some of them are still trying to deal with downloaded software!  And only a few have ventured into downloaded content, like music and movies.

But I have come up with two solutions to the problem.  and you're not going to like it.

Solution 1 - Rental

1.  I think that the closest existing type of transaction that would cover Software as a Service (SaaS) is software rental. Think about it.  That's really what is going on.
2.  Downloaded software is treated like TPP in most states and therefore taxable.
3.  Rental of TPP is taxable in most states.
4.  Therefore, SaaS should be treated as the rental of software and should be taxable in states where downloaded software is taxable, and rental of TPP is taxable.
5.  Don't do this!   Hold off, at least until you've chewed this over with your sales and use tax consultant.  Heck, your own state may not take this position, and therefore why self-assess when they wouldn't.  But from a theoretical sense, this seems to be the answer. 

Solution 2 - Tax SaaS as a service

Alternatively, if we consider SaaS as a service, then it gets stickier.

In states that tax data processing services (not many), SaaS would seem to be taxable.  That's easy.

With other states, they'll probably have to start passing laws.  Which, given the amazing skills of our politicians, will take some time.  Get back to me in 20 years.

Where is it taxable?

The next question is, since it's in "the cloud" how does any given state tax it?  Where is it taxable?  There seems to be a lot of hand-wringing about this.  But I think that this has already been dealt with, to a degree.  Whenever a taxable service is performed in one state, but the buyer receives the benefit in another state, it's usually taxable in the state where the buyer receives the benefit.  This isn't absolute, and I'm short-circuiting a lot of theory, but that seems to be the way that it usually works out.

For example, if you're in a state that taxes alarm monitoring services (many do), and you hire an out of state company to provide that service, the purchase of the service will usually be taxable in your state because that's where you're receiving the service.  Either the seller collects the tax if they have nexus, or you self-assess use tax.  But it's still taxable.

So, if you're using SaaS, and if the service is taxable based on one of the above methods, it'll probably be taxable in the state where the benefit of the service is received. Seems simple to me.

Selling SaaS

What about companies that sell SaaS?  Well, if you have nexus in states that have figured out how to make this taxable, then you're going to have to start collecting tax.  Welcome to the business world.  Of course, if Congress makes it easier for states to create nexus for you, that's not good.  But quit whining.  It just means you'll have to hire at least one more accountant.  Speaking as an accountant, that's not a bad thing.

Nobel Prize

I've just given everyone a guide to solving this SaaS / Cloud Computing problem.  So when will I be picking up my Nobel Prize for Sales and Use Taxes?

Links

Here are a few articles I found on the subject.  I didn't go deep in my search, so if you wish to mine the web further, please do so.

Accountingweb.com February 2010
forum discussion at softwareceo.com March 2006
Gene Hoffman at http://blog.vindicia.com April 2010 
Jeremy Aber at aberlawfirm.com September 2010
grantthornton.com - there are a couple of links within the article too




*Ya gotta love an acronym made up of upper and lower case letters.  Credit must be given to the techoids that came up with that one.




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. 

Friday, November 18, 2011

Great Article: A Summary of the Federal Nexus Bills

I got an email from someone named Gabriella who said I had a little stick.  But she could make it bigger.  How did she know?

from stateandlocaltax.com

A nice summary of the different nexus bills that are currently in Congress intended to allow states to force nexus on out of state sellers (like Amazon.com).  Clear, concise and with more info than I expected.  Heck, it answered MY questions.

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."



The Sales Tax Guy
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. 

Tuesday, November 15, 2011

Great Article: Can Luck Be A Tax Planning Strategy?

Yea!
from Derek Hoffman at http://salestaxinsight.com

Don't count on luck to get you out of a sales tax audit.  And don't trust that a call from an auditor to tell you that a refund awaits you.  Just like that letter from US Airlines - it may be a scam.  And I got one of those letters.  It smelled fishy, and a quick Google search turned up no info on a company called US Airlines.  Circular filed!

