Friday Feb 03, 2023

A Tax You’re Forgetting – Snow Magazine

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When everyone battled to complete their income taxes, one year-round, “self-assessed” state and local tax continues to be overlooked by many in the snow management industry.  While few snow and ice management businesses are required to collect a sales tax, frequently neglected is their liability for the related tax on the “use” of sales-tax-liable purchases.

The “use” tax affects everyone buying tax-free supplies, equipment and more online, in another state or from a seller — that fails to pay the required tax on that purchase in the buyer’s home state.

All this fuss over a sales tax that is supposed to be collected by the seller — but all-too-often often isn’t?  Yes, despite a ruling by the U.S. Supreme Court that requires sellers to collect sales taxes on all out-of-state sales, many transactions continue to slip through the cracks.  And, remember, ultimate responsibility for payment of those state and local taxes is on the shoulders of the purchaser.

SALES TAXES FROM BOTH SIDES

Frequently overlooked by many snow and ice management contractors, the well-known sales tax, is generally broken down into three types:

  • Transaction Privilege taxes are imposed on sellers (and an increasing number of service providers) for the privilege of making sales within the state.  Sellers usually have the option of absorbing the tax, in other words, paying it out of their own pockets, or passing it along to their customers.
  • Sales taxes are the basic, more familiar transaction tax, calculated as a percentage of the sales price of taxable goods and some services.  The sales tax is usually collected by the seller on behalf of the taxing authority.  Because the tax is primarily the buyer’s responsibility, unlike transaction privilege taxes, sellers don’t have the option of absorbing the tax.
  • Retail transaction taxes are imposed on the sale transaction itself, with the primary liability for paying the tax falling on both the seller and the buyer.  Sellers are responsible for collecting and paying the tax, while buyers are responsible for paying any tax which should have been collected and remitted but wasn’t.The majority of states have a basic sales tax, where the buyer bears the legal burden of the tax and the seller is required to collect and remit the tax to the state.  Only a few states have the seller privilege tax option.  From the perspective of the buying snow contractor, understanding the type of tax they are confronting can help in dealing with sales taxes that are not billed or collected.

When dealing with a transaction or vendor privilege tax, for example, no contractor or snow and ice management business should voluntarily pay any tax that hasn’t been billed to them because the tax is the seller’s responsibility.  Obviously, when dealing with a consumer excise or retail transaction tax, unbilled taxes should not be ignored.

Unless there is some written proof that the tax was paid, the snow removal operation, the buyer, can be held liable for the unpaid tax.  Which brings up the so-called “use” tax imposed in 45 states but actually paid by less than two percent of those required to pay on taxable transactions where sales taxes were not collected by the seller.

USE TAXES
Where there is a sales tax, there is usually a use tax.  The use tax typically applies only to purchases where no sales tax was collected.  

In most …….

Source: http://www.snowmagazineonline.com/business-tax-state-local-penalties-snow-ice-winter.aspx

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