While there are many real estate tax incentives available on the market, Cost Segregation is stil...
State & Local Sales Tax is a consumption tax imposed by a taxing authority on the sale of goods and/or services. Sales Tax is crucial for US businesses as all states except five levy a Sales Tax.
There are two questions commonly asked regarding Sales Tax where a lot of ambiguity and “it depends” answers tend to follow:
The second question will be the focus of this article as the errors made in paying undue Sales Tax are so overwhelmingly prevalent and costly across the Nation that entire State & Local Tax consulting practices are built around addressing this question. This is due to the gray areas that exist within individual state regulation and lack of conformity and consistency in that regulation across states. This makes trying to determine what item and/or service is taxable vs. not-taxable very difficult for multi-state businesses. Taxable determinations can be determined by how an item or service is used, who uses the item or service, and where the item or service is used.
The use of purchased items can often determine whether those items are subject to Sales Tax or not. For example, in the state of Massachusetts, materials, tools, or fuel consumed and used directly or exclusively in research and development by a manufacturer or research and development corporation is exempt from Sales Tax. However, if those same items were used outside of those exempt activities, they would be subject to Sales Tax. These Use-based exemptions vary by state and can change with time. As these exemptions are often used to encourage economic development by targeted entities determined at the discretion of the local taxing authority.
In general, most services are not subject to Sales Tax, however, this vastly differs by state. For example, in Texas, routine maintenance on real property is typically exempt from Sales Tax, but real property repair and remodeling of nonresidential property is not exempt. New York, on the other hand levies a Sales Tax against repair, maintenance, and installation services provided to residential AND non-residential customers alike.
Taxing authorities can exempt certain activities or entities from Sales Tax based on their nature, structure, or end-consumer.
A Reverse Sales & Use Tax Audit determines if Sales Tax has been overpaid and/or paid in error. Sales Tax errors are common and can be costly to a business, especially when compounded over time. At Leyton, our experienced Sales Tax consultants can conduct a review of a business’s past purchasing activity to (1) identify if any errors have occurred, (2) rectify those errors by filing for refunds with the appropriate taxing authority, and (3) conduct ongoing maintenance to ensure no future errors take place.
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