Software Club 210: Light Red/Club_Software_210_Light_Red_Micro_Star_1997.iso/sba/f265.sbe

Text File | 1997-01-30 | 49KB | 1,222 lines

@109 CHAP 11
@CODE: HI NM
@CODE:EN

          ┌───────────────────────────────────────────┐
          │      SALES AND USE TAXES (IN GENERAL)     │
          └───────────────────────────────────────────┘

@CODE: OR AK MT NH DE
         @STATE doesn't impose a sales or use tax.

         Accordingly, the following general discussion of
         sales and use taxes will be of interest to your
         company based in @STATE only if you also
         operate in other states.

____________________________________________________________

@CODE:OF

With a limited number of exceptions, every business that
will sell tangible personal property (such as merchandise)
to customers must obtain a seller's permit from the state
sales tax agency.  A separate permit may be necessary for
each place of business where property subject to tax is
sold.  In many states, certain kinds of services are also
subject to sales tax.

@IF150xx]NOTE REGARDING @NAME:
@IF150xx]------------------------------------------------------------
@IF150xx]Because you are in a retail business, your firm will need to
@IF150xx]be cognizant of sales tax laws and regulations in each state
@IF150xx]in which you do business, from day one.
@IF150xx]------------------------------------------------------------
@IF150xx]
In general, as a wholesaler (or manufacturer) you will not
have to collect sales tax on goods you sell to a retailer
for resale, if the retailer holds a valid seller's permit
and provides you a "resale certificate" in connection with
the transaction.  Likewise, if your business, as a retailer,
buys goods for resale, you need not pay sales tax to the
wholesalers if you provide them with resale certificates.

@IF151xx]@NAME is in the wholesale business.
@IF151xx]
@IF151xx]Accordingly, you need to be particularly familiar with the
@IF151xx]sales tax rules and regulations in each state where your
@IF151xx]firm does business; and particularly with regard to "resale
@IF151xx]certificates."
@IF151xx]
While the sales tax generally applies to the sale or rental
of tangible personal property (other than for resale) within
the state, a "use tax" or compensating tax, applies to the
storage, use or other consumption of such property purchased
from a retailer for such storage, use or consumption.  The
use tax generally applies to purchases made OUTSIDE the
state for use within the state.  The use tax also applies,
generally, when a retailer buys goods ex-tax (for resale),
and instead uses or consumes some of the goods rather than
selling them.

Note that if you sell across state lines to customers in
states where you have no offices, employees or other
presence, the sale is usually not subject to sales tax in
either state, since it is an interstate sale.  However,
technically, such sales are subject to "use tax" (which is
sort of a "shadow" of the sales tax, which applies where
the sales tax doesn't in most states) in the customer's
state.  The U.S. Supreme Court and other courts generally
have not supported attempts of the various states to force
out-of-state retailers to collect use tax on mail order or
other sales made to residents of the taxing state, so that
most mail order firms tend to treat such interstate sales
as being tax-free, or tell the customers that it is up to
them to report the purchase and pay the use tax (which
they almost never do).

However, in just the last few years, many states have
enacted new and broader sales and use tax laws that attempted
to require out-of-state retailers who advertise in the local
media or send substantial amounts of direct mail/catalog
solicitations into the state to register as retailers subject
to sales or use tax in the state, treating such direct sales
as taxable.  Some states have aggressively enforced these
broad laws, which would definitely begin to cramp the style
of many mail order firms if these laws were upheld in court.

BOTTOM LINE:  Don't assume that such interstate sales are
still "sales tax-free," at least in many states.  (For
example, a Tennessee law even imposes use tax on free mail
order catalogs shipped into the state, whether or not any
sale is made.)

MAIL ORDER DEVELOPMENTS:  The U.S. Supreme Court ruled,
in the case of Quill Corp. v. North Dakota (1992), that a
state may NOT force out-of-state mail order retailers to
collect use tax on sales to residents of the state, where
the company had no presence in the state, holding that such
a tax law violated the Commerce Clause of the United States
Constitution, not to mention a Federal law, P.L. 86-272.

Thus, the Supreme Court, in one fell swoop, invalidated
many, if not all, of the broad new mail order use tax laws,
targeted to hit mail order firms, that had been adopted in
some 34 states in recent years, prior to the Quill decision.
While this was good news for mail order retailers, the bad
news is that the court also indicated in its decision that
Congress could, if it chooses to do so, constitutionally
enact legislation that would permit the states to require
use tax collection on mail order and similar sales by
out-of-state retailers.

Expect something along these lines to be passed in the next
few years, now that the Supreme Court has opened that door.

In fact, just such a bill was introduced in the U.S. Senate
in 1994 by Sen. Dale Bumpers (D) of Arkansas, inaptly named
the "Tax Fairness for Main Street Business Act of 1994."
While it failed passage in 1994, he reintroduced the bill
in 1995, as the "Consumer and Main Street Protection Act of
1995." (Apparently intended to protect us poor, befuddled
consumers from low mail order prices...?)  This bill, too,
failed to pass, but will no doubt be back, as the states
continue to pressure for the right to impose sales tax on
interstate commerce.

The Bumpers bill would grant states the right to enact laws
requiring out-of-state sellers of tangible personal property
to collect and remit state and local sales-use taxes if:

  .  the seller is subject to the personal jurisdiction of
     the taxing state;

  .  the tangible personal property has a final destination
     in the state in question;

  .  the seller's gross receipts from sales of such property
     in the 12 months ending September 30 of the calendar
     year before the year of the sale exceeded $100,000 in
     the taxing state or $3 million in the U.S. as a whole;
     and

  .  the taxing state collects and administers all of the
     local sales-use taxes imposed on behalf of its local
     jurisdictions (cities, counties, etc.).

Where a state has non-uniform local sales tax rates, the
proposed legislation gives the seller the choice of either
collecting tax at the appropriate rate in each local
jurisdiction, or collecting tax at a flat state-wide rate,
based on an average rate determined by the state, rounded
to the nearest 0.25%.

Thus, if this or another federal law authorizing such use
tax collections is enacted, it seems likely it will provide
some exemption for smaller retailers and a simplified,
state-wide tax rate and payment method for sellers who have
only minimal sales in each of a number of states.  Or so we
fervently hope.... (Otherwise, most small mail order sellers
would quickly be forced out of business, due to the
inordinate complexity and enormous cost of filing annual or
even quarterly sales tax returns for every state and local
taxing district where any sales are made.)

@CODE: CA
        ┌──────────────────────────────────────────────┐
        │       CALIFORNIA SALES AND USE TAX LAW       │
        └──────────────────────────────────────────────┘

California requires virtually every business that will sell
tangible personal property (even wholesalers) to obtain a
seller's permit from the state Board of Equalization office
nearest the place of business.  A separate permit is required
for each place of business where goods subject to tax are
sold.  To obtain a permit, it is necessary to submit a
completed registration form, Form BT-400 or BT-403.  There
is no