Use tax ????

[heirloomoriginals]

I am trying to get a straight answer here because I got a letter in the mail saying that I haven't paid any use tax since opening my business (and I haven't). I looked at the paper that the state of PA sent it looks like I would have to pay tax on out of state purchases of furniture, or office items. that I don't pay tax on.

I asked my accountant and she said that I would only have to pay a use tax on it if I bought it for my business and then used it for personal use.

I am totally confused. I tried calling the state tax office, but they were closed because of Martin Luther King.

Steph

[ebcandles]

I've never heard of such a thing but what your accountant said does make sense.

[artcwolf]

I asked my accountant and she said that I would only have to pay a use tax on it if I bought it for my business and then used it for personal use.

Anything you take out of business for personal use with out paying for it you need to keep track of and put it into your taxes. If you take stock and give it to friends or family as a gift same thing. I use turbo tax for home and business and there is a box for items taken out for personal use.

a USE tax i haven't heard of, in VA we have the state and local taxes, and an area to put in the non-taxable income from out of state sales...

[Accents]

Use tax is for things you use but don't sell. Even candles you take for yourself, you'd pay the tax on the cost of the supplies for that candle. Prestos or pour pots, for instance you'd submit as use tax. Anything that's not for resale, I believe. I haven't submitted any use tax either because those things I use I bought at a regular store and just pay the sales tax. And I believe, testing products does not qualify for use tax.

[Beth-VT]

We have a use tax. Same rate as our sales tax, 6%

Here's how it works:

If I purchase supplies, anything that is for resale (ends up being paid for by the consumer) will not have a use tax required.

If I purchase equipment, furniture, or anything that does not end up with the consumer, a use tax is applicable.

If I purchase what are considered to be taxable supplies (pour pots & molds, for example) from an out-of-state vendor and am not charged sales tax, I am expected to remit the 6% use tax to the state on those items.

If I purchase those same supplies from anywhere and am charged sales tax, then I need to do nothing more.

(Whether or not the vendor is in or out of state doesn't determine anything, just whether or not they charged tax. I use out-of-state as an example because it's often true with online purchases that you are not charged sales tax.)

Likewise, if I purchase non-taxable item (wax, FOs, etc.) from an out-of-state vendor and am not charged tax, no biggee. If I am charged tax, I can adjust that amount off of my use tax remittance.

Just because you have a Tax ID/wholesale#/whatever your state calls it, doesn't mean you are allowed to purchase any and everything sales tax free. Again, only items that end up for re-sale. A use tax is simply a means of collecting the sales tax on an item from the end user.

Here, how often you remit is based on your $$ sales. I remit annually, in late January. I am, as we speak, going through all my expenses and revenues to calculate my use tax . HTH.

[Nanasnecessities]

here we pay a use tax, if we buy it using our id (in state only) and don't pay tax on it, we are supposed to declare it.

I was told that if it goes out the door with the product we do not pay tax on it.

I found it easier to pay the tax on items I want for the business, nothing to declare that way.

[Stella1952]

Here are some online links that should help...

This is an informational pdf download from the PA Dept. of Revenue website...

http://www.revenue.state.pa.us/revenue/lib/revenue/rev-1748.pdf

Here is the Official website

http://www.revenue.state.pa.us/

Other informational links on PA Use Tax...

http://pasalestaxguide.com/

http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P07_5662

http://www.salestax-usetax.com/state_tax/pennsylvania_sales_and_use_tax_links.htm

HTH

[heirloomoriginals]

Okay, that makes sense. I will talk to my account just to make sure. Seems like they get you either way!

Steph

[HeavenScentU]

Yeah, I would talk to your accountant. I do my own quarterly taxes and from what I was told from my state any item from my business that I would normally sell but use for my personal use like giving a candle as a Birthday gift, test burning a candle, etc. I would have to pay taxes on that because I am removing it from my shelf and using for myself not for resale. So anytime you take from your inventory it's easier if you write a receipt to yourself for an item. I tend to forget over time so if I have a receipt it helps.

[heirloomoriginals]

Do you have to count it even for testing? Man, that seems like a lot of money wasted on Use Tax. I guess I will have to start keeping track of it.

That is ridiculous!

Steph

[heirloomoriginals]

So, if I take my candles (even testers) for myself or gifts, would I pay the tax on my cost or my retail cost? I wish I had known this before I started selling.

Also, does this include any give aways?

Steph

[HeavenScentU]

Yup to answer to questions. That is why I don't offer anymore freebies, just do my test burns because it is a nightmare when I do my quarterly and yearly taxes. Someone has to pay the taxes either you or the customer. You have to pay the tax on retail, because there is no tax on wholesale.

[VerticallyEnhanced]

Do you have to count it even for testing? Man, that seems like a lot of money wasted on Use Tax.

That is ridiculous!

