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Author Topic: Sales tax  (Read 1007 times)

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Offline John S

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Sales tax
« on: November 06, 2017, 09:53:08 am »
I mill in Northwest NJ and occasionally mill in Pennsylvania.  I must charge sales tax here in NJ and do not know what the policy is in PA.  Any PA millers here who know the rules on sales tax for portable milling?  Thanks in advance.
LT40HDG28

Offline WV Sawmiller

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Re: Sales tax
« Reply #1 on: November 06, 2017, 08:16:13 pm »
John,

   Sorry I can't answer for other states. Please check with your accountant or the tax people there. I think some states do not require sales taxes on services. I thought that when I was first getting set up in my business but before I ever cut a board I checked with my (WV) tax people and they advised me in WV I have to collect sales tax for sawing jobs I do for others. I pay sales tax on everything I sell or saw for others.
Howard Green
WM LT35HDG25(2015) , 2009 4wd Dodge PU, Kawasaki 650 ATV, Sthil 440 & 441, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once"

Offline drobertson

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Re: Sales tax
« Reply #2 on: November 06, 2017, 08:30:32 pm »
All I will say is if you don't have a pension,, and you are still working for (whatever) keep good books, pay taxes, and especially SS,
only have a few chain saws I'm not suppose to use, but will at times, one dog Dolly, pretty good dog, just not sure what for yet,  working on getting the gardening back in order, and kinda thinking on maybe a small bbq bizz,  thinking about it,

Offline Ron Wenrich

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Re: Sales tax
« Reply #3 on: November 07, 2017, 06:20:08 am »
Try this link:  https://revenue-pa.custhelp.com/app/answers/detail/a_id/2825/~/is-there-a-list-of-services-subject-to-pa-sales-tax%3F

I know there isn't any sales tax for the services I get from my accountant or other professionals, and I never charged any sales tax on any services I did in the industry. 

Never under estimate the power of stupid people in large groups.

Offline terrifictimbersllc

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Re: Sales tax
« Reply #4 on: November 07, 2017, 07:40:57 am »
Look for language in the code having to do with services involving  "processing, fabricating....of personal property".  I know 3 states in New England that all have this same language which defines sawing logs for others as a sales taxable service.

Also if you have a sales tax office telling you that your service isn't subject to sales tax, ask for the address where you can submit this question to get a written answer.   If they (you) make a mistake by determining it is not taxable, that answer given verbally probably won't help you avoid later paying all the tax, interest on it, and penalty.   If you have it in writing at the beginning, that would probably save you all that $$  if the "not taxable"answer is later found out to be in error.

You may still have to register and file reports with the PA sales tax office even if your sawing there is not taxable, I would ask about this.
DJ Hoover, Terrific Timbers LLC,  Mystic CT   2001 WM LT40SHDD (42HP Kubota, Accuset2, FAO's, Lubemizer, debarker, hydraulics everywhere), Peterson WPF 10-30 with chain slabber. LogRite fetching arch, WM BMS250 sharpener/BMT250 setter.

Offline Tom the Sawyer

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Re: Sales tax
« Reply #5 on: November 07, 2017, 03:46:48 pm »
Based on some bad advice I received, I did not collect sales tax on milling services for the first two years in business.  Then I attended a small business class at our local junior college and one session involved a Department of Revenue agent teaching about sales and use taxes.  I found that I was required to collect sales taxes. 

His explanation was that services involving "real property" (like real estate) did not require taxes, things like felling/pruning trees, mowing grass, painting a house.  Once that real property had been severed from the land, then it was considered "tangible personal property", and was subject to sales taxes.  So cutting your trees down was not subject to sales taxes; milling your logs, or splitting your firewood, was subject to sales taxes.  Mowing your grass is not taxable, raking your leaves is taxable.  I said that seemed a rather indistinct line, he didn't think so.

So, after going back and paying two years of sales taxes that I had never collected, I am back in the good graces of KDOR, and I collect sales taxes, based on the jurisdiction where I am providing services.  I did request, and receive a letter detailing what services required the collection of sales taxes, and (based on the size of my operation) submit my sales tax collection reports (and the money) quarterly.  No client has ever questioned the inclusion of sales tax on their invoice (some state organizations and charitable groups are exempt, of course).
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If you call and my wife says "He's sawin logs", I ain't snorin'.

