Question:
Can my business pay sales tax for customers?
2014-10-24 11:42:22 UTC
I run an online business selling taxable goods. Currently, there is a big hassle with trying to implement the sales tax into the actual transaction on the website, so I was wondering if we can take a hit on our profits and pay the sales tax ourselves?

When taxes are due, we'll calculated all of the taxes and pay it out-of-pocket.

Is this legal?
Twelve answers:
Babe
2014-10-24 22:30:45 UTC
It's legal, but why not gross up the sales price with the tax included instead of cutting your profits. ie: Your taxable goods sell for $100 and tax is 8% so you process the sale as $108 and pay the taxes from that. You can still cite a sales price of $100 but make sure you show that there will be tax added.
Cathi K
2014-10-24 17:27:43 UTC
Yes actually. The law actually says 1- the vendor is responsible for paying sales tax, and 2 - the vendor may ask the customer to reimburse him for that tax. This is why vendors charge sales tax. The law does not really say the customer must pay the sales tax (unless there are changes I am unaware of). All the sales tax reporting is done from the vendor. If you buy from a vendor in another state that does not require a sales tax or has a sales tax lower than your state and your state does have one then you pay the sales tax as a use tax on your yearly state tax return.
tro
2014-10-24 15:08:45 UTC
years ago I had carpet installed and paid the bill not looking at any breakdown, when I was ready to claim sales taxes on this the company informed me that the sales tax was paid by the company, I was not allegedly charged any sales tax

when the local bar sells his beer he doesn't show the customer what sales tax is being paid because he claims all his sales and then sorts out the sales tax that applies--leaving actually less for total sales

the internet sales you make may not all be taxable since some may not be sold in your state where you should be registered with the sales tax agency of your state
?
2014-10-24 11:56:55 UTC
Generally no. Every state's laws I've seen appears to require that the sales tax amount be split out on the customer's receipt.



So if you sell something for $100 and the tax rate is 5%, you have to show $100 + $5 = $105.

If your intent was to say, $100 and you'd absorb the 5%, you would STILL have to show the receipt as $95.23 + $4.77 = $100. If you didn't, the state would say you owed them $5, not $4.77.
StephenWeinstein
2014-10-24 19:04:01 UTC
You won't be able to calculate all of the taxes when taxes are due. The tax rate depends on where the customer lives and what the customer bought. If you don't have the right records, you're not going to be able to do the calculation.
2014-10-24 21:21:06 UTC
If I start collecting sales tax now do u know how far back they can come after me for not collecting sooner? And what is the penalty for not collecting sales tax? Not that I am informed and plan on collecting sales tax, I'm worried about the repercussions for past sales.



Thanks again for the advice!
?
2014-10-24 14:14:06 UTC
YES just try and keep your good daily records of all sales and the copies of the receipts for that purpose and time make sure and try to account for your sales and use tax amounts correctly for this purpose and time.

Hope that you find the above enclosed information useful. 10/24/2014
?
2014-10-25 02:49:59 UTC
"Is this legal?"



I can't believe everyone who answered this question with the exception of NA thought this was perfectly legal to do. Sales tax laws vary from state to state.



Depends entirely on the state & state sales tax laws vary from state. It also depends on how you do it. AS NA said - in general, in most states it has to be itemized on the receipt.



"The vast majority of states have a consumer sales tax, where the buyer bears the legal burden of the tax and the seller is **required** to collect and remit the tax to the state."



""In some states, the tax is imposed on sellers, who then have the option of passing the tax along to their purchasers. In other states, the tax is imposed on the purchaser, with the seller being responsible for collecting the tax and remitting it to the state. And then there are other states where the liability for the tax is shared by sellers and purchasers"



"If you are registered for purposes of New York State's sales tax you are a trustee of New York State and you have a responsibility to collect the proper amount of sales tax from your customers and to remit the tax you have collected with your timely filed sales tax return. If you are registered for purposes of New York State’s sales tax you are a trustee of New York State and you have a responsibility to collect the proper amount of sales tax from your customers and to remit the tax you have collected with your timely filed sales tax return." There are some states like NY which don't require a receipt but if you give one you **must** itemize & state the sales tax separately. If you don't give a receipt than you may use the alternate unit price method where the sales tax is included in the purchase price. If you use this method - you have to have to have a notice or sign stating this is what you are doing. You have to inform the customer.



IN Kentucky,



" although the sales tax is generally imposed on a retailer's gross receipts, shifting of the tax to the purchaser is **mandatory**. Sales tax must be separately stated and the tax becomes a debt from the retailer to the state of Kentucky. **Absorbing** the tax is not permitted."



In the state of Maryland



"A vendor may assume or **absorb** all or any part of the sales and use tax on a retail sale and pay that tax on behalf of the buyer. The vendor must, however, continue to separately state the tax from the sales price at the time of the sale to the purchaser. If the vendor absorbs all or any part of the tax on the sale, the vendor shall pay the tax with the return that covers the period in which the vendor makes the sale."



In the state of IA (see IA sales & use tax pub)



In IA, it's illegal to tell the customer the seller is **absorbing** the tax. The seller **must** add the tax to price & collect from the customer. The seller may include the sales tax in the price of the item & this is typically done. The seller either has to post a notice or include a statement on the invoice the tax is included in the purchase price. It does NOT have to be itemized.



In WI, the retailer is responsible for the taxes & they can pass the tax onto the customers or the seller can pay it all. They don't have to charge or collect; but if they do they have to give an itemized invoice to the customer. The tax due is the total taxable sales multiplied by the tax rate regardless of how much they collect from the customer.





"There are the three general types of sales taxes:



Seller (vendor) privilege taxes. These taxes are imposed on retailers for the privilege of making retail sales in the state. Retailers usually have the option of absorbing the tax (that is, paying the tax out of their own pockets) or passing it along to their purchasers.



Consumer excise (sales) taxes. A consumer sales tax is are imposed on the person who makes retail purchases in the state. In the states that impose this type of tax, sellers serve purely as agents who must collect the tax on the state's behalf. Because the tax is primarily the purchaser's responsibility, sellers don't have the option of absorbing the tax and usually must separately state the tax on the receipts or invoices they provide their purchasers.



Retail transaction taxes. These taxes are imposed on the retail sale transaction itself, with the primary liability for paying the tax falling upon both the sellers and the purchasers. Sellers are responsible for collecting and paying the tax, and purchasers are responsible for paying the tax that the sellers must collect and pay. In essence, this type of sales tax is a hybrid of the other two types. Operationally, however, it's closer to a consumer excise tax because sellers are not given the option to absorb the tax."



AZ has a transaction tax



http://www.bizfilings.com/toolkit/sbg/tax-info/sales-taxes/understanding-sales-tax-obligations.aspx



I'm certainly NO expert on state sales tax laws in all the states which have sales tax; but if you want to know the law in your state- read the sales tax pub for your state.
The Oracle of Omigod
2014-10-24 12:00:10 UTC
I believe it is legal. The taxes have to be backed into and a discounted price shown as the sales price.
just_the_facts_ma'am
2014-10-24 11:45:18 UTC
Yes, though it might not be the best way of doing business. Why not just increase prices to cover the sales tax?
Judy
2014-10-24 11:45:58 UTC
yes you can.
?
2014-10-24 13:59:54 UTC
sure


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