You did not pay tax on your supplies, right? The reason we do not pay tax on our supplies is because of the understanding is that we will resell products made with those supplies, and that is where the tax will be eventually collected. Of course if you wholesale the candles you made with tax-free inventory, then the ultimate sellers (wholesale accounts/retail stores) of the candle will collect tax.

Use tax is necessary because not all of your tax free supplies go into candles that are ultimately sold, right?

Let's just say for grins sake that in 2007 you purchased $500 worth of supplies and did not pay tax on it because you assumed most would go into items for wholesale/resale and that is where the tax is ultimately collected.

So of that $500 tax free inventory, $400 went into products that were resold and ultimately the tax was collected (either by you in a retail situation or by your wholesale account which resold the product). So $100 of that tax free inventory is hanging out there...it was "used" for testing and the tax was never collected on it. So, use tax is assessed. Use tax can be assessed on stuff used for testing, damaged items, items given away for chairity, gifts or personal use. (Of course don't confuse state tax with federal tax. All of those can be written off for federal taxes)

In most states it is called "Sales and Use Tax" so a lot of people don't even realize that you need to keep track of supplies "used" in business and report it under your "sales and use" tax.

Someone said

Prestos or pour pots, for instance you'd submit as use tax.

Actually in most states, those are considered manufacturing items. In most states, you can issue an exemption certificate when purchasing those items and not pay tax. Again, in MOST STATES, manufacturing equipment (items which typically cause a physical or chemical change) is exempt.

I have said this about a million times...all states are different. Most are very similar in the basics such as the stuff above, but it is always best to check with your state's revenue office/comptroller/tax office.

[Suzanne]

Quote:

Prestos or pour pots, for instance you'd submit as use tax.

This is not true in Michigan (nor sure about other states).

In Michigan for businesses there is an exemption for property (not land or real estate) which is used for modifying or changing the form, composition, etc for ultimate sale as retail.

There is a lot of inconsistancies and inaccurate statements in this thread and I STRONGLY encourage you to take make an appointment with your accountant. There are many things you need to consider concerning your taxes. Your accountant would be very happy to explain the responsibilities you have as a business owner for your taxes. What I've seen in this thread about the Sales and Use Tax information is not correct. It differs for each state but their are exemptions and requirements you must comply with.

It will be much easier for you to take the professional advice from your accountant. You're accountant will make it easy for you to understand and tell you what you need to track, keep records of, etc.

[VerticallyEnhanced]

There is a lot of inconsistancies and inaccurate statements in this thread and I STRONGLY encourage you to take make an appointment with your accountant. There are many things you need to consider concerning your taxes. Your accountant would be very happy to explain the responsibilities you have as a business owner for your taxes. What I've seen in this thread about the Sales and Use Tax information is not correct. It differs for each state but their are exemptions and requirements you must comply with.

inconsistencies are understandable since, as mentioned, every state is different in their administration and collection of state taxes. While most are quite similar in the basics, again, I have found there are some variances from state to state. Actually in my line of work I have seen even the most experienced accountants butcher state tax law. It is a good idea to talk to your accountant, but it is also wise to arm yourself with information straight from your state's department of revenue. One thing that is pretty consistent among state tax law is that they don't forgive your reporting/filing errors if your accountant botched the information. Unfortunately, you are the one held liable for any penalties and interest.

Your state has a pretty decent website for state taxes. I linked specifically to the area for Sales and Use tax.

http://www.revenue.state.pa.us/revenue/cwp/view.asp?a=13&Q=69009&subID=B&revenueNav=|3637|

There is a knowledge base area where you can search previous questions submitted and even submit your own. Under Laws & Policies you can find actual bills and rules as well as Tax Bulletins. I am sure if you nose around, you could find a toll free number for specific questions you cannot find on line.

[Stella1952]

Materials/product used for testing are usually written off as an R & D expense - part of the cost of doing business.

[heirloomoriginals]

Thanks again to all those who replied. I will definitely talk to my accountant when I get our personal taxes done, which is soon. I also want to find out about the testing supplies, because that would have a definite affect on how much I carry of each product! I will start keeping track of what I use for personal gifts and my family.

Just what I needed, more money and work to keep track of! I wish I could pay my accountant to do my books, but not right now!

Steph

[grama]

Where I used to work I filed sales & use taxes and all of the quarterly taxes. Your customers were billed the tax, they paid it and you reported it and paid it to the state. Anything ordered in your state is already taxed by the company you order it from so you don't have to report it because they will do that on their end. If ordered from out of state thoses were the invoices I had to keep up with and report on sales tax and pay the sales tax on because normally sales tax is only collected by companies-supplier in your state. Does that make sense? The business we were in there was nothing exempt except sales-services to government agencies and places like hospital etc that had filed for exemption and been granted that. If that was the case you got a copy of their state-federal exemption and you backed out their charges from your total amount.

I always hated filing Sales & Use Tax and now I have to do for myself.

[grama]

The only sales tax I report are from the sales to my customers in GA. I just add up what they have paid me and I pay the taxes on that.