What to Know About Sales Tax on Layaways

This article was originally published on AccountingWeb, 12/7/2018.

As the holiday season approaches, your retail clients who offer a layaway option must know to accurately apply sales tax rules of their state to layaway purchases.

While these types of sales may be small, they are an important area of compliance. More importantly, layaways are likely ripe for improved process documentation, employee training and accounting system upgrades to promote consistent and accurate treatment of similar transactions.

When a business invests time and energy in making meaningful improvements in tax compliance processes, people and technology, the result is usually more uniform customer service and less confusion for employees,

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Advice for Clients Selling or Buying Bulk Assets

This article was originally published on AccountingWeb, 5/29/2018.

In retail sales, at least one type of sales transaction where the application of sales or use tax isn’t obvious or always occurs is when a seller makes a bulk sale of all, or nearly all, the assets of a business.

A bulk sale occurs outside the normal course of business of a seller. It may involve the sale of inventory, other assets of a business or both. In the context of commercial law, bulk sales are more specifically defined and regulated with the laudable purpose of preventing debtors from liquidating assets to avoid creditors.

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Cloud-Based Services, Sales Tax, and the Slow March of Recognition

For accounting professionals and many of their clients, the software or other digital services they use daily are no longer stored on local hard drives or overheated servers stuffed in a back closet. The professional world has moved on to using the cloud, but most states have still not affirmatively recognized this new-ish elephant in the computing room. In terms of the sales and use tax treatment for cloud-based services, many regional governments leave vendors, purchasers, and their advisors in a haze when searching for answers about accounting for cloud services.

Buying and Selling Cloud-Based Services

In dealing with sales tax, one of the principal tasks for any vendor is to determine the proper tax treatment for the items or services they sell in the jurisdictions where they are obligated to comply.

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States Looking at Internet Cookies for Additional Tax Revenue

To expand sales tax revenues, some states are now searching for and using the presence of Internet cookies dropped across state lines to add to their coffers.

These cookies are the colloquial expression for small snippets of software code stored on remote computers, phones, and other internet-connected devices. Cookies are extremely common. They’re what allows a website previously visited to “recognize” the computer’s user when the site is revisited. Cookies are everywhere. States aren’t looking to tax the transmission or storage of cookies, but instead want to base a claim of sales tax nexus on the transmission and storage of a cookie once transmitted to an in-state device.

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Drop Shippers Beware: Should you be Collecting Sales Tax?

By Bob Heller, JD, LLM

Figuring out when and how a supplier should collect sales taxes in a drop shipment transaction is often a bewildering task.

Generally, sales for resale are not subject to state and local sales taxes – provided that a purchaser supplies proper exemption documentation.

As a result, wholesalers who deliver taxable products directly to their customer’s customer do not typically worry about collecting sales or use taxes. This is because they assume their customer can give a valid resale certificate. But, as explained below, that is not always the case.

Figuring out when a purchaser can give a resale certificate can be challenging.

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