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Author Topic: Sales tax  (Read 8414 times)

George Powell

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Sales tax
« on: October 21, 2016, 01:13:13 AM »

What is the consensus?  Do you charge sales tax when you take a system out and set it up, operate it and strike it? 


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Clair i212
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Justice C. Bigler

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Re: Sales tax
« Reply #1 on: October 21, 2016, 02:19:18 AM »

I think that is going to depend on the State that you are in. You should probably talk to your accountant if you don't know the answer to this question.
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Tim McCulloch

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Re: Sales tax
« Reply #2 on: October 21, 2016, 08:47:27 AM »

It depends on the laws of your state, county and city.  Here in Kansas the total value of rental agreements for personal property are subject to sales or use tax.  Services that involve the repair or maintenance to personal or real property are subject to sales or use taxes.  Other services are not.

If a client wants an itemized list of equipment with prices for each item, it's a rental agreement even if the professional or skilled technical (non-repair) services represent a majority of the total fee.  If the client wants a bill for "audio production services" the fee is not subject to sales tax.

We have a couple of clients that pay sales tax even if it's not on the invoice but they have regulatory oversight that requires them to operate with great caution regarding tax obligations (even though the obligation to remit sales taxes are on us, not them).

You should talk to your accountant and your attorney.  You don't want to find yourself audited and suddenly have to come up with 3-7 years of sales tax money...
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Bob Cap

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Re: Sales tax
« Reply #3 on: October 21, 2016, 08:53:38 AM »

No such thing as consensus.

Call your state Department of Revenue.

Get it from the horse. SYA

Bob Cap
Advanced Audio Inc.
Gilbert, MN
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Ivan Beaver

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Re: Sales tax
« Reply #4 on: October 21, 2016, 08:58:28 AM »

As already said-it varies by state and type.

Just like it varies when a business purchases something.

In some states, everything you purchase for a business is not subject to sales tax.

In other states only some things are.

For example-in Georgia, only things that the customer ends up getting are tax exempt. 

So a saw blade is taxable-HOWEVER the lubricant you put on it is not-becuase some of the lubricant will end up on the product the customer purchases and they therefore pay the tax.

Or the glue in the bottle is tax exempt but you have to pay tax on the bottle to put it in.
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Ray Aberle

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Re: Sales tax
« Reply #5 on: October 21, 2016, 10:02:05 AM »

As already said-it varies by state and type.

In some states, everything you purchase for a business is not subject to sales tax.

In other states only some things are.

For example-in Georgia, only things that the customer ends up getting are tax exempt. 

So a saw blade is taxable-HOWEVER the lubricant you put on it is not-becuase some of the lubricant will end up on the product the customer purchases and they therefore pay the tax.

Or the glue in the bottle is tax exempt but you have to pay tax on the bottle to put it in.
In Washington, if I purchase something for *direct resale* -- with no "intervening use" by my company, then I can provide my resale certificate and not pay sales tax on it. However, if I purchase something for use IN my company (new speakers, console, etc) then the 6.5% state Use Tax is owed on that purchase price, regardless of the fact that I am charging retail sales tax on the production rental charges when it bills to the client.

This also means that for those of us who cross-rent to each other, we make sure we each have resale certs to each other, and therefore none of us charge sales tax to each other *for rentals* since we're all collecting it from the client(s).

-Ray
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Mike Diack

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Re: Sales tax
« Reply #6 on: October 21, 2016, 04:29:53 PM »

So a saw blade is taxable-HOWEVER the lubricant you put on it is not-becuase some of the lubricant will end up on the product the customer purchases and they therefore pay the tax.
Or the glue in the bottle is tax exempt but you have to pay tax on the bottle to put it in.
This sounds as mad as NZ's old sales tax scheme.
Example :
Things used in production (tools etc) were considered worthy, hence tax exempt.
Things used for pleasure (like cars and parts thereof) were considered luxury hence attracted 20-30% sales tax.
This gave rise to some strange anomolies for an electronic engineer.
Oscilloscopes were exempt.
Signal generators got hit 20%
Reason :
Generators are part of a car.
Now we have GST and everything gets whacked.
M
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Ivan Beaver

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Re: Sales tax
« Reply #7 on: October 21, 2016, 06:32:09 PM »

This sounds as mad as NZ's old sales tax scheme.
Example :
Things used in production (tools etc) were considered worthy, hence tax exempt.
Things used for pleasure (like cars and parts thereof) were considered luxury hence attracted 20-30% sales tax.
This gave rise to some strange anomolies for an electronic engineer.
Oscilloscopes were exempt.
Signal generators got hit 20%
Reason :
Generators are part of a car.
Now we have GST and everything gets whacked.
M
If you want to talk about "wacky laws", the southern US used to have what was called "blue laws".

That regulated what could be sold on Sundays.

You could only buy food.

So you could buy a can of beans, but NOT a can opener OR a pot to cook them in OR a spoon to stur them.

There were still around into the 1970s.

I wonder what they hoped to accomplish with those laws.
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Brian Jojade

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Re: Sales tax
« Reply #8 on: October 21, 2016, 06:40:41 PM »

Every state has their own rules.  In Wisconsin, tax must be paid on sales or rental of any tangible personal property.  Some services are taxed, others are not.  Where it gets really confusing is where you draw the line on what part of the bill is rental vs what part of the bill is the service.

If you show up and run sound for a show, that should not have sales tax, as you are providing service only.. However, if you are providing gear for the show, now it can be considered rental of the gear and the customer would be subject to sales tax.  If you break out the bill between the rental and the labor, the customer would only pay sales tax on the rental and not labor.  However, if you have one line item and don't track the lines separately, the whole thing gets taxed.

To make things even more fun, REPAIR services are taxable, but a complete replacement of certain items would not be taxed.  Huh?  Well, if you are working on a jukebox in a bar, for example, and repair a part of it, the labor would be subject to sales tax. If you replace the whole thing, then the labor doesn't get taxed.  It makes clear sense.
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George Powell

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Re: Sales tax
« Reply #9 on: October 21, 2016, 07:59:47 PM »

Pa tax code says
   (1)  If the equipment is furnished with the services of an operator, it shall be presumed that the transaction involves a transfer of the right to use or direct the use of the equipment. This presumption may be rebutted by establishing that the work to be accomplished is exclusively under the control of the person who furnished the equipment and operator."
Most sound companies I have talked to do not charge tax on their services.  I don't feel we transfer the right to directly use our equipment when I am operating it or are directed in its use. Yes I have been audited and in am in my 2nd round of appeals.  It's an interesting issue and might have some interesting ramifications for others here.  I don't owe enough to hire a tax code attorney but when I call one they said I had a good case. Just looking for some ammo or anyone with similar issues or thoughts.


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Clair i212
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ProSoundWeb Community

Re: Sales tax
« Reply #9 on: October 21, 2016, 07:59:47 PM »


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