By Christi Rains
Last month we spent some time talking about the pitfalls and idiosyncrasies of sales taxes, specifically here in my home state of Texas.
This month I want to talk about one of the most confusing parts of sales taxes, the Use Tax. A Use Tax is placed on an item or service when the seller of that item does not charge sales tax. The buyer is then responsible for remitting payment to the state at the same rate as the sales tax of the jurisdiction in which they bought the good or service. In other words, the state is going to get theirs, one way or the other.
Allow me to give you some examples that are the most frequent sales tax issues people get tripped up on.
Online purchases frequently do not charge sales tax. So a purchase over the internet, from a company in Kansas, won’t have sales tax on it, but once you receive that item here in Texas you are required to pay a Use Tax on it. Another example of a common mistake people make is on international purchases. If you travel to Mexico and purchase items, you will be required to pay a Use Tax on them when you return. The final example can, and does, trip up the most people. If you are purchasing an item from within the state, and you live in a jurisdiction with a higher sales tax than the seller, you are required to pay the difference.
The bad news for everyone, is that most of you have probably made one of the mistakes that we have discussed in the past two articles. The good news is that now you know the problem, and knowing is half the battle. What can be done, in this case, can be undone. Start today in finding a professional that you trust to help you with your accounting issues. It will not be easy and you will need to be prepared to pay fines, but the alternative could put you out of business.
Christi Rains, President Alpha Omega Consulting & Bookkeeping, LLC – sensiblebusinessowner.com. Contact Christi@AOBookKeeping.com for more information.
