Any vendors here sell out of state? (US) Sales tax Q...

[FoolishTech]

I was under two impressions that my new accountant doesn't seem to follow.

First I had always believed that you only had to collect sales tax on the state in which you had a brick and mortar office. I thought it was the responsibility of the out of state buyer to pay their own state's "sales and use" tax on their annual income taxes for online purchases. I mean, there IS a form for that, at least here in NC.

My accountant is telling me I need to collect and file sales and use tax for EVERY purchase in the states. This means I need to keep up with all 50 states' tax rates (which btw can vary by county, because the tax is actually a combination of state and individual county tax rates which can vary even inside the same state.) I just guess he expects me to use the highest county's tax rate in every state - oh boy how to figure that one out?? And to manually create rules for all of this on a state level in my shopping cart and paypal - ugh.

His reasoning is that many larger companies are starting to do this, because the likes of Amazon.com and other online retailers are (he said) losing court battles against several states over it, despite the fact that the tax shouldn't be required by law to collect! Well he says the law is 'funny' about these things. He had to confer with another accountant to even figure out what to tell me and double check his facts and they other agreed.

My NEXT impression was that you don't charge sales tax for SERVICE. Now he tells me I need to start charging tax on dCloud, my subscription service as well. So I said ok, it's sort of a product, maybe it's a gray area - the accountant reminds me that their hosted email and some other IT services didn't use to be taxed - and now it IS... so I can see his point there. I think I pay tax on my Netflix account maybe(?) so that's a fair comparison also. I'm fine with that. But what if I provide remote services to a client that require my actual time - for example I'm on an emergency remote job right now - I've never charged tax on that before and I don't know anyone that does... I haven't talked to him specifically about this situation but I don't plan to.

The more I tell this guy the more bad news he gives me. I'm thinking that since he signs the paperwork as an accountant, he is (somewhat?) liable for what gets reported - so I'm sure he wants to cover his ass.

Is this guy for real? He IS the best in the area which is why I went to him. He S-incorporated my LLC, advised me on financial planning to reduce tax burden and some of it sounds good (SEP IRA, etc.)

There pretty much isn't anyone else local that I would trust. Should I keep this guy and just lie about selling out of state? "Ahem, yes here's my NC state tax sales for this month, no I didn't sell to any other states, yes every other sale was out of the US..." LOL he wouldn't believe that - and I realize due to some possible liability it is his business - or should I just tell him flat out I refuse to collect out of state sales tax? What could he do?

I don't expect legal advise here, just really ranting and wondering of others have run into these issues with their CPA or similar...

 

[Paul Rodgers]

Get a new accountant.

You are only required to collect sales tax for states that you have a physical location.

 

[EAGtech]

I agree...in Florida you only collect and remit sales and use tax on physical product or labor related to installation or repair of a taxable product...rule of thumb, if there is a taxable item on the invoice the labor is taxable also. Also, if I buy product from out-of-state, not for resale, I must pay tax on those purchases to the state of Florida. For that reason I usually seek to purchase from companies that have a physical presence in Florida (TigerDirect, Dell, etc).

 

[YeOldeStonecat]

Service/manual labor is much lower...has been for years...although in the state of CT it is still a small %.

We really cut down on sales/ shipments to out of state...due to the difficulty of keeping all that straight. Our clients in NYC for example....Dell even required us to give them a State of New York tax ID info if we had them ship units to those clients that we were selling to our clients. Had enough, we just send those clients a Dell cart and have them purchase direct.

 

[samfrees]

Well, I don't pay sales tax at the time of sale on things I buy from another state and neither does anyone else (or at least they shouldn't...that's why there's a tax form for use tax) so your accountant is wrong about that. I ran an online retail business for a while and was only required to charge sales tax for things sold in my state.

Not sure about dCloud being a product or a service. As far computer repairs, here's something I grabbed referring to auto repairs...should be the same for computer repair as well, although it contradicts what EAGtech says so I'm not sure:

"There's no tax on labor to repair a motor vehicle. This means that charges for labor to replace a tire, battery, muffler, or shock absorber on a car, truck, trailer, or any other motor vehicle are not subject to sales tax.

A repair shop that charges a single price for parts and labor should not collect sales tax from the customer, but instead should pay sales tax to its supplier when buying parts. For example, a shop performs an oil change for the lump-sum price of $19.95. The shop should pay tax when buying oil, filters, and other items used in the repair, and should not collect tax on any portion of the $19.95 charge to the customer. If a shop erroneously charges tax, it must remit the tax collected in error and must still pay tax on items used in the repair.

