Question re: Sales Tax

[PhotoMagicCreations Profile Private message]

I posted this under Odds and Ends, but it probably should have been posted here. So here is my question.

I am just starting to get some business off the internet, as well as from word of mouth, and I am wondering if those of you who do this as a side or full-time job, do you collect sales tax? I went on line for the Arizona Department of Revenue and found the Code for Service Businesses, and I don't think I need to obtain a sales tax license, as I think the DVD itself is an inconsequential element of the service we are providing. What do you think?
The following is the statute I found.


R15-5-104. Service Businesses

A. Gross receipts from the sale of tangible personal property to a person engaged in a professional or personal service occupation or business are subject to tax if the tangible personal property is used or consumed in the performance of the service or is sold only as an inconsequential element of the nontaxable service provided.

B. Gross receipts from the sale of tangible personal property, by a person engaged in a professional or personal service occupation or business, are not subject to tax if the property is sold only as an inconsequential element of the nontaxable service provided.

C. Sales of tangible personal property are inconsequential elements of the service if:

1. The purchase price of the tangible personal property to the person rendering the services represents less than 15% of the charge, billing, or statement rendered to the purchaser in connection with the transaction;

2. At the time of the sale, the tangible personal property transferred is not in a form that is subject to retail sale; and

3. The charge for the tangible personal property is not separately stated on the invoice.

D. A person engaged in both a retail business and a service business shall keep records of purchases of tangible personal property sufficient to establish whether the property was resold as a taxable retail sale.

Historical Note
Renumbered from R15-5-1805 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).

R15-5-105. Services in Connection with Retail Sales

Gross receipts from services rendered in addition to selling tangible personal property at retail are subject to tax unless the charge for service is shown separately on the sales invoice and records.

Historical Note
Renumbered from R15-5-1815 and amended effective August 9, 1993 (Supp. 93-3). Amended by final rulemaking at 12 A.A.R. 4099, effective December 4, 2006 (Supp. 06-4).


R15-5-2001. Definitions

The following definitions apply for the purposes of the rules in this Chapter, unless the context requires otherwise or unless otherwise defined. An individual rule may contain definitions which are specific to the context of that rule.

1. "Casual sale" means an occasional transaction of an isolated nature made by a person who is not engaged in the business of selling, within or without the state, the same type or character of property as that which was sold.

2. "Department" means the Arizona Department of Revenue.

3. "Gross income" means all receipts of a trade or business from sales or services. It includes the total consideration received or constructively received. The value of all services which are part of the sale is considered part of the gross income, unless statutorily excluded.

4. "Gross receipts" means gross receipts as defined in A.R.S. § 42-5001.

5. "Real property" means land and anything permanently affixed to land.

6. "Taxpayer" means any person required by law to file returns or to pay transaction privilege tax, use tax, rental occupancy tax, or excise taxes to the Department.

7. "Vendor" means any person engaged in a business which is subject to Arizona tax.

Kelly

[BarbaraC Profile Private messageWebsite]

Aargh! Can you even read that without choking on the convoluted language?!

When I went into business for myself--not with slideshows, but as a potter--I called the NYS tax department. It took a while, but eventually and after being passed from one know-nothing to another, I hit a person who understood exactly what kind of business I was opening and whether or not I needed to collect sales tax. Because I was selling to retailers, I was a wholesaler and didn't, therefore, have to collect tax. In your case, you're selling retail. You have the possible added complication of selling to people in other states with whom your state may or may not have sales tax agreements.

I suggest you grit your teeth and call your state tax department. Each state has its own laws.

Good luck finding your way through the bureaucracy.

Barbara

[PhotoMagicCreations Profile Private message]

Thanks Barbara. That is exactly what I am going to do.

Kelly

[rkligman Profile Private messageWebsite]

The DVD is tangible. You can hold it in your hand. It's taxable in Calif.

If you distributed the content via download in Calif. then it's not taxable because nothing tangible exchanged hands. Kind of wierd.

[BarbaraC Profile Private messageWebsite]

Rick, are you saying that any software you obtain via download even if the software company is Californian carries no sales tax?

