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Sales Tax Defined

Sales Tax Defined. Sales Tax Imposed on the retail sale of tangible personalty or services within the taxing jurisdiction. Use Tax Defined. Use Tax Imposed on the possession, use, storage, or consumption of tangible personal or services within the taxing jurisdiction. Use Tax Illustration.

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Sales Tax Defined

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  1. Sales Tax Defined Sales Tax • Imposed on the retail sale of tangible personalty or services within the taxing jurisdiction

  2. Use Tax Defined Use Tax • Imposed on the possession, use, storage, or consumption of tangible personal or services within the taxing jurisdiction

  3. Use Tax Illustration Doris O’Brien • Resident of State A • Purchases $ 30,000 of goods • Pays $ 1,200 sales tax (*) • $ 30,000 X 6.5% $ 1,950 (1,200) $ 750 net tax due

  4. Sales and Use Tax Nexus Vendor's physical presence in state is required (Quill decision) and is established if the vendor: • Maintains a place of business for selling or storing property in-state. • Uses employees or independent contractors for selling or delivering goods in-state.

  5. Sales Tax Burden • Wealthy taxpayer illustration: • Income (net of income taxes) of $ 200,000; 50% Investment or $ 100,000; Consumption $ 100,000 including $ 6,000 sales tax • Middle income taxpayer illustration: • Income (net of income taxes) of $ 50,000 Consumption $ 50,000 including $ 3,000 sales tax

  6. Excluded Goods or Transactions • Sales for resale • Ingredient or component parts Industrial or agricultural machinery or equipment • Property used or consumed in manufacturing • Containers and packaging • Occasional sales

  7. Tax-exempt Purchasers • Federal government and agencies • State and local governments and agencies (public hospitals, state schools, etc. • Not for profits

  8. Areas of Current Interest • Definition of Specific Exemptions • Taxation of Services • Sales Tax Audits (Tyco) • Taxation of e-Commerce • Streamlined Sales Tax Project • Alternative Approaches to Sales/Income Tax • Sales/Use Tax on Capital Changes • Competition with No Sales Tax States—NH,DE,MT,OR • Tax Amnesty, Holiday Programs

  9. Payroll Taxes • State Withholding Arrangements • Unemployment Compensation • Audit Issues

  10. Property Taxes • Ad valorem base • Personal Property Taxes • Autos and Similar Vehicles • Accounts Receivable, Inventory, Machinery and Equipment • Intangibles • Real Property Taxes • Assessment & Collection Procedures

  11. Other Taxes • Incorporation Tax • License Tax (Occupations & Professions) • Realty Transfer Tax • Mortgage Recording Tax • Capital Stock Tax • Franchise Tax

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