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Monday, November 14, 2011

Great Article: Sales Tax Outsourcing vs. Sales Tax Automation

 Zombie Squad II

from Robert Dumas at salestaxsupport.com

A short, handy-dandy discussion of the difference between sales tax automation and sales tax outsourcing.  No, wait, didn't the title just say that?  Dang, if I say any more about the article, I'll just be repeating the article, which isn't the point.  So I'll just shut up now. 

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Friday, November 11, 2011

Great Article: Stepping Through Sales Tax Nexus

In Flanders fields the poppies blow...

First of all, this is to remember our veterans.  Click on the picture to see the poem "In Flanders fields..."

Now, for sales tax stuff:

from TaxConnex.com

Nexus is one of the grayer areas of sales and use taxes.  And there are three big problems that you will face:  The first is figuring out if it's a problem.  The second is deciding if you need to register.  And the third problem is the registration process itself.  Brian at TaxConnex doesn't toot his horn here, but I will.  If you find yourself facing a nexus issue, you need to get professional help.  This isn't a DIY solution.

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Wednesday, November 09, 2011

A Short Course in Sales and Use Taxes for Artists (Part 1)

Big Artist, Small Picture

A reader (Richard Streitfeld at peaceloveandbusinessplanning.com) recently asked me about sales taxes related to art and artists and I referred him to an article I’d written a while back. We continued to exchange emails and he told me about the writing and training he’s done on this topic.  He inspired me to try my own spin on this. In weak moments I think of myself as an artist, so maybe an article for the right-brained folk might be interesting.

I’m going to be writing this article in multiple parts because this is going to take some time. And this should be useful not only for artists but for other entrepreneurs as well. Most of the issues an artist faces will be dealt with by other businesses as well. So this “course” will apply to pretty much everybody.

Some of you may have taken issue with something I said above. Yes, if you’re selling your art, you’re in business. And you should be collecting and paying sales and use taxes as the law requires, just like any business. I’ll make the assumption that you want to do that. Everyone should be paying their fair share, right?

I’m going to avoid some of the theory that I love to talk about it. I will also be omitting, skipping and simplifying to keep the right-brained among you interested. But please see the disclaimer.  Get a second opinion; don’t take my word for it. I’m just trying to give you an overview. I strongly urge that you sit down with an accountant and discuss the issues I’ve raised here. And if you don’t have one, you’re making a big mistake.

OK, let’s dive into it.



Things that you sell

I hate to break it to you, but to be very plain spoken, if you’re an artist and you’re in the business of selling your art, you sell stuff*. And sales of stuff are generally taxable. So if you sell a painting, you should be charging tax. And if you sell a photograph, you should be charging tax. If you sell crafts, you should be charging tax. If you're a musician and you're celling CD's at the back of the room, you should be charging tax.  It doesn’t make much difference if you sell five pieces a year or 500 a year. If this is your work, then you should be charging tax.

If you sell something from a web site, like Etsy, eBay, or your own web page, you should be charging tax. However, there’s a big exception here. If you’re shipping to someone who's not in your state, then you may not have to charge them tax. And the taxes that apply are based on the state you’re shipping to. If you’re not in that particular state, you probably don’t have to worry about charging taxes for that other state.

However, if you’ve visited clients (or prospective clients), done art shows, worked on an exhibit, have work on consignment at a gallery, or done any other kind of work or performance in that other state, or paid someone else to do so, then you may need to charge that state’s taxes. And yes, if you do that art show in another state, you should be collecting that state’s taxes on any sales you make both during and after the show.

Remember this also means that it's taxable when you sell something to someone who is in the same state you are.

And just charging taxes isn’t enough. You have to send that money to the appropriate state. Which means you must register in that state and start filing sales and use tax returns. You don't just write on a scrap of paper "here's your taxes" and mail them a check.  You have to register and then fill out a very left-brained form.

And to make matters even worse, the rules are completely different in every state. So if you do an art show in one state, and then do some production artwork in another, it's not going to be the same.

Are you sure you don’t need an accountant?

That’s enough for today. There’s lots more.

I'll post a link to the next articles as they get posted.  Here are all of them published so far.

