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Thread: Handling Tax Exempt Sales

  1. #1
    Hail to the CHIEF shayla's Avatar
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    Default Handling Tax Exempt Sales

    My boss has come up with a sheet for people who come
    from tax exempt states (Oregon, Montana & Alaska)
    to fill out. She said they're always supposed to do that,
    but what about when they're calling in to buy something?
    She also said we always have to check their drs. license
    for credit card payments, but what about people who
    call in? What about those of you who have websites?
    I'm curious about how you handle this sort of thing.
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    PFG Picture Framing God FrameMakers's Avatar
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    Weird, in Ohio, sales tax is collected from the end point that the consumer receives the merchandise. If they pick it up in my shop then it is Delaware County sales tax. If I deliver it to somewhere else they get charged that tax rate and it is filed to that county (same form just a separate line), if it is shipped out of state then no Ohio sales tax is charged.

    The fact that someone is visiting from another state shouldn't change the sales tax that is collected.
    Dave Wetterstroem

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    Grumble Moderator Team wpfay's Avatar
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    Check the state DOR on that. Transactions are usually taxed based on the location where the transaction takes place. A sale in your shop is taxed at your state and local rate regardless of its destination or the residence of the person purchasing.
    If the piece is purchased by phone and shipped, the tax is based on the recipient's location, and it is incumbent upon them to voluntarily report the tax and pay it to the proper governing body. (Right)
    If you are not collecting and paying the taxes of sales at your shop, your boss could be held liable for the taxes plus penalty and interest should there ever be an audit. For items shipped, you must have a shipping bill to prove the purchase was made out of state.

    There may be some reciprocity in the great northwest of which I am unaware. Best to double check WA. DOR.
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    SGF Supreme Grumble Framer John Ranes II, CPF, GCF's Avatar
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    Lightbulb Out of State sales...

    Typically in most (if not all) states, if the transaction takes place physically in your store, in your state than that transaction is subject to the tax laws of your state.

    For example, when we ship out anything to another state from our website, we charge no sales tax for Wisconsin and the customer is setup in our POS software as tax exempt. Our staff is informed that if the person walks into our shop and makes a purchase, then that sale is subject to state sales tax.

    I think this answers your question... but go online and verify the sales tax collection law for Washington State.

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    I'm not too sure about that. If someone makes a purchase in my store I don't care where they are from, the purchase was made here and local tax rates apply.

    Jeff K

    John beat me to the reply.

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    If they come to your store, buy something, and then take it with them, they have to pay the sales tax. If something is shipped out of state, it is generally up to them on the receiving end to take care of the taxes. You should have a log, showing all out of state exempt sales, and should note that on your monthly tax reporting forms.
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    SPFG Supreme Picture Framer God Dave's Avatar
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    In addition to what others have said, if someone orders from out of state and it is delivered by your delivery vehicle, it is generally taxable to your state unless the account is a tax exempt institution. If it is shipped by common carrier then it is tax exempt and the onus is on the recipient to pay the use tax to their state if applicable.

    Call the Washington DOR. They will gladly answer any questions you may have.
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    PFG Picture Framing God Larry Peterson's Avatar
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    Quote Originally Posted by Dave View Post
    Call the Washington DOR. They will gladly answer any questions you may have.
    Just don't give them your name or you may get a surprise visit from them to audit all the supposedly tax-exempt sales that really aren't and find yourselves liable for all that sales tax.
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    Unless things have changed.

    Been there before purchasing in Washington with Alaska home address.

    The purchaser MUST be present to SIGN the Washington legal affidavit at the time payment is made. There is a specific Washington multipart form to complete. Go to any HomeDepot or Lowes and they should have a copy of the form because they use them frequently.

    Website sales or item is being shipped to an out of state customer, we are only required to charge sales tax if the purchaser/ship to address is within our state (Idaho).

    Unless things have changed.
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    PFG Picture Framing God Larry Peterson's Avatar
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    A quick look at the Sales Tax guide for Washington indicates that this practice is correct and residents of those states shouldn't be charged sales tax.

    Read it and weep ( or laugh or cry or whatever). http://dor.wa.gov/Content/FindTaxesA...s/default.aspx
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    I stand corrected.

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    Hail to the CHIEF shayla's Avatar
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    Thank you all for your responses. To put your minds at
    ease, please know that I'm just curious here, and we would
    check anything we do out with our accountant. But even if
    what you do is different, I'm interested in knowing how it
    works where you are.

    Yes, in Washington, if someone is from one of those three
    states, as long as they fill out a form with the correct info.
    and show us their license, they are able to make tax exempt
    purchases. That's not just at our shop, but at any retailer.
    But the thing about people calling to pay over the phone has
    me wondering. We have one lady who's here a lot but has a
    Montana license and an address there, and sometimes she just
    wants to call in with her credit card to pay. From your notes,
    I can see that it really does vary a lot from state to state.
    I had just thought that anyone from those three states could
    show their info. and be tax exempt in all states.
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    Quote Originally Posted by FrameMakers View Post
    Weird, in Ohio, sales tax is collected from the end point that the consumer receives the merchandise. If they pick it up in my shop then it is Delaware County sales tax. If I deliver it to somewhere else they get charged that tax rate and it is filed to that county (same form just a separate line), if it is shipped out of state then no Ohio sales tax is charged.

    The fact that someone is visiting from another state shouldn't change the sales tax that is collected.
    Same here.

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    PFG Picture Framing God FrameMakers's Avatar
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    I am guessing this had something to do with keeping business in WA in the boarder communities. If you lived in a no sales tax state that was on the boarder with a sales tax state, I can guess where you would do most of your shopping.
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  • #15
    Hail to the CHIEF shayla's Avatar
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    Dave, that's definitely a common practice in border areas,
    but it's not so easy to do for big ticket items now. My mom's
    friend once bought a sofa set at a furniture store in Oregon,
    and a year later the tax folks tracked her down. Every purchase
    with a total over $1000.00 they were coming for their moolah.

    But, at least in Washington, it applies to other states, as well.
    We just framed several things for that Montana customer, and
    I have a lady with an Alaska address who brings work in, too.
    They both have tax exempt status on their purchases here.
    Not all barking spiders are a bad thing as long as they bring in the bacon once a year. ~ Jeff Rodier

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    I guess the lesson there is to pay with cash and leave no paper trail.
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    It looks like this is the form that would need to be filled out. http://dor.wa.gov/docs/forms/excstx/...xmptcert_e.pdf

    After a quick glance, I don't see where framing type items would be exempt. But I didn't look real close.
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    SGF Supreme Grumble Framer David N Waldmann's Avatar
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    First item...
    Nonresident:
    a. Tangible personal property other than motor vehicles for use outside Washington by a resident of a
    state, possession, or province of Canada, with a sales tax rate of less than three percent.
    Tangible personal property means anything you can touch/feel that is for personal use.
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    Ah. I thought almost all states had a sales tax over 3%. As it turns out they all do, except the states with 0 sales tax. Those very few states would include "Oregon, Montana & Alaska." People from 45 states would still not be tax exempt though.
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  • #20
    Hail to the CHIEF shayla's Avatar
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    I don't know about the other two, but Oregon has a state income tax instead.
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  • #21
    SGF Supreme Grumble Framer David N Waldmann's Avatar
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    Quote Originally Posted by shayla View Post
    I don't know about the other two, but Oregon has a state income tax instead.
    Instead? Vermont has 6% Sales Tax AND Income Tax that is equivilent to 25% of your Federal Tax!
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