SALES & USE TAX AND RELATED
Sales and use tax audits are
becoming more frequent and less random. Over the course of the last
6 months a number of our clients in various states have been selected for
a sales tax audit including non-retail operations as the focus of those
audits is on use tax.
On the surface, the
collection and remittance of sales tax and the payment of use tax appear
straight forward but it is not. What makes the situation difficult
is that there are many different scenarios that can be deemed a taxable
sale for purposes of sales tax.
For example, a company
selling goods to customers outside their home state which are deemed
taxable in the seller's state and are shipped by common carrier. Generally,
that sale would not be considered taxable for sales tax purposes by the
seller's state or in the customer's state unless the seller has so-called
nexus to the customer's state. Nexus represents a significant
connection with the tax imposing jurisdiction and this connection may
include soliciting sales in the state via an employee or independent
agent, having a physical presence (e.g., sales office, warehouse) or by
the delivery of goods into the state by means of other than mail or
common carrier (e.g., shipped on your company's vehicles). Once
nexus is established, the company must collect sales tax, which may
include both state and local taxes, depending on the jurisdiction.
Other problems exist where goods that are subject to taxation in one state
may not be in another.