Part 1 - Introduction and overview
Part 2 - Services that you sell and buy




*My definition of stuff, to make it really easy: A single piece of stuff is something you can hear, see or touch and that can be moved without damage. This isn't complete but it's about 90% of the way there.



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. 

Tuesday, November 08, 2011

Great Article: Check your nexus footprint

Boots, Leaves and Rail

from salestaxinsight.com

I've got a new term (actually, I've heard it before, but I'm gonna start using it now).  This short article talks about what happens when a state discovers you and thinks you have nexus.  It talks about how you should evaluate your "nexus footprint" on an annual basis.  This way, you make sure that your business hasn't changed since the last time you checked on nexus.

I also didn't know that November was nexus awareness month.  Must have been before my time.

Enjoy the article.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Monday, November 07, 2011

Great Article: Are you sure you want to appeal?

Ben Holds Court

from state-tax.blogspot.com

While this article is specific to Texas, it makes the point that you really don't want to let the audit get to the point where you go through the appeals / administrative hearing process.  The odds don't look very good.  Enjoy the article, and be scared - very scared.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Friday, November 04, 2011

Great Article: Virtual Chaos: Online Gaming

3 Pounds per Body

from stateandlocaltax.com

When I first read this, I wasn't sure.  The concept behind this series is to give you links to articles that I wish I had written.  Frankly, I never would have thought to write one about online gaming, since I don't do it.  Video and computer games just don't do anything for me.  Ever since I failed miserably at Pong.  Nowadays, I stick with Freecell.

But, some of you obviously do care.  And some of you may even be involved in these industries.  So to you I dedicate this daily link.

Essentially the article discusses recent rulings in Kansas and Missouri.  While you may not care about those two states, the article does give you some more global ideas about the issues involving online access, gift cards and downloadable software.

So enjoy, you crazy gamers.  Now, where's my Freecell.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Thursday, November 03, 2011

Great Article: Iowa's Pumpkin Tax

"Alas, poor pumpkin, I knew him well"

From the Tax Foundation

Many states have exemptions for food sold in grocery stores.  And pumpkins are food (although I'm not sure how much actual pumpkin is in the Pumpkin Spice Latte I had this afternoon).  The problem is that some pumpkins are not sold as food, but as decorations.  And Iowa decided that they needed to tax pumpkins when they were sold as decorations.  Scratching your head?  Read more.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



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

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

Wednesday, November 02, 2011

Fabrication Services

Harley Jim

In most states, fabricators provide a taxable service. Fabrication broadly means taking stuff, then doing work on it and adding value to it (as opposed to repairing it). 

A more limited description of fabrication services is: receiving the customer's property, working on it, and then returning it to the customer.  The problem in this case is that, from a sales tax perspective, there is no sale of tangible personal property, other than some insignificant material like ink, solder, etc.  So in states that typically do not tax sales of services, this presents a problem.

Here is a short list of examples of fabrication services:

keymaking and locksmithing
tailoring (usually more than letting out the hem)
meat cutting and butchering
taxidermy
custom welding
custom assembly

Similar businesses, but that aren't quite the same are:

imprinting and silkscreening
engraving

What's the difference between these two types of businesses?  In fabrication services, something new is created.  To use a common manufacturing definition: "taking something in one form with one name and turning it into something else, with a different form and a different name."  Taking ten pieces of metal and welding them together per the customer's drawing is a fabrication service - something new has been created.

But a silkscreened t-shirt is still a t-shirt, even if it now has a cool Harley-Davidson logo.  Nothing new has been created. 

Many states will impose sales and use taxes on fabrication services, including imprinting and engraving.

But others will tax just fabrication services, excluding imprinting and engraving. 

And still others won't tax either service.

It's up to you to check in the states that apply to you (where you perform the work or where the customer receives the work).




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.  And if you think I just wrote this article so I could use the picture, well.....

Tuesday, November 01, 2011

Great Article: San Juan car dealers lead in sales taxes, but are more needed?

