Are Your Vendors Stealing Sales Taxes?

This article from kirotv.com is long on fluff, but has a good core point to make. Are your vendors, who you're paying sales tax and/or use tax, actually remitting that money to the state?

Remember, if they're not paying over those taxes, they're ripping you off, as well as the state. You may be off the hook for the taxes (maybe not, it depends on the state*), but why should you pay that extra 8 percent or so just to line the vendor's pocket. It would be nice if that money actually went to the state, where it kinda sorta actually benefits you.

So what can you do?

The article notes that if the seller doesn't ring up the sale or give you a receipt, it's a red flag that they're not reporting the sale, or the tax. If you want to make someone miserable, and you're assertive, raise the issue right there and ask for a receipt. This would require them to ring it up, and the tax will probably get reported. Unless of course, their "cash register doesn't work right now." This really won't solve the problem unless everybody does it...which they won't. What to do? The state relies on tips from consumers - if you catch my drift.

And as I've recommended in my seminars for a long time, it's not a bad idea to ask the vendor for a copy of the permit or license they received from the state when they registered to collect sales and use taxes. It's not a guarantee they're report the income, but at least you know they're on the state's list. This is particularly important for vendors from outside the state that are charging you tax on shipments into your state. And you might want to make sure you do it for in-state vendors who you use a lot, and are kind of small or new operations.

In some states, the vendor is actually required to post their permit by the cash register. Next time you shop, try freaking out the poor clerk by actually carefully inspecting it.

But the best course, and the one your state would probably prefer, in the spirit of the season, is to tell the sheriff 'bout those law-breakin' varmints.

Sales Tax Guy

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*In some states, the buyer's liability for paying either sales tax or use tax isn't extinguished until the seller actually pays the tax to the state. Didn't know that did ya? In other states, the buyer only needs a receipt showing tax to be off the hook. But you need to check.

Second Amendment Sales Tax Holidays

I thought of this story after writing yesterday's post.

When I first read about Second Amendment sales tax holidays, it was South Carolina's. I happened to be doing a series of seminars in Tennessee that week and mentioned it in my class in Chattanooga.

(For those of you who don't know your Bill of Rights, Second Amendment sales tax holidays allow the purchase of firearms without sales tax). Read on to see why I think they exist.

South Carolina (and Louisiana) both have, in the past, scheduled them for the weekend after Thanksgiving.

Tony was in the class in Tennessee and when I mentioned the holiday, his eyes got really wide and he started squirming around in his seat.

I said, "Tony, you're thinking about taking a little road trip to South Carolina to buy yourself some guns, aren't you?"

"Heck yeah! I can save myself a ton of sales tax!"

"Now Tony, you do realize that, while you can buy those guns without tax in South Carolina, when you bring them back here to Tennessee, you're going to have to pay 9% use tax, right?" It was a sales tax seminar, so I made this a teaching experience for Tony.

His response, "Yeah. Right."

So much for even making them feel guilty!

OK, why do states have a Second Amendment sales tax holiday?

I have a couple of theories (and they are just theories):

1. As with any other sales tax holiday, it's an opportunity for South Carolina to suck business into the state for their retailers. The politicians know that the customers won't pay use tax when they return home to their own state - and they don't care.

2. It's a Second Amendment holiday, and it gives the politicians a chance to curry favor with the real men in their districts. Just kidding, if you were about to take offense.

3. These are held on the weekend after Thanksgiving. Which is often the opening of deer hunting season.

4. It's the weekend after Thanksgiving. Tony's family wants to go shopping. He might be able to justify this road trip to South Carolina by suggesting it be a shopping trip for Mom and Sis and Junior too. So, while he and Junior are shopping for guns, Mom and Sis are spending money, and paying lots of South Carolina sales tax on their purchases at the malls. Maybe South Carolina figures that they'll lose some sales tax on the gun sales, but they'll make it up on all of the other shopping that will be brought into the state that weekend. Nah, I can't believe politicians would be that devious.

As I finish this up, it occurs to me that this would be an ideal post for just before Thanksgiving. And here I am, two weeks late. But, I can see an "oldie, but goodie" post in my future for next November.

I hope you all had a good Thanksgiving and I wish you a Merry Christmas.

See you next week.

Sales Tax Guy

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Sales Tax Holidays

Sales tax holidays are events, usually over a weekend, but sometimes longer, when some items are exempt from tax. They are usually in August (back-to-school time) and include most clothing. These August holidays often include back-to-school supplies and computers too.

There are also holidays for guns in a couple of states (SC and LA last I looked) - they're called "Second Amendment" holidays.

And there are Energy Star holidays when you can buy energy-saving appliances tax free, and hurricane sales tax holidays. One state has a sales tax holiday on just about everything!

Sales tax holidays seem to be a regional kind of thing. They're mostly in the east and southeast with only one that I can think of in the midwest, and a couple in the west.

States are getting nervous about them. Sales tax holidays are a major crunch on state budgets. And, in these times of falling sales tax revenues, they are not looked upon too kindly by your friendly elected representatives. They like to brag about the holidays, but they hate to give up the money.

And I personally wonder if they work? They're often lauded as increasing sales, but are sales increased over the entire season, or does the holiday just force more sales into a few days, forcing retailers to stock up, pay overtime, reprogram their systems, etc?