On the other hand, a shop that charges separately for labor and parts must collect sales tax on the parts."

 

[Tony_Scarpelli]

Not only are their 50 states but also American territories and then each big city and even some counties have their own sales taxes and it is beyond the ability to know let alone program this into your shopping cart.

I would tell the acct. you got to make a change because it is simply not possible nor cost effective for you to follow his guidance. Not that he is right or wrong only that you cannot do it. Trust me he has heard it already by many others.

I am told in my state that if I put on the line xxx sales out of state, if I have not collected for that amount my state will try to collect it as if it were in state....I don't know probably better to just report net instate taxes and be done with it.

Outside of your own tax authority, no one else has the ability to come into NC and serve you to go to a tax audit so it will never come up.

SO I guess I would legally file and pay all taxes on NC income....the rest would sort of not be reported to NC. I would report all to Feds and pay as required.

 

[Tony_Scarpelli]

Service/manual labor is much lower...has been for years...although in the state of CT it is still a small %.

We really cut down on sales/ shipments to out of state...due to the difficulty of keeping all that straight. Our clients in NYC for example....Dell even required us to give them a State of New York tax ID info if we had them ship units to those clients that we were selling to our clients. Had enough, we just send those clients a Dell cart and have them purchase direct.

When I do out of state work I just have everything come to my office and then deliver it from there. I do have vendors that will drop ship without salestax but I don't deal direct with Dell/HP..

 

[1aComputerServices]

Charge my home rate only. In the area I am in, 2 other states are only 15 minutes either way you decide to go.

 

[YeOldeStonecat]

When I do out of state work I just have everything come to my office and then deliver it from there. I do have vendors that will drop ship without salestax but I don't deal direct with Dell/HP..

I did that briefly for a while....but started feeling bad for that.
The upcharge I have to pass onto the client to ship a brand new desktop/tower PC...for shipping, it's too much for me to eat, and it adds so much price to the client..just figured easier to have them purchase direct.

 

[Mercenary Roadie]

The simple answer is to call your state sales tax board and get the official answer since it will change from state to state.

Yes amazon and a few other large online retailers have struck deals with many states to collect sales tax, they are an exception and not what you should be following.

On the Service tax side. I still haven't a clue as to when I should collect that tax and haven't had much success getting a straight answer from anyone.

 

[Paul Rodgers]

The simple answer is to call your state sales tax board and get the official answer since it will change from state to state.

Yes amazon and a few other large online retailers have struck deals with many states to collect sales tax, they are an exception and not what you should be following.

On the Service tax side. I still haven't a clue as to when I should collect that tax and haven't had much success getting a straight answer from anyone.

That depends on the state.

 

[Mercenary Roadie]

That depends on the state.

Paul,

I have no idea what you mean by your post since I said it will change from state to state.

 

[budsandbytes]

Straight to the horses mouth...

Here in MN, there are some major changes taking place to the sales tax code, both to the base rate, and the list of what is and isn't taxable.

They are adding all computer/electronics repair labor, data processing, hosting, and pretty much every other line of business I'm in to the list of taxable services. (Along with a whole host of other industries that won't affect us that much, although some are crying bloody murder already.)

Come 2014, or whenever it would take effect, we are going to watch quite the sum of money leaving our customer's pockets and getting handed off to the state. I doubt it will affect business much, but it will have an effect. I'm sure lowering it, or at least the part of it that isn't allocated to transit, or the arts, etc. to 5.5% will have a positive impact on several industries that were already taxable.

You don't have to be an accountant to figure out what the current law is. Most state revenue departments have a ton of literature aimed at business owners. Check out their website. If you can't find your answers there, I'm sure they've got a help line. They want to be sure they are getting their money, so they make sure it is easy. The out of state thing sounds a little fishy to me, but who knows what tricks your state may have afoot.

I know you have to track payments to vendors and contractors at a nationwide level, but that is specifically because you aren't collecting tax.

 

[twincountycomputers]

In Virginia, business are required to collect sales tax on all sales to Virginia residents whether the sale was made to them in person, phone or internet.

Any Virginia resident who buys merchandise from in-state or out-of-state over the phone, internet, or in person is required to fill out a form at the end of the year and remit Virginia State Sales tax on that amount..... I doubt many people do that but it is the law. I would guess that most other states are the same way, I know that NC is.

We are about to get our NC Alarm License (for our security company) and to do so we will then have to start charging NC Sales tax on any work we do in NC.