Auburn Cord Duesenberg Museum

In these short bits, I try to give you links to articles that have longer lasting appeal than just news.  That's what I use Twitter for.  But I found this one interesting because it delves into the decisions that local politicians make about sales tax revenue.  Note, for instance, the impact of the renovation of an Interstate interchange on sales tax revenue from a couple of businesses.  It's a short read, but illuminating.

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Monday, October 31, 2011

Great Article: True, Scary, Funny Tax Stories*

"I'm not dead yet!"

from Avalara

I love horror stories.  And these are stories from the "other side" - where the auditors' souls reside.  Boo!

Happy Halloween

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Thursday, October 27, 2011

Great Article: The Marketplace Equity Act: The New Competition on the Block

Tourists at the White House II

from Sylvia F. Dion at www.salestaxsupport.com

At the time Sylvia wrote this, there were two bills in Congress to allow states to force tax collection on companies that do not have nexus in their state (what have been commonly and annoyingly called the Amazon.com laws).  Now there are three such pieces of legislation that have been introduced.  I try to avoid looking at proposed laws until someone actually signs them.  Thank goodness Sylvia finds this interesting, and she's written a nice summary and comparison of the first two bills.  I'm sure that the third bill will fall under her pen shortly.

In the meantime, if you want to get up to speed on the concepts and the first two versions, here ya go


This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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.  And yeah, the picture isn't of Congress or the Capitol.  But I don't have a good picture of either, so you'll have to enjoy this one.  Sheesh.

Wednesday, October 26, 2011

Let the other guy do it!

Ice Fishing
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. **



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

Tuesday, October 25, 2011

Who CARES if they have nexus?!?

Hope she's not on my colonoscopy teamI've heard these two questions so many times, including today, that I feel the need to put them to rest.  So if I've suggested you read this article in response to an email, then ya best read it now.

Question 1: My vendor has nexus in our state.  Shouldn't THEY be charging tax?  

In a perfect world, yes, they should be charging you tax.  But, you may have noticed that we're not in a perfect world.  Your vendor may not realize they have  nexus, or they do realize it but choose to ignore it.  If you call them and insist they collect, you run the risk of:

a.  Ticking off your vendor
b.  Having to educate them about nexus, which is above your paygrade
c.  Having them say, "OK, we'll start charging tax," just to make you shut up.  This will come back to haunt you

You could rat them out to your state's department of revenue, but that just seems...tacky.

But who cares?  Just accrue and pay the use taxes the vendor should have charged you, and move on.  There's no economic cost to do this, and if you have a decent system in place, not really any more work.

There is a risk however, of the vendor getting caught in a couple of years. They may come back to you for the tax that they didn't collect when they should have.  Protect yourself from this hassle by having a clear audit trail on the invoice showing that you HAVE self-assessed use tax.


Question 2:  My customer is based in Canada.  I'm in Nebraska.  He has nexus in Nebraska.  I know this because I'm delivering the shipment to his warehouse here in Omaha.  He says I shouldn't charge tax because he's in Canada.  What should I do?

Charge Nebraska sales tax.  Their nexus isn't the issue when it's something YOU sell.  Nexus is only relevant to determine if a seller has to charge tax in states the seller ships into.  If you're a customer of this company, see question 1.  You shouldn't care about the buyer's nexus in your state.  What you need to care about is properly taxing your sale.

And generally, that means to base your decisions on where the delivery occurs.  Since that happened in Nebraska, you collect Nebraska tax.  If they claim the purchase is exempt because they're in Canada, ask them for proof.  Point out that if you go to Canada and buy something in a store there, you are not exempt from Canadian tax. 

There might be other exemptions (eg. manufacturing, resale, etc.).  But I know of no exemption in Nebraska for material delivered in Nebraska just because the customer is Canadian.  Again, ask them for evidence that they are exempt.  They should be able to provide you with a Nebraska or US law.

As a point of comparison, if you shipped the goods directly TO Canada, then they would be right.  The delivery point is Canada and Nebraska sales tax would no longer apply.  But that's not what's happening.

See why that delivery point rule is so handy?




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.  By the way, I have no clue why I used it.  It just seemed seasonal..

Monday, October 24, 2011

Great Article: Sales Taxes on Services: Yoga Classes, Veterinary Services, and ... Dog Socials?

