Exploring what's new, relevant and upcoming in the ever-changing world of sales tax.
Apr 02, 2015 Sales Tax DataLINK
States are losing billions of dollars in use tax revenues because how our economy has changed over the past decade. Consumers and businesses alike are buying products from across the globe instead of just in their own states—and that means sales tax isn’t always collected as part of the transaction. But that’s not how the majority of use tax liabilities are created for businesses and not knowing this might end up costing you a good deal of money, time, and growth. Read More
Apr 28, 2014 Sales Tax DataLINK
In a LinkedIn discussion about paying use tax, one commenter replied that sometimes the higher ups in a company get in the way of paying use tax. They don't understand what use tax is, why the company needs to pay it, and what negative impacts not paying has on the company. Instead, they see use tax as an unnecessary expense that cuts into profits and the overall bottom line. As the sales tax practitioner in your company, you know that sales tax is only one side of the coin and that use tax needs to be paid. But how can you convince your bosses that the company really need to pay use tax? If you're not completely up to date on what use tax means, be sure to go read our article on use tax to get your bearings. The employee who brings problems to the boss is never on the Favorite Employee list. That is unfair in many ways, because knowing what the problems are is important. Still, it's much better to bring your boss a solution that a problem. Keeping that in mind, when you approach your boss about paying use tax, you need to frame it in how it impacts results positively. In most instances, paying use tax is a security measure because it is the law. When your company pays use tax, they're avoiding being audited and being slapped with fines and penalties. Paying use tax prevents the company from being shut down because of nonpayment. But to your boss, paying use tax doesn't seem like a security blanket to them but rather a undue burden that can be avoided. The result they see is reduction in profits. Instead, show your boss what will happen if you don't pay use tax. Run a report that shows just how much use tax the business had over the last year and do some math behind what kind of penalties the company might have to pay if you don't pay. Compare that number to the amount of profit you see in sales. In many cases, the amount of penalties is higher than what the company makes in profits. Take those numbers to your bosses and show them what not paying use tax will cost. If your bosses point out that your scenario will only happen if they get caught, be sure to underline the fact that states are looking towards use tax as a means to recoup missing sales tax because of low revenues. The more we buy online where sales tax isn't collected, the more states will go after businesses for use tax. With any luck, your boss will be happy that you pulled the company's chestnuts out of the fire -- not ready to shoot the messenger.Read More
Nov 15, 2013 Sales Tax DataLINK
Use tax is one of the most misunderstood areas of sales tax. Both businesses and individuals are required to pay use tax but only 1.6% of people who could possibly owe use tax actually take the time to calculate and pay it. Some states, like Oklahoma, provide a check box on income tax returns for an easy way to file use tax—instead of having to calculate it out, taxpayers can accept the state's calculations. However, businesses are in a different position and need to pay use tax -- and to figure it up first. But what exactly is use tax? We all know what sales tax is but for the sake of making a point, let's define it. Sales tax is a tax levied on the receipt of sale of tangible personal property. If you buy a coffee at the corner store, you'll pay sales tax on the cost of the coffee unless there's an exception. But what if the corner store didn't collect sales tax? The tax jurisdiction still wants to collect tax on the sale but now it's up to you as the purchaser to pay that tax. This is what is called use tax. You can see how this gets complex. Retailers have programs that calculate out sales tax and spend a lot of time determining which products are subject to sales tax and at what rate. In a use tax situation, all this obligation to calculate sales tax is passed on to the entity that consumes the product. A good example of use tax in our coffee situation is if you bought a lot of coffee from a wholesaler that doesn't collect sales tax. Normally, they sell coffee to places like corner stores and aren't obligated to collect sales tax. Sales tax, after all, is only charged when the product gets to the end consumer. If you're providing coffee as a perk to your employees, your business is the consumer and paying use tax is required. You'll need to calculate out the use tax on the coffee and remit it to your tax jurisdiction. Use tax can get really complex, however, and it often requires a professional to determine where and when your business needs to pay sales tax. For instance, if you send coffee to a client as an end of year gift and they're in a different state, do you owe use tax? It's easy to see how use tax can start to get puzzling. The best way to handle use tax is take a consumption inventory of your business expenses—what things did you pay for without paying sales tax? Did you use those items, rather than selling them? Then you probably owe use tax.Read More