Sales and Use Tax – Paul Gaulkin CPA

cubes spelling salesThe sales and use tax is imposed on retail sales of tangible personal property and in some circumstances, sales of services. It is important for businesses to distinguish between retail sales and wholesale sales because this tax is normally only imposed on retail sales. If you are a wholesaler, you do not want to be subject to additional taxes that are not your responsibility for paying.

Retail Sales Tax

At the most basic level, retail sales are sales directly to consumers. Wholesale sales on the other hand are sales of goods or services to someone expected to resell the good or services to consumers.

States have the options to exempt or impose a lower tax rate on sales of certain types of property, such as food, drugs, or fuel for residential customers. The retailer typically collects the tax from the consumer and remits it to the state. Half of the states in the US give retailers a discount for collecting sales tax. An additional discount may be available for retailers who pay early or file and pay electronically.

States are very adamant about collecting their sales and use tax and will generally treat retailers favorably if they choose to pay on time and be honest with their sales.

Defining Use Tax

States that impose a sales tax also levy a complementary use tax on tangible personal property purchased outside the state but consumed within the state. For example, someone who purchases a book online from an out of state retailer does not have to pay sales tax on the purchase but does have to pay use tax to the purchaser’s state of residence.

The use tax usually is paid at the time that a buyer files a state income tax return. The purpose of the use tax is to eliminate sales tax evasion by subjecting property purchased in a low tax jurisdiction to the tax rate in effect in the purchaser’s state of residence.

About Paul Gaulkin CPA

Paul Gaulkin is a Certified Public Accountant and enrolled with the U.S. Treasury to practice before the IRS. Mr. Gaulkin possesses unique technical knowledge in the process of securing relief for taxpayers nationwide with IRS and State tax problems. With an accounting degree from Florida International University, he is able to transform complex tax and accounting problems into easy to understand solutions.


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