Pewee Visits the Vetfrom http://www.taxfoundation.org

This article discusses the proposition that sales taxes should apply to both services and stuff.  With which I have no problem, as long as the rates go down.  But the great part is the fine points of taxing services in Connecticut.  A state which has a LOT of fine points.

Click here for the article. 

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Wednesday, October 19, 2011

Great Article: Interviewing Your Sales Tax Outsourcing Provider Will Enhance Success

Xena from accounting wants your expense report right now!from http://www.taxconnex.com

What a great idea!  Who'd a thunk it?  When you're hiring a sales tax outsourcer, or any systems company for that matter, don't just make your decision based on the slick sales person and a tour of the nice offices.  Check on the people who will be providing day to day support.  That is where the rubber meets the road.

http://www.taxconnex.com/Blog------/bid/74463/Interviewing-Your-Sales-Tax-Outsourcing-Provider-Will-Enhance-Success

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy.



The Sales Tax Guy
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. 

Tuesday, October 18, 2011

Great Article: Saying “I Do” to Tax Software

DVD'sfrom http://www.salestaxsupport.com

Suzy Soo outlines five popular sales tax software systems and does a pretty thorough job of reviewing how you can match your needs against what they offer.

http://www.salestaxsupport.com/blogs/sales-use-tax/sales-tax-software-automation/how-to-select-sales-tax-software/

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." Enjoy.


The Sales Tax Guy
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.

Monday, October 17, 2011

Great Article: Three Deal Breakers for Acquisitions

The View from My RoomFrom the good folks at http://salestaxinsight.com

About a year ago, I wrote a true horror story about this problem.  This article summarizes the problem much more succinctly than I was able to do. 

This link is a new series we're offering called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy and learn.



The Sales Tax Guy
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. 

Friday, October 14, 2011

Great Article: How a Color Coded Map of the US Can Reduce Sales Tax Nexus

LinksThis is from TaxConnex and talks about a simple, graphic and proactive way for a business to manage nexus.

http://www.taxconnex.com/Blog------/bid/70899/How-a-Color-Coded-Map-of-the-US-Can-Reduce-Sales-Tax-Nexus

This link is a new series we're offering called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy and learn.


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

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


Thursday, October 13, 2011

Dealing with the Home Office

Waiting for the RestroomA recent webinar participant had a couple of complicated questions, so we made a phone-date to chat when I knew I would be spending an hour or so in a Chicago rush hour.  So, while I was in the warm embrace of traffic, we talked sales tax. 

Warning, the language gets a tiny bit crude a little later.  Just letting you know in case you have delicate sensibilities.

A problem she was having that ran through all of her questions was the problem of dealing with her corporate office.  She was kind of the chief-cook-and-bottle-washer in the office at a branch location of a much larger (though not gigantic) company.  She had grown so frustrated at the inconsistent guidance she was getting that she decided to sign up for all four of our webinars.  Yay for her!

The conversation eventually evolved to talking about what she could do to solve the problem with corporate.  Before I tell you the answer I gave her, let me put a different disclaimer than usual here: there's a reason I finally decided to start my own company.

I have spent years in the corporate world and years presenting seminars on regulatory issues (like sales and use taxes).  I have heard this complaint more than a few times. I gave her this precious bit of wisdom:

"These problems are above your paygrade."

Folks, I want you all to learn about sales and use taxes.  I want you to care about sales and use taxes.  I want you to care about your company.  And your company should want these things too.  But if, once you've learned, they refuse to listen to you, then relax.  This problem has now sailed WAY above your paygrade (but you can still be smug knowing you're better informed about sales and use taxes than they are).

See, if you're at the right paygrade, then when you complain, people will listen to you.  And they may change things.  They may do it grudgingly, but they'll at least pay attention and give you explanations.  But if they won't do that; if they pretty much ignore your concerns, or respond in a blow-you-off kind of way, than the issue is above your paygrade.  Simple.  They've just told you in their own special way.

But that doesn't make you feel that much better, does it?  Because when it all blows up, you're still gonna get in trouble, right?