Offline Cedarman

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Re: Sales tax
« Reply #6 on: November 08, 2017, 06:57:32 am »
When I buy parts for our loaders they are only partially exempt.  The sales tax on parts is dependent on what I use the loaders for.  If I unload a truck or load a truck, it is taxable.  After unloading a truck and put those logs on the mill it is taxable .  If I put a chainsaw to the logs, then moving the logs is not taxable.  Moving stacks of lumber around the yard is not taxable unless it is the final trip to a truck.  When I asked the sales tax auditor how I was to keep track of all this, she said she understood my situation as it was similar to other places.  We both agreed the rules were crazy, but had to be followed.  Our solution: she asked what percentage of time was used loading and unloading trucks and moving uncut logs to the mill.  I came up with 20%.  She said that was fine.  So every month when I fill out my sales tax papers I have to look at the purchases of parts which I do not pay tax on at the dealer and figure 20% as taxable amount. Thank god I don't have to keep a time log.
Not difficult as I use a credit card for all parts purchases for the loaders.
Just showing that logic plays no part in what can be considered taxable.

BE SURE TO GET TAX EXEMPTION PAPERS FROM TAX EXEMPT ORGANIZATIONS.
No paper, you owe tax.
When we ship goods to instate customers, we tax.  If we ship to out of state customers, it is up to them to pay their own state's sales tax.
I am in the pink when sawing cedar.

Offline John S

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Re: Sales tax
« Reply #7 on: November 08, 2017, 08:40:29 am »
Thanks to all for your helpful replies.  I did charge the PA sales tax and will continue to do so.
LT40HDG28

Offline YellowHammer

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Re: Sales tax
« Reply #8 on: November 08, 2017, 09:06:09 pm »
Not only is it important top get sales tax exemptions from other companies, its important to understand that it goes both ways, and supply suitable sales tax exemptions to companies you deal with for purchasing specific materials or supplies.
 
For example, when I buy logs I pay tax, when I buy green sawn lumber from the same mill, I don't. It can save thousands of dollars per year to not pay tax.  However, there are forms to fill out, and they must be supplied or collected to make things legal.

It is all spelled out in the tax codes.   :P
Hobby Hardwood Alabama.com
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Offline Ron Wenrich

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Re: Sales tax
« Reply #9 on: November 09, 2017, 05:38:35 am »
Tax codes vary from state to state.  In PA, most anything dealing in agriculture is tax exempt.  The forest industry is part of agriculture.  In addition, if you're charging sales tax in PA, you must have a license. 
Never under estimate the power of stupid people in large groups.

Offline Stuart Caruk

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Re: Sales tax
« Reply #10 on: November 09, 2017, 07:32:35 pm »
Having been audited by the Feds, and WA State, I'd have to say I much prefer the Feds. With them, you have recourse, and can go to tax court. I've been there twice and won both times. With the state... you are screwed. My last audit cost me $11k in taxes that I really didn't owe.

We live right on the border with Oregon, and as such we get a lot of out of state sales. Used to be, all someone had to do was show you an Oregon drivers licence to prove they were from out of State, and we didn't have to charge the tax. Boy, it's not that way anymore....

Unless you have proof that you shipped goods out of state, trucking receipts, USPS or UPS, they will charge you for the tax, even if you never collected it. Do work out of state even for a company that has no presence in WA State, you better have a receipt, job ticket, or equivalent to state that the work was done outside the state of Washington. Attend an out of state event where you sold goods but took a credit card that was processed by your WA bank, and don't have a way to prove that the transaction was done entirely outside the state.... pay the tax. Shoot, make a sale in WA, and come the end of the month tax time you have to determine the specific code for the city the goods were shipped to. You pay State tax, and city or local taxes, all at different rates. What a royal PITA.

The latest trend is for companies who ship goods to WA state, but don't collect or pay the sales tax. The state of WA is aggressively going after the taxes from companies who ship into the state, assuming they don't have to pay sales tax...

And don't even get me started on the ridiculous rules for mitigation required if you "disturb" the ground here....

Best bet is to figure out the applicable tax rate, collect it and pay it. Unless the customer has a reseller permit or a direct pay permit.
Stuart Caruk
Wood-Mizer LX450 Diesel w/ debarker, Woodmizer twin blade edger, Barko 450 log loader, Clark 666 Grapple Skidder w/ 200' of mainline. Bobcats and forklifts.

Offline Cedarman

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Re: Sales tax
« Reply #11 on: November 12, 2017, 01:25:05 pm »
If someone from outside of Indiana comes to pick up lumber, they owe the sales tax.  If we deliver to them, then they owe the sales tax to their own state and are supposed to pay it.  When I was audited for sales tax, they gave me a month or so to contact people that were tax exempt and send in the paperwork.    They were easy to work with.  Since then I do a much better job getting their exempt forms so I don't have to track them down.  God help small businesses if we have to collect tax for each state and jurisdiction and send it to them.
I am in the pink when sawing cedar.