Overview - Retail Industry

Question 1

Define “Retailing”

Answer 1

The activities involved in the selling of goods to ultimate consumers for personal/household consumption.

Question 2

What are the 5 types of retailing?

Answer 2

• Stroefront/Brick-and-Mortar (store)
• E-commerce (online)
• Catalogs/Mail (mail)
• TV and Infomercials (TV)
• Telemarketing (phone)

Question 3

What are the two areas of retail compliance and what is involved in each?

Answer 3

• Operational compliance
  - Front-end side
  - Ensuring the correct tax is collected
• Tax Reporting
  - Back-end
  - Ensuring the tax information from
  collection is stored and summarized
  properly

Question 4

What are 7 things that need to be determined as part of Operational (front-end) compliance?

Answer 4

• Where you’re required to register.
• If you have nexus.
• Point-of-sale challenges
• Tax base/tax rates
• Exemptions
• Each state’s product definitions
• Non-sales tax fees that may apply (Ex: Tire disposal fees, E-911 fees, Paint fees, etc)

Question 5

Any allowance or credit for TPP taken as partial payment by a retailer for the purchase of goods.

Answer 5

Trade-in

Question 6

What are 4 things to keep in mind about trade-ins?

Answer 6

• Some states deem trade-ins as consideration and are therefore taxable.
• Some states have exemptions/exclusions for trade-ins and will take the net amount as the taxable amount.
• Some states limit the exemptions/exclusions to “like-kind” items.
• If the state doesn’t mention anything about trade-ins, assume they’re considered consideration and will be taxable.

Question 7

What are the 3 types of nexus and what are some examples of each?

Answer 7

• Physical: Stores, employees, warehouses, agents, etc
• Economic: Sales and/or transactions that reach a given threshold
• Marketplace: Marketplace facilitators (Amazon, Facebook, eBay, etc) selling on behalf of a company

Question 8

What are 4 scenarios where the retail sale may be exempt?

Answer 8

• Exempt Transaction (interstate sale): The retailer may not have nexus in a jurisdiction and the sale should not be taxed.
• Exempt Product
• Exempt Customer: Government, charity, manufacturing company, etc
• Sales Tax Holidays

Question 9

True or False: All states will have the same definition for the same product.

Answer 9

False

Question 10

In retail, items purchased for resale are generally (nontaxable/taxable), while charges for advertising are usually (nontaxable/taxable).

Answer 10

nontaxable, taxable

Question 11

What are 4 things that you need to be aware of during Tax Reporting (back-end) compliance?

Answer 11

• Returns and Payments
• Reporting Software
• Bad Debt Deductions
• Vendor Discounts

Question 12

What are 4 common purchases made by retailers?

Answer 12

• Store fixtures (TPP vs Improvement to realty)
• Expense purchases (Packaging, Business forms, Supplies, etc)
• Gifts/Premiums/Marketing Aids
• Merch sold by retailers (Sale for Resale, Vendor-owned merch, Buy-downs, Funds given to retailer for advertising)
• Advertising

Question 13

What are the different types of audit issues that impact retailers?

Answer 13

• Documentation/Document Retention
• Sampling Techniques
• Nexus Issues
• Tender Type
• Product Usage
• Exemption Certs
• Product Taxability
• Effective Tax Rates/Excess Tax Collected
• Mfg. Coupons and Rebates