Email is a wonderful thing because it solves a problem that I had back in the day.  Back then, pre-email, we had to write "cover your ass" memos whenever we felt that an issue we had raised had been ignored.  So we wrote something like, "in regards to the meeting we had today on the Johnson Project, I just want to confirm that you said that I should just forget about it."  And our bosses would immediately spot that as a CYA memo.  This was not a career enhancing move, but was usually the only thing we could do that would get us off the hook when the proverbial poop hit the fan. 

Today, you kids have email.  So you probably haven't even HAD a meeting.  You've been exchanging emails with your boss that document the entire Johnson Project conversation.  So when someone starts chucking poop, you've got cover.

So make sure you raise the issues via email, then go home at 5 and watch The Simpsons.  Relax.  Then go back to work in the morning, ready to face the bright new day, with a song in your heart, and ready to deal with some fascinating new sales tax issue. 

And if you're corporate, listen!  Those people may actually know more about it than YOU do.  And if they won't listen to YOU, then it's obviously above your paygrade too.

You see, what it comes down to is that if they don't listen to you and respect your opinion, then you obviously don't need to worry about it anymore.

Now I know that some of you more responsible readers are going to still take ownership of the problem and want to solve it for the good of the company.  And that's admirable and I don't want to discourage this.  So please learn and try to solve the problems.  But I don't want you to get ulcers and migraines from the frustration of dealing with people that don't care as much as you do.  I have the ulcers to prove it. 

At some point in time, go home and watch the Simpsons.  

As I said, there's a reason I am out of that world. 

And just to show you how hip I am, feel free to watch Family Guy too.




The Sales Tax Guy
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. 

Tuesday, October 11, 2011

Great Link on Local Sales Tax Rates

This article reviews the local jurisdiction rates running for really low all the way up to real bloodsuckers.  From http://taxfoundation.org.

http://taxfoundation.org/news/show/27645.html

Monday, October 10, 2011

Friday, October 07, 2011

Great Article Link: Surprise! Surprise! Surprise! - The State Auditor Looked at Your Website???

What did he see?!!?Years ago, I came across someone in a seminar who said they got caught by Washington because they had listed, on their website, their manufacturers' reps.  It turns out that one of those reps was based in Washington.  Washington had audited the rep firm and then simply searched the web for any other companies with this firm listed on their web page.  Bingo!

So, as this article from http://dowlohnesprice.blogspot.com says, watch what you put on your web site.




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

Thursday, October 06, 2011

Link: Groupon, Living Social, etc.

Eat in GalenaA very good explanation from http://dowlohnesprice.blogspot.com/ on the sales tax issues involving these deals that companies like Groupon and Living Social are offering. The article particularly addresses MA and NY, but can be helpful in understanding the issues in any state.

And for some background, here's an article from 2009 on good old-fashioned coupons.




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

Wednesday, October 05, 2011

Link: Top 5 Activities that Cause Nexus for Technology Companies

La Crosse Rail Bridge Closes After We PassTaxConnex recently published an excellent white paper that really covers all the bases when it comes to having nexus in a state.  They describe WHY nexus is a problem and how you get it.  And don't let the title fool you.  While it's directed at technology companies, fishing tackle companies will find it useful as well.

http://www.taxconnex.com/top-5-activities-that-cause-nexus-for-technology-companies/ 




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. 

Tuesday, August 30, 2011

Enterprise Zones

Something horrible happened here

Most states have economically depressed areas, usually urban but sometimes rural.  Politicians want to encourage businesses to locate in those areas (more jobs, more votes).  So they offer sales and use tax exemptions as incentives.  They also often offer non-sales tax incentives, like income tax and property taxes.  But I think I'll just talk about the sales and use tax piece, if you don't mind.  Enterprise zone is the generic name for this exemption, and most states call it by some variation of that term.

Interestingly, this is about the only exemption that is based on where an item is purchased, sold, or used.


The incentives usually include some mix of the following exemptions, depending on the state:

No sales and use taxes on purchases of building materials used inside an enterprise zone.

