Compost By Any Other Name

A year ago, the Vermont Compost Company received a bill for $100,000 in unpaid sales tax after an audit by the Vermont Department of Taxes. The company thought that compost wasn’t taxable if it was being used to grow food, but a law change that went into effect in 2009 made all sales of compost taxable unless to an exempt customer. Karl Hammer told the Vermont Digger, “We have always said to people, ‘If you’re growing food, you don’t have to pay sales tax.’” This is just one more case in which a complex system of sales tax laws ended up costing a business a whole lot of money. The Vermont Compost Company is now seeking a change in legislation to move compost back to sales tax exempt since other products for growing food are exempt, like fertilizers and seeds.

While they have the support of their community and Rep. Will Stevens, it’ll still be a long battle to have a change enacted and the company will probably still have to remit their sales tax of $100,000 even if the law is changed back. As sales tax professionals, we know that sales tax is extremely complex. In this case, it seems like compost sold under any other name would fall under an exempt category. That’s why consulting a tax professional is recommended when you’re setting up a business — and working with a CPA or staying on top of changes in sales tax law within your department is always a must. Sales tax reform is increasingly part of the discussion, especially with the Marketplace Fairness Act languishing in a subcommittee in Congress.

While much of the conversation in the media is concerned with the Affordable Care Act, sales tax will also be addressed after Congress finishes their recess and picks up where they left off. Meanwhile, states and cities across the nation are making their own sales tax changes. Web-based sales tax software can automate a lot of tasks related to sales tax, and give you more time to follow tax-related news. You can also<a href=”http://twitter.com/SalesTaxDLink”> follow us on Twitter</a> to get the latest updates.

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