Barbara

[rkligman Profile Private messageWebsite]

Rick, are you saying that any software you obtain via download even if the software company is Californian carries no sales tax?

Barbara

Sort of. In Calif. you have to pay sales tax on anything tangible. I write business programs on the computer for clients. I perform a service. That is not taxable. My wife duplicates CD's. While it's a service to duplicate your CD, she has to give you back the burned CD. It's tangible and therefore taxable. OK, now to your question.

I wrote some commercial software and I investigated the tax code. If you buy my product and I ship it to you, I have to charge you tax IF the destintion of the product is Calif. I wouldn't have to charge tax on the product if you, Barbara, buy my product and have it shipped to New York because it's out of state. The code clearly states though that if you are a Calif. resident and you purchase my software online, nothing tangible has changes hands and therefore I do not need to charge you sales tax.

That being said, there are companies that WILL charge me Sales Tax on downloads because 1) they don't know any better and/or 2) they don't want to look like they are doing something illegal. But it is in the tax code and it addresses this issue specifically which was very cool.

Now if I buy software OUTSIDE Calif., then just like me selling you my product, it's an out of state purchase and therefore shouldn't be taxed whether it's tangible or not. UNLESS that company happens to have a physical presence in Calif. in which case they must charge me tax, regardless of the fact that whether I bought it from the NON Calif. office.

[flyrobynfly Profile Private message]

Wow Rick, this is great information!

[BarbaraC Profile Private messageWebsite]

Rick, New York State is a lot greedier. Services are taxed the same as tangible goods. If I'm in the business of holding seances, every client pays the service fee plus tax. I don't know about the ghosts, but if NYS could find a way, they'd tax them too. It's one of the many reasons my husband and I will eventually leave the state.

Barbara

[stickgirl Profile Private message]

It's one of the many reasons my husband and I will eventually leave the state. Barbara

Make sure you don't move to MD. Come January, our sales tax will increase by 20%, the tax on cigarettes will increase by a $1.00 per pack and now we'll have to pay taxes on services like pc repair or computer programming.
We already have one of the highest gasoline taxes in the nation and that will be raised soon too.


Kathy

[BarbaraC Profile Private messageWebsite]

Kathy, you could move to NYS and never realize you've left Maryland. Services have been taxed here for a long, long time. The gasoline tax is a boon to the state government because the higher the price of oil, the more the government rakes in just so they can spend it in areas where they think they'll get the most votes. And then there's our governor who thought it would be neat to give illegal aliens licenses so they could--what? Vote for him? Oh, but I do hate politicians.

Barbara

[rkligman Profile Private messageWebsite]

It's one of the many reasons my husband and I will eventually leave the state. Barbara

Make sure you don't move to MD. Come January, our sales tax will increase by 20%, the tax on cigarettes will increase by a $1.00 per pack and now we'll have to pay taxes on services like pc repair or computer programming.
We already have one of the highest gasoline taxes in the nation and that will be raised soon too.


Kathy

Your General Sales Tax is going to be > 20%? That would be unheard of. The largest I think I've seen is almost 9%. In Calif. they tax on foods differently too. Food at the grocery store is not taxable unless it's carbonated, liquor or a snack food item. If you eat at a restaurant and the food is cold, like a salad, and you eat it THERE, then it's not taxable. If you want it TO GO, it's taxable. Hot prepared food is taxable either way, eat-in or take-out. So many exceptions.

[stickgirl Profile Private message]

[quote="rkligman
Your General Sales Tax is going to be > 20%? That would be unheard of. [/quote]

That's so everyone forgets about the 72% rate increase we had in September on electricity.

K

[BarbaraC Profile Private messageWebsite]

Kathy, you're welcome to join us in Wyoming.

Barbara

[stickgirl Profile Private message]

Kathy, you're welcome to join us in Wyoming. Barbara

Barbara - That sounds like a plan! I've always wanted to try my hand at farming.

Of course the only thing my husband visualized when I mentioned Wyoming was Brokeback Mountain.

Kathy

[BarbaraC Profile Private messageWebsite]

Tell him it was just a fairytale.