No sales and use taxes on any purchases to be shipped to and used in the enterprise zone.

No sales taxes on items sold in the enterprise zone by a business in the zone.

There are usually some mix of the following restrictions, depending on the state:

Companies receiving the exemptions have to meet employment and/or investment targets.

Companies can't simply move from one part of the state to the enterprise zone, causing growth in the enterprise zone and loss in the former location of the business.

The seller AND the buyer have to be located in enterprise zones, but not necessarily the same one.

Companies have to register with and get prior certification from the economic development agency du jour.

The exemption is available for local taxes only.

The sales may not be exempt.  But the company can apply for a refund or credit.

Zones have expiration dates.

The certifications of businesses in the zones have expiration dates.

Some states have a variety of different types of zones with different rules.  For example, Pennsylvania has: Keystone Opportunity Zones, Keystone Opportunity Expansion Zones, Keystone Improvement Zones and First Class City Improvement Zones.  Sheesh.

Why I hate Enterprise Zones (warning, you're entering the "editorial zone")

Let's see:

1.  Politicians want private companies to do something, like set up businesses in blighted areas.

2.  So they write tax exemptions encouraging that.

3.  But they want to make sure those sneaky businesses don't make TOO much money in tax savings, nor abuse the exemption.

4.  So they add nuttier and more complicated restrictions into the rules.  Notice that I wound up listing a whole lot more restrictions above then actual exemptions.

5.  Politicians also appear to be too lazy to just update the rules for a zone.  They have to write new ones piling on the old ones (see Pennsylvania above).  

6.  Businesses that might move into the area look at the rules, sigh, and say, "never mind."  Therefore these enterprise zones don't accomplish what the politicians wanted and promised.

What  you should do

Check to see if your company, or any of your vendors or customers, are already located in an enterprise zone.  In other words, are there exemptions available to you that you weren't aware of?

Factor any tax exemptions into your expansion plans.

Make sure you understand the rules clearly before taking action.

Get a professional to assist with this if the rules are as complicated in your state as I've implied.

Get a professional anyway.  If you're making business decisions based on some system a politician has set up, you want to make sure you do it right.



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. 





Monday, August 29, 2011

Got an iPad?

Firewhip II've just tested it on our last webinar and it truly works...kind of.  You can download the gotomeeting app and join our webinars.  The screen looks nice and it seems to be pretty fast.  There is ONE problem though.  And it's a biggy.  There's no chat function that's available on the regular clients.  Which means you can't text in your questions.

This isn't the end of the world since I do invite voice questions at the end of the webinar so that folks who haven't been able to chat can ask questions (eg. people who phone in and follow along on the paper copy of the handouts).

So if the iPad, with its limitations, works for you, huzzah!  

Yes, I've been spending too much time at our local renaissance fair recently.

Oh, one more thing.  I haven't heard of an Android version yet.




The Sales Tax Guy
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.




Wednesday, August 17, 2011

Felony Watch: Links to Stories About People Doing Bad Things

Felony, anyone?Some relatively recent news items about sales tax evil-doers

Gadsden AL businessman charged with sales tax evasion  myfoxal.com

Bronx County Restaurateur Faces Felony Tax Charges Failed to Remit over $500,000 in Sales Tax to State and City readme.readmedia.com


3 North Georgia Business Owners Indicted for Tax Theft newschannel9.com

Former Loris SC councilman, wife face sales tax charges thesunnews.com

Liquor store owner charged with $380k sales tax evasion NY midhudsonnews.com

Rye Man Accused Of Stealing $380K In Sales Tax NY northcountrygazette.org

Brooklyn Park business loses sales tax permit MN hometownsource.com

Ex-Anderson Mayor Rex Lynch arraigned on felony charges TN knoxnews.com

Miller’s Essenplatz’s owner convicted of not paying sales tax NewarkAdvocate.com

Former North Naples restaurant owner accused of stealing $67,000 in sales taxes naplesnews.com

Aurora IL gas station owner charged with sales tax fraud couriernews.suntimes.com

Bronx Businessman (Truck Rental) Failed To Pay $400K In Sales Tax northcountrygazette.org

