Cream of the Crop 1/Cream of the Crop 1.iso/BUSINESS/SBA62.ARJ/FSBA.EXE/F265.SBE

Text File | 1992-04-30 | 11KB | 260 lines

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

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

@CODE: NM
Unlike most states, New Mexico does not have a typical sales and
use tax that applies mostly to sales of tangible personal property.
Instead, New Mexico has a "gross receipts tax" on virtually all forms
of gross income, including income from services as well as from the
sale of goods.  As such, it is a much broader and more pervasive tax
than the sales tax imposed in all but a half-dozen of the other 50
states.  It applies to all gross receipts of all persons (including
corporations, associations, etc.) selling products or furnishing ser-
vices within the state, but allows a number of deductions and exemp-
tions.

The tax rate is currently 5% (as of 7-1-91), but cities and counties
are allowed to add on local gross receipts taxes, so that rates range
from as low as 5.125% to as much as 6.75% in different localities.  As
a seller subject to the tax, you must register on Form RP-31 with the
New Mexico Taxation and Revenue Department.  Businesses are generally
required to file monthly returns on Form CRS-1, which is used to report
gross receipts tax and, if applicable, state income tax withheld from
wages.

Major exemptions from the gross receipts tax include wages, salaries
and commissions paid to employees; receipts of growers, producers,
or nonprofit associations from selling livestock, poultry and un-
processed agricultural products; interest or dividend income; receipts
from sales of stocks, bonds or other securities; and receipts from the
sale or leasing of oil, natural gas, or mineral interests.

Sales of various goods and services for resale are usually deductible
from the gross receipts tax base, if the buyer gives the seller the
appropriate type of Nontaxable Transaction Certificate.

@CODE:EN
@CODE: OR AK MT NH DE
          @STATE does not 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 sub-
ject to tax is sold.  In many states, certain kinds of services are
also subject to sales tax.

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.

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, general-
ly, 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 never do).

Unfortunately, in just the last 3 or 4 years, many states have enacted
new and broader sales and use tax laws that require out-of-state re-
tailers 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 di-
rect sales as taxable.  Some states are aggressively enforcing these
new laws, which will definitely cramp the style of many mail order
firms if these laws stand up in court.

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

LAST-MINUTE UPDATE:  Just as we release this latest revision of the
program, the U.S. Supreme Court has ruled, on May 26, 1992, in the case
of Quill Corp. v. North Dakota, 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, under the U.S.
Constitution.  Thus, it appears that many of the broad new mail order
use tax laws, targeted to hit mail order firms, which have been adopted
in some 34 states in recent years, may be invalid.  While this is 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 year or two, possibly after the November election.  At least
if a federal law authorizing such use tax collections is enacted, it
will most likely provide some exemption for smaller retailers and a
simplified, state-wide tax rate and payment method for sellers with
only minimal sales in each of a number of states.

@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 fee
for obtaining a permit, but you may be required to post a bond as
security for payment of tax.

However, the State Board of Equalization has recently dropped the
requirement that most new businesses registering for the sales tax
post a deposit (except for retailers who have established a poor
record of paying sales tax to the state).  In the past, most new
businesses in California were required to post a bond or deposit
totalling 3 times their estimated monthly sales tax collection (up
to $10,000).  Dropping this requirement is intended to lower one
barrier to the creation of new small businesses.

Sales tax rates in California range from 7.25% in most rural counties
to as high as 8.25% in some of the urban counties, such as Alameda and
Santa Clara counties, and San Francisco voters have approved an addi-
tional 0.25% sales tax increase, effective February 1, 1992, to be in
effect for 17 months.  This raises the sales tax rate to 8.5% in San
Francisco (City and County), the highest in the state of California.
There is some doubt about the constitutionality of this increase, under
Proposition 13.

Numerous types of transactions and categories of property are exempt
from the tax.  Perhaps the main type of exempt property is food
(although this exemption does not apply to restaurant sales or to
liquor, nor, after July 15, 1991, to "snack foods" or to bottled
water).  One-half of one percent of the current statewide sales tax
rate (after July 15, 1991) is theoretically "temporary," but we
suggest you do not hold your breath waiting for this temporary tax
to expire.

In addition, recent sales tax law changes will permit counties to
increase the local sales tax to as much as 1.5% (versus the current
limit of 1%), starting January 1, 1993.

California sales and use tax returns usually must be filed and tax paid
within one month after the end of each calendar quarter, although lar-
ger businesses may be required to make more frequent payments of tax.

@CODE:EN

(NOTE:  Not every state has a sales and use tax law.  Oregon, Montana,
Alaska, Delaware and New Hampshire do not.  However, there is a sales
and use tax in @STATE.)

@CODE: DC
The general sales and use tax rate in D.C. is 6% of retail sales for
sales or rentals, or for storage, use or consumption of tangible
personal property.

@CODE:EN
The general statewide sales and use tax rate in @STATE is:
@CODE: WY CO
3 percent.

@CODE:EN
@CODE: LS
300 percent.  Take it or leave it.

@CODE:EN
@CODE: VA
3.5 percent.

@CODE:EN
@CODE: AL GA LA MI NY NC SD
4 percent.

@CODE:EN
@CODE: MO
4.225 percent (which was scheduled to 4.6% in 1992 if approved by
voters).

@CODE:EN
@CODE: KS
4.25 percent.  However, legislation passed by the Kansas legislature
just as we release the new edition would increase the tax rate to
4.9 percent, effective June 1, 1992, unless vetoed by the Governor.

@CODE:EN
@CODE: AR OK
4.5 percent.

@CODE:EN
@CODE: AZ ID IN IA NB ND OH SC MD MA UT WS
5 percent.

@CODE:EN
@CODE: VT
5 percent until June 30, 1993, 4% thereafter.

@CODE:EN
@CODE: TN
6 percent.  Tennessee has also recently enacted a separate tax on
certain types of services, of 6.75%, repealing the sales tax on such
services.

@CODE:EN
@CODE: CT KY FL WV PA
6 percent.

@CODE:EN
@CODE: ME
6 percent (dropping to 5%, effective July 1, 1993).

@CODE:EN
@CODE: MN
6 percent (6.5% between July 1, 1991 and December 31, 1991).

@CODE:EN
@CODE: IL TX
6.25%.

@CODE:EN
@CODE: NV
5.75% (6.5%, effective October 1, 1991).

@CODE:EN
@CODE: WA
6.5% (over 8%, counting local taxes, in the Seattle area).

@CODE:EN
@CODE: MS NJ
7 percent.

@CODE:EN
@CODE: RI
7 percent. (A scheduled reduction of this rate in 1991 and 1992 has
been repealed.)  A 5% additional tax applies to transient room rentals.

@CODE:EN