Administration of Sales and Use Taxes

Question 1

What are the 9 powers of the tax governments?

Answer 1

1. Make laws
2. Give time extensions for filing
3. Require recordkeeping
4. Compel testimony
5. Review books/records
6. Audit for compliance to the law
7. Assess/adjust taxes
8. Hear appeals and initiate court proceedings
9. Abate penalties/interest

Question 2

What are the 6 types of taxes administered by governmental agencies?

Answer 2

1. Income tax
2. Sales/Use tax
3. Withholding/Payroll tax
4. Property tax
5. Alcohol and Tobacco tax
6. Motor Fuel tax

Question 3

6 facts to know about the…. Streamlined Sales Tax Agreement!

Answer 3

1. Started November 12, 2002
2. 44 States & DC have entered into the agreement
3. CO doesn’t participate
4. Includes rules for sourcing, bad debt, and remittances
5. Includes restrictions on sales tax holidays
6. Provides simplified registration

Question 4

the SSTA imposes limits on what 4 things?

Answer 4

1. Tax liability of a seller
2. Tax base
3. Number of tax rates
4. Frequency of local tax rate changes

Question 5

What are 5 issues that exist when trying to register in a jurisdiction?

Answer 5

1. Cost (direct cost of license or indirect cost of compliance)
2. Renewal date of registration may be unclear
3. Local jurisdiction registration can be complicated (home-rules states)
4. Some states require separate registration for each location and do not allow registration certificates to be transferred from one location to another
5. Federal ID # is required (not all businesses have one)

Question 6

What are 8 questions you should ask yourself when deciding whether you should collect sales tax?

Answer 6

1. Is there nexus? (Physical or economic)
2. Is the transaction exempt? (resale, etc)
3. Is the customer exempt? (Hospital, gov, etc.)
4. Is the property exempt? (Mfg, Food, etc.)
5. What kind of tax is imposed? (Seller privilege vs consumer levy vs etc.)
6. How should the tax be presented on the invoice? (absorption, separation)
7. What is the jurisdiction? (for tax rate and sourcing determination)
8. What’s included in the tax base? (discounts, freight, etc)

Question 7

What are 9 things that you should do when setting up a tax collection system?

Answer 7

1. Review the current processes
2. Set system parameters to determine how tax is calculated
3. Set conditions to get tax results
4. Make taxability matrices for each jurisdiction
5. Organize exemption documentation
6. Create reporting/audit files
7. Consider automated reporting
8. Update processes
9. Train personnel

Question 8

What are 8 things you should do/be aware of when managing exemption documentation?

Answer 8

1. Verify that the certs use the state’s wording/language.
2. Update your certs regularly.
3. Confirm the “Sold To” party info is correct.
4. Know that subs must issue separate resale certs.
5. Know that there are two types of certs: blanket and unit (Blanket: Covers all purchases, Unit: Covers specific purchases).
6. Know that “See Purchase Order” is a red flag.
7. Know that a verbal confirmation of a customer being exempt is not legally binding.
8. Know that there is no universal cert (some states however will accept the MTC certificate)

Question 9

What are 5 things you should be aware of when requesting a refund?

Answer 9

1. You may have to request it directly from the vendor if the state doesn’t have a claims process, which can potentially cause vendor relationship issues
2. SOL
3. Interest rates may not be available or could be set at reduced rates
4. It may result in an audit
5. Due date (postmarked date vs when it’s received)