Sales Taxes...GOTCHA

[txdon]

Gary, I just PMed you, looks like Bill has your answer.
also: <font color="red"> f) A farm or ranch is defined as one or more tracts of land used, either wholly or in part, in the production of crops, livestock, and/or other agricultural products held for sale in the regular course of business. This includes feed lots, dairy farms, poultry farms, commercial orchards, commercial nurseries, and similar commercial agricultural operations. Farm or ranch does not include home gardens or timber operations.
</font>

 

[mahlers]

I did a ton of reasearch on this topic, and I've talked to some people who are "in the know" about sales tax, use tax, and internet tax.

In short, most states that have a sales tax also have always had a "use tax" so that they have a mechanism to collect "out of state" purchase tax revenue. They've normally enforced this through simple means like automobile, boat, and airplane registrations. They can't charge you "sales tax" on out-of-state purchases because of a long standing little rule somebody wrote down a while ago about "taxation without representation." Use tax, on the other hand, is OK because you're using the merchandise in your locale.

Contrary to popular belief, the "no internet tax" rule isn't designed to control taxation on merchandise purchased over the internet - it is just a measure to keep the actual use of the internet from being unfairly taxed. It really has nothing to do with purchases (in state or out), unless those purchases happen *completely* through the internet (like downloading software that has no physical media whatsoever).

Regarding "use tax" and the state's recent move to collect on it - don't worry too much about it for the next few years. "Use tax" has been almost completely unknown and mis-understood until just recently, and the main purpose for the addition of this line item on your income tax return is really to increase public awareness of it. In fact, virtually all goverments are expecting to *lose* money on the latest "use tax" measures (it costs them more to start applying it than they expect to get back in revenue). In New York, a prominent taxing authority even went as far as to say that, even by declaring "zero" in the use-tax line on your tax return, you *will not* be increasing your chances of audit or causing anyone to look twice at your return. For now, at least...

So, the bottom line for the next couple of years is that the States want to educate people about use-tax, and get them ready to start paying it in the future. Politically, it makes much more sense to ease us into it than to just hit us with it all at once - even if they theoretically could nail us right now. Also, since there are over 14,000 different local tax structures in the country, it is presently cost-prohibitive for them to try and enforce it rigidly now because the cross-reporting just doesn't exist now.

You'll see a definite trend toward use-tax 'education' over the next year, and be ready to see it enforced within the next couple of years. For the immediate time-being, though, don't lose any sleep over it.

By the way (back to the original topic of this thread), for any purchases made in-state and delivered in-state, the legal responsibility to pay the tax resides with the merchant. They don't have an obligation to specifically *collect* the tax from the buyer, they just have the obligation to pay it to the State (which, for bookkeeping reasons mostly, normally means that they automatically calculate it at the point-of-sale, collect it and show it on a receipt).

If they didn't show "sales tax" on the invoice, it is 'reasonable' to assume that they built the tax into the purchase price as a marketing program or for simplicity. It happens all the time - "no tax" days at Orchard Supply Hardware, "out the door" price packages at the matress store, etc. Lots of merchants run promotions where they say that there's no tax on the sale, where in fact you're really just getting a 7% discount, etc., and they're still obligated to pay the sales tax to the state. It's totally unethical for them to come back later and try and collect more on a deal that was already a "done deal." If they screwed up and didn't pay the State, then it's their problem in my opinion. I'm sure that, even if they would have paid the tax, they still would have made a profit on the sale.

Part of salesmanship is getting a customer to feel like they're getting the deal of the century. If a dealer told me that they were doing something to make the "tax go away" I'd assume that it was just a cheap sales tactic to make me feel like I was getting a great deal that other dealers wouldn't offer. I'd also assume that nobody could be so stupid as to announce to a stranger that they were about to do something completely illegal like tax evasion - it's just not worth it just to close a sale. So, in my opinion, it's reasonable to assume that the dealer was just using sales tactics on you to close the deal, and you had no reason to *really* believe that the dealer was shirking his legal obligations, and you certainly didn't have an obligation to tell the dealer how to run his business...

Now, if they did indeed do something illegal, *DO NOT* have anything to do with them anymore. Don't write anything to them, don't say anything to them. They might just be trying to take the heat off of themselves by diverting the tax authority's heat onto their customers. They're probably in deep doo-doo, and they're looking for a way to spread the pain.

 

[Alan L.]

Throw the letter in the trash, or show up at the dealer and remind them of the deal. Its their problem at this point, they can't repossess the tractor because they failed to collect sales tax from you. I certainly wouldn't volunteer it. The state will get their money.....from the dealer.

 

[puter]

</font><font color="blue" class="small">( ...the legal responsibility to pay the tax resides with the merchant. They don't have an obligation to specifically *collect* the tax from the buyer, they just have the obligation to pay it to the State...Lots of merchants run promotions where they say that there's no tax on the sale...)</font>

Not to belabor the point, but at least for New York that's not accurate. From the NYS Tax Dept's Pub 34:

Advertisements that offer to pay all or part of a customer's sales tax liability, or to refund all or part of the sales tax, or to extend or expand a limited sales tax exemption to other products or time periods, are examples of improper advertisements... New York State Tax Law requires that a vendor must collect sales tax from the customer when collecting the selling price of any taxable item or service. It is illegal for a vendor to advertise or represent to the public in any manner, directly or indirectly, that tax is not considered as an element in the price to be paid by the customer. Therefore, advertisements stating that the customer will not be charged the tax, that the vendor will pay the tax for the customer, or that the tax will be refunded to the customer or applied as a credit against the customer's bill, account, or future purchases, are prohibited. (my emphasis... lots of additional references are available)

As a vendor, I have a fiduciary responsibility to the state to collect and remit sales tax on taxable purchases. I don't have to collect the tax when: 1) the item isn't taxable under state law, 2) the state notifies me that usually taxable items aren't for a period of time (i.e. clothing tax free week), or 3) I'm given one of many properly completed exemption certificates.