Sometimes they snag business from other states, with shoppers coming from neighboring jurisdictions for the deals. But since those shoppers have to pay use tax* when they return home, what's the point? Oh, yeah (finger snaps). The politicians who complain about out of state vendors not charging tax on shipments into their state are perfectly happy to more-or-less do the same thing to the other states. Either that, or your legislators just don't know about use tax issues (which is more likely).

You can't miss sales tax holidays. If you live in a state with a sales tax holiday and you watch the news at all, you'll know when they come up. These are just the kinds of things that reporters will cover. And they can understand it. Sort of.

*yeah, right

Sales Tax Guy

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Sales and Use Tax News

These are gleanings from newsletters, etc. I have not included all of the events, nor have I provided much detail. As usual, the disclaimer applies - check this kind of thing out yourself. I just want to give you a heads-up.

In Florida, indoor plant maintenance services and warranties are taxable. Florida Tax Information Publication 09(A)-053, 10/21/2009

Tour bus receipts are taxable, even if there is some shuttling going on. But walking tours that are strictly on public property are not taxable since people can tag along for free, and there is no access to restricted areas. Florida Tax Information Publication 09(A)-054, 10/29/2009

With regard to admissions, local or state surcharges and fees, if separately stated, aren't taxable. Florida Tax Information Publication 09(A)-056, 11/05/2009

And a restaurant was still required to remit collected sales taxes, even though the employees stole the tax collections. 30-A Restaurant Group, Inc. v. Florida Dept. of Rev., FL Div. Admin. Hearings, Dkt. No. DOR 09-3-FOF, 11/20/2009

Man, those guys in Tallahassee are tough.

Wisconsin now requires that, if you buy stuff to give away with a sale, you must pay use tax on it. Wisconsin News for Tax Practitioners 12/04/2009(Items Given Away for Free - Change in Wisconsin Sales and Use Tax Treatment Effective October 1, 2009), 12/04/2009

And they have adopted the rule that says that leasing equipment with an operator who does more than set up and/or service the equipment and is necessary for equipment to perform correctly becomes a service and is no longer a rental.

Many states and news outlets are now reminding you, when you order stuff online, to pay your use taxes. Like any of my readers would forget.

Texas now provides a rate lookup tool on their web site at http://ecpa.cpa.state.tx.u/atj/addresslookup.jsp


Local rate increases

Alabama
South Dakota
Texas

Sales Tax Guy

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

You're missing some tax breaks

I was chatting with a woman who bragged about finding a really big sales and use tax break for the company she worked for. What stunned her was that it was just a matter of reading the rules for her industry...the exemption was clear. She had to do a little digging - but it was right there! And her company had been handing over money for years without realizing that they didn't have to.

Not only that, but other folks in the same industry didn't know about the exemption either.

The fact that no one was using the exemption made her nervous. She contacted a sales and use tax lawyer who basically said, "Yeah, it's right there. So what's the problem?"

The moral is that you should very carefully comb the sales tax and/or use tax laws and exemptions in your states. Look for rules that could apply to you. They may be relevant to your industry. Or they might just be something that only tangentially is relevant. And they might be a little hard to tease out. But if there is a law that you can use to save money, why aren't you?

Remember, the auditor will be carefully checking that you've paid all your taxes. But she won't be telling you about the exemptions that will save you taxes. You have to do that yourself. Go crack the books and do some research.

Look! Research! Use it!

Sales Tax Guy

See disclaimer and research the issues thoroughly before making decisions

Here's information on our upcoming seminars and webinars

Sales and Use Tax News

These are gleanings from newsletters, etc. I have not included all of the events, nor have I provided much detail. As usual, the disclaimer applies - check this kind of thing out yourself. I just want to give you a heads-up.

Illinois court rules freight charges were taxable. Illinois has a pretty confusing rule regarding the taxability of freight charges. The law says the shipping charge must be "separately contracted." But I've read different and conflicting illustrations.

A test that the court applied is whether or not the customer bought the item and the shipping charge in one transaction. If they did, the shipping is taxable.

Another is whether they can avoid the shipping charge in some way, either by picking it up at the store or buying it online and then separately contracting for shipping. If they can, it's an indication that the freight isn't taxable.

For example, when you buy from your average dot com, do you have any option to avoid shipping? If you don't, then, in Illinois, the shipping is taxable.

Kean v. Wal-Mart Stores, Ill. S. Ct., Dkt. No. 107771, 11/19/2009

And in Chicago, the continuing sales tax saga - the rate goes down by half a point. Suntimes.com and others

There are lots of articles floating around focusing on the loss of taxes to the states from people buying online and not paying their sales tax and/or use tax. LOTS. Here's just one of them And about 1400 more.

College privilege tax in Pittsburgh? salestaxbuzz.com

Local rate changes

Utah
Washington

Sales Tax Guy

See disclaimer and research the issues thoroughly before making decisions

Here's information on our upcoming seminars and webinars

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

Installation Charges

This is one of a series on how to handle items that affect the "basis" of tax.

Installation charges are often included in the basis of the tax calculation...in other words, they're often taxable. Installation charges include pretty much any on-site charges related to setting up a product.

They typically don't include charges that happen at the seller's facility. Those would typically be include in the normal selling price and therefore taxable in all cases. But installation charges might be taxable or might not, depending on the state.

Short and joke-free topic today. I swear I tried. But, I mean, installation charges?

Sales Tax Guy

See disclaimer and research the issues thoroughly before making decisions

Here's information on our upcoming seminars and webinars