Lake Elmo man faces 9 counts of tax evasion MN startribune.com

Pasco café owner accused of failing to pay sales tax (WA) tbo.com

Coraopolis car dealer faces charges (PA) timesonline.com

Guilty plea entered in theft of sales taxes (used car dealer) buffalonews.com

Norwalk CT Businessman Accused Of Stealing More Than $15,000 In State Sales Tax (liquor/convenience store) Courant.com

Ocala car dealer arrested on tax charges ocala.com

Tax Lien Forces Kushi (restaurant) To Shutter With Hopes To Reopen Wednesday DC
dc.eater.com

Local Auctioneer Serving 90-Day Jail Sentence (SD) yankton.net

Tri-Cities WA Home Builder Charged With Tax Fraud keprtv.com

Omaha guy mulls moving company but may owe a LOT of taxes to Nebraska due to playing games with vehicles - allegedly omaha.com



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/

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Wednesday, August 10, 2011

Sales Tax Poetry

Clippers Gone WildCollect sales tax, you kept?
Beware the tax man, he'll catch you.
Orange suits will look nice.

Now, you're all supposed to snap your fingers and say, "Cool, man. Cool."

This was published for fun in the latest issue of e-AP News Trust me, there are no anthologies coming.


The Sales Tax Guy
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Tuesday, August 02, 2011

Editorial: What's the point of a sales tax holiday?

Beaver House
Warning - I have absolutely no real facts to back me up, merely surmises, my own experiences and assumptions.  But I'll bet I'm right.  This is just pretty much a rave-out.

Seems to me that most retailers really don't get much benefit from sales tax holidays.  They have to stock up for that one particular weekend in August.  They have to reprogram their POS systems. They probably have to staff up as well.  They may even pay their staff overtime if they happen to be paying attention to wage and hour laws (which is a big "if").  They'll get in arguments with customers about whether or not this particular school supply qualifies for the exemption.  Is it a purse?  Or is it a school bag?  And then they see a slide in their sales for the non-holiday weeks surrounding that one particular weekend in August.

In other words, do retailers see any long term, increase in profits?  I'll betcha they don't. 

But there are two situations where holidays can benefit retailers.

1.  If they're on the border with another state that doesn't have a sales tax holiday, then they can steal business from that other state.  I wonder though, if the retailers would be so enthusiastic if they had to enclose a flyer with each purchase advising the customer that when they return back to their state, they will owe use  tax on their purchase to their state.  In other words, legally, it's pointless to go to another state to take advantage of a sales tax holiday and then use those clothes in your state.  You know, use tax?

I always find it funny that politicians know that they're stealing business from the other state, even use that as a justification for the holiday, but still whine about losing tax revenue from Amazon's failure to collect taxes.  Isn't this kind of the same thing?  They're creating a system where the buyers are failing to pay the required use taxes in their home states.

2.  I can see, from a marketing perspective, that having a sales tax holiday is a great way to build enthusiasm, a festive atmosphere and maybe a buying frenzy.  But can't the retailers just buy some balloons and have a "storewide sale?"  Essentially, by making it a sales tax holiday, ALL of the taxpayers in the state are paying the marketing costs of the retailers.  Doesn't seem fair.

There is one group that definitely and always benefits from a sales tax holiday - politicians.  An example:

I live in Illinois, who, up until last year, never had a sales tax holiday (at least in my memory).  Then, in the midst of a massive and spectacular budget crisis (I've heard we are now the most broke state in the Union), we have a sales tax holiday.  Which is just going to mean a bigger budget crisis.  Why did we have one?  Well, let's just say that our beloved governor was running for reelection and it was a tight race.  Need I say more?

I guess I will.  Politicians love to pat themselves on the back about sales tax holidays.  But the holidays cost the state tax revenue, probably don't help the retailers, and steal business from other states without really benefiting the customers, who then owe use taxes in their states.  

Cynical?  Yep.  Correct?  I'll betcha.  What do I think of politicians?  Not much.

Enjoy your sales tax holiday, if you live in or near one of these states




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

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