If I don't follow the proper procedures, the state can (and usually will) make me remit all the tax I should have collected. And then they usually won't bother the customers. But they can... the obligation to pay the tax stays with the customer. And if the compliance guys think something funny is going on, they can go directly after the customer with all the tools available to them.

Tractor example: you decide to use a little of that home heating oil you purchased free of state tax to run your tractor. You just incurred an obligation to pay the use tax on the fuel you used... (probably also committed a misdemeanor)... in for a penny... /forums/images/graemlins/smirk.gif

 

[texaslandman]

Bill, thanks for the TX sls tx quote. Gary

 

[texaslandman]

TXDON, guess I'll just have to die broke! Thanks. Gary

 

[drcollie]

WOW! Lot's of posts....lots of good advice...some angry admonishment. Very interesting.

To expand my senario a bit futher (or make it easier to understand) this Kubota Dealer in Northern Virginia is undergoing a Virgina State Sales Tax audit (there is only one so you locals can probably figure out which dealer it is), and the state auditor is flagging records on it. The dealer is then sending out letters to those people he delivered to out-of-state to CERTIFY with a NOTARY that you did indeed authorize a delivery to that stated address. This will - in effect - take the heat off them and place it on the consumer and from that point on the state can attempt to verify the out-of-state address and collect the USE tax if not legit (which is the same dollar amount as the sales tax).

I own a retail business in Virginia as well, so I am familiar with VA sales tax requirements - which is why I did not lie to my selling dealer and give them a fictious address out-of-state, or sign a Virginia Sales Tax Exempt form for Resale, etc....

Rather I assumed the saleman (who no longer works there) reduced the price of the tractor to meet the Maryland dealer's price and was giving me a net-net invoice as he promised. My mistake was being totally distracted by the new BX22 in the driveway rather than looking at the details of the paperwork to see in the small print "Delivered to 19 Courtchase Road, Olney, MD". I was paying the net price on the deal that we agreed to on the phone and that's all I looked at. I had ASSUMED they reduced the goods price to accomodate the net-net price, when they had not.

Similar to buying a computer from Dell, who may not collect the out-of-state sales tax on it, but you are obligated to pay the use tax as a consumer and report it on your Virginia Income Tax. But who ever does?

In Virginia, the merchant has a duty to collect the sales tax, and is liable for failure to do so. What this dealer is attempting to do now is an 'end run' and clear himself off the target scope of the Sales Tax Examiners by either getting a check or afidavit. Right now, I'm not going to give him either and will ignore the non-certified letter they sent out.

Someone will eventually pay this tax on the Kubota. Either the dealer via audit (in which case we'll see if they have the nerve to come after me in small claims) or I'll get a demand letter from the State of Virginia on Use tax. I will make my dealer squirm a bit though....and not help them out. If a demand letter arrives from the state I will pay it promptly with any penalities, etc.

Virginia is perhaps the single msot aggressive state in the country on pursuing sales and use taxes. They are well-known for conducting audits when the there are too many exempt sales from a merchant and will also send Use tax notices of collections to consumers by confiscating shipping records of out-of-state mechants selling to Virginia residents. If that trucking line or merhant wants to run their vehicles on the highways of Virginia, they must turn over those shipping records upon request.

Anyways, the whole point of my original post was to warn new tractor and implement purchasers that in the Commonwealth of Virginia, you can wind up paying that sales tax for what you buy *tax-free* now at a later date, so when you have big-ticket items shipped or delivered to you, mentally calculate 4.5% sales tax and don't be surprised if you have to pay it down the road as part of your purchase (that 3.5% figure someone quoted applies to licensed motor vehicles in VA, not tractors).

Thanks for all the input!

-Duane

 

[mahlers]

Interesting - and I thought that California was the most strict with this. Over here, it's just the opposite regarding who's responsible for sales tax - and it's very common practice to advertise "tax free" and "you pay no tax" sales. Here's a regularly occuring event as an example: Tax Free Sale

 

[OrangeFloyd]

Wa State sales tax, Or State no sales tax. I'm in Wa. Had a number from an Oregon dealer, went to local dealer and got a number. I asked local guy frankly why I shouldn't just go to Oregon with a trailer and get one. We have always bought stereo equip and such there.

He told me that on a couple of occasions he has had people bring in rigs for service work, they scan the barcode or enter the serial number and WHAM!, the process begins. He said that the tax folks called them and the customer asked why did he turn them in? He of course didn't.

It happens. It's gonna happen more.

They might not be right. They certainly are bigger than all of us. Support your state and pay your taxes, or move.

I hope things work out for you. Good luck.

-OF

OkeeDon, the (latin, maybe greek) in your sig is from that opera piece?

MikePA, your quote is Shakespeare, not Sir Walter Scott

 

[dmartin88]

Believe there are two Kubota dealers in N. Virginia, one in Manassas and one in Purcleville. I understand a similar situation happened a few years back in the opposite direction, a dealer in N. VA complained they were losing sales to a dealer in Maryland and after an audit, the Maryland dealer was hit with some payments. Don't remember the entire story but I'd be surprised if the dealer involved in the original debate would be caught doing the same thing only a few years later but you never know.

When I bought my BX22 last summer, part of the overall reduction in price I paid from the Virginia dealer was to help offset the tax I would pay when purchased in Virginia. I'll have to check my original paperwork now to see what the delivery address actually was to make sure I'm not the next one to get a letter-- it was clear at the time that it was a price reduction, not a scheme to get out of paying the tax but will have to be sure the tax collection is clearly spelled out!