A few recent developments – including scams and fine definitions –across the country show how sales tax compliance can be complicated.
New York: An appeals court ruled last month against a company that claimed eligibility for sales tax refunds on several purchases of concrete.
The petitioner argued that its purchases of concrete were for a nontaxable service provided by the seller that would also provide the installation of capital improvements to real property, rather than a taxable delivery of concrete.
The appeals court agreed with an earlier ruling and upheld the denial, affirming that the transactions were retail sales of personal property. The appeals court said that if the concrete had been purchased in conjunction with the installation, instead of individually, it would have been exempt from sales tax.
The invoices reflected purchases of concrete rather than installation services, a slip of documentation that may have hurt the petitioner’s argument.
North Carolina: The state’s Department of Revenue explained in a private letter ruling request that the purchasers of machinery and equipment for a manufacturing plant are not exempt from state sales and use tax.
The taxpayer was in the business of collecting goods and processing them into products sold to customers; the goods underwent sorting, baling and weighing before becoming finished products. Nevertheless, the letter ruled that the taxpayer making the request did not meet the definition of a manufacturing industry or plant and did not qualify for an exemption.
Manufacturing exemptions are often based on use of the equipment or type of entity. Acquiring equipment should be accompanied by examination of definitions of manufacturing and manufacturers in state laws.
Pennsylvania: The Department of Revenue continues to warn about sales tax scam letters to business owners claiming to be from the state.
The letters include the Department of Revenue’s name and logo and say recipients are under investigation for failing to pay Pennsylvania taxes. It conveniently includes contact information for a “Resolution Officer” and urges the business owner to provide accounting records prepared by a licensed professional. Scammers can then strip sensitive information from the records.
The notices include suspicious and inaccurate details, such as no return address, a generic salutation and no specific information about the taxpayer’s account and the names of fake state enforcement units.
“It appears that you have registered with the United States Internal Revenue Services, but not yet registered your Entity with Pennsylvania Department of State and The Sales and Use Tax Division,” the letters read. “Your business engagement requires for the proper accountability, control and payment of sales tax collected to the proper agency.”
Ecommerce and sales tax cybercrime is on the rise. Don’t let the overall confusing nature of sales tax panic you into falling for a scam. Always verify who’s asking for your financial info.
If you think your business may be impacted by sales tax developments, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.