Sales & Use Compliance & Reviews
Do you know which of your sales or services are subject to sales and/or use taxes?
Sales and use tax laws vary widely between states, and are constantly changing. Moreover, businesses are expanding and growing all the time, which it makes it even more difficult to keep track of what sales and/or use tax implications they might have in each state they operate in.
It's not uncommon for local taxing authorities to have different rules for products or services coming into their states, products and services going out of their states and even how various products and services are defined in a particular jurisdiction. For example, bottled water might be taxed as a food in some states, but not in others. Similarly, gum is treated as food in some places (because it has calories), while it is not taxed in others (because it’s GUM!). Are you confused yet?!
This is where Rea’s SALT Team can help you become aware of each state’s tax laws and regulations, thus avoiding any unpleasant surprises, such as an unforeseen tax bills. States are becoming hungrier and more aggressive in finding ways to increase their revenue. Rea’s SALT Team provides a number of reviews to ensure your business is compliant in any state it does business in.
Sales Tax Reviews
Does your business know when or what to charge sales tax on? Rea’s SALT Team can conduct a review of your company sales transactions to customers over the last several years. We will review your business operations, customers you sell to and services/products you would be selling/performing for them. We will also review all exemption certificates you may have on file, as any taxable sale your business does not charge sales tax to their customer, must have an exemption certificate on file from the customer.
Use Tax Reviews
Unsure if you owe use tax? You're not alone. Use tax is a complement to sales tax – and it is required due to the American transactional tax system (i.e. taxes on things at the point of sale). In the U.S. system, no sales tax is due until the very last step – where you have the final seller and the end user.
But what if the seller, the person who is selling the product to the end user, does not have nexus in the state where the sale is sourced? Well, in this case, that seller would not be required to charge sales tax. Fair enough, but then how would that state get its transactional tax? The answer: use tax! The state's end user would be expected to pay a use tax, which is usually the exact same as the sales tax you would have paid on that transaction.
Generally, if you paid sales tax on an item, you would not need to pay use tax on it. But, if you didn’t pay tax to the vendor on the original purchase, and then you used that item in a taxable manner, you would be the one on the hook for use tax.
Now you might be wondering what it means to use something in "taxable manner." Taxable manner is a kind of use that an end user would put to the item. For example, if you sell hammers in your store, and you take one out of stock to do some repair work for your store, you would be using that hammer in a way that an end user would use that hammer – you used it in a taxable way but you didn’t pay sales tax on it. So, as a result, you would owe a use tax.
Now, on the other hand (at least most of the time), if you're taking an item and putting it into an item you will sell, that would not be considered a taxable use. Consider our hammer example again. Instead of using the hammer to do fix something in the traditional way an end user is expected to use the hammer, maybe you put it into a piece of modern art. The hammer itself wouldn't be taxable if you are plan to sell your art. But if you are going to keep the work of art on your own mantelpiece, that hammer is, once again, taxable.
As you can see, determining the taxable manner of something can very quickly become complicated. And keeping track of it all once you figure it out isn’t easy either. Rea’s SALT team will conduct a review of the company’s purchases you've made over the last several years and will analyze all expense, fixed assets and/or capital purchases made to ensure whether or not sales tax paid to the vendor or use tax paid directly to the state was in fact taxable and should have been paid.
If your business is struggling to keep up with state and local tax filings, Rea’s SALT team can assist in the preparation, review and/or filing of sales, use or CAT returns. This will ensure that your business is filing in all of the correct jurisdictions (and on time) to avoid any unforeseen liabilities.
Reviews conducted by Rea’s SALT team will ensure that your business is compliant in each state you conduct business in. If any underpayments or liabilities are found, we will provide you with recommendations and options to ensure compliance moving forward. That being said, please keep in mind that these reviews can lead to over payments of tax as well, which Rea’s SALT Team can help file the refund and produce cash flow for your business.
Put Your State And Local Tax Team In Place
Contact any member of Rea's state and local tax team today to find out how we can help your business comply with current state and local tax laws while ensuring that you are only paying what is owed. This can be a huge burden off your shoulders. Give us a call to get started.