Sales Tax on equipment

[Doug S]

Just recently went through a sales and use tax audit.  It went amazingly well.  They found a $500 mistake over a 3 year period. I was completely happy with the amount we owed.

Now for the bad news.  When we bought our press, our distributer told us we were sales tax exempt for manufacturing equipment in Arkansas and showed us the law on paper.

To make a long story short, the auditor contacted us 2 days after she left and told us that because the majority of the printing work we do is for customers wanting custom work that we were going to have to pay "use tax" on the printing press. 

We also have a store front and print shirts to sell to the general public, but because we print some shirts and are not the end seller of them that requires us to pay sales tax on our printing equipment, Called a "Use Tax"

You live and learn.  10.5% of $72000 + interest.  There goes my better exposure unit.

[Socalfmf]

is it still a use tax if you lease it?  we personally buy our equipment then lease it back to the corporation so we do not have to a pay a use tax...just a thought...

[Doug S]

is it still a use tax if you lease it?  we personally buy our equipment then lease it back to the corporation so we do not have to a pay a use tax...just a thought...

I brought up the fact that we were leasing it and was told that we have to pay the use tax on the payment it self per-month.

[Socalfmf]

wow...they just keep taking taking taking...

[Dottonedan]

I HATE state tax dept.  Mainly because one hand doesn't know what the other is doing. If you got audited by another person they'd come up with something different that you owe on... and never mention or know about the "use tax" on the equipment. It's a gamble. 50/50 crap shoot. You may as well just plan on sending them an extra $500 each year towards something that will be going wrong or something they will get you for later. Call it a deposit on their future GOCHYA!.


They fought me on Fl unemployment compensation for my employees for 7 years.  Thing is, It wasn't even ME!    I never had owned the business in questions...and never had employees. Still, they hassled me and said I owed over 8000.00 for about 3 years till finally one day, someone found the mistake and didn't even apologies. I still feel like they will try to get me to pay that again one day.

[inkman996]

And people complain about federal taxes. To me paying the fed is really simple and pretty straight forward, it's state tax and fees and use and fines and on and on that is a total nightmare, like Dan said no two people can interpret the laws the same. In our state if the fed lowers any tax in any way the state adds a tax and then some to take more from you.

[mk162]

better than Cyprus.

If they don't find anything on an audit, they aren't doing their job.  That's how it goes.

Heck, I should have my parents buy the equipment and then lease it back to me, across state lines, no sales tax.

[whitewater]

In new york i called the labor dept. and asked and they confirmed we are manufacturers, so no sales tax...maybe i should look into this...i can see myself getting screwed later on....you think you do everything correct and then they take...

I believe its purposely set up this way, so the common person has a hard time understanding all the rules and what not...so they can stick it to you when they feel like it..

[Doug S]

I HATE state tax dept.  Mainly because one hand doesn't know what the other is doing. If you got audited by another person they'd come up with something different that you owe on... and never mention or know about the "use tax" on the equipment. It's a gamble. 50/50 crap shoot. You may as well just plan on sending them an extra $500 each year towards something that will be going wrong or something they will get you for later. Call it a deposit on their future GOCHYA!.


They fought me on Fl unemployment compensation for my employees for 7 years.  Thing is, It wasn't even ME!    I never had owned the business in questions...and never had employees. Still, they hassled me and said I owed over 8000.00 for about 3 years till finally one day, someone found the mistake and didn't even apologies. I still feel like they will try to get me to pay that again one day.

You are so right about one hand not know what the other is doing.  They had us categorized as "gold miners" .  I started to say "ok you got us, we print shirts half the day and fly to the bering sea and mine for gold the other half".

[beanie357]

It's always the particular states "use" tax of the equation that gets you. We are ocd on cpa meetings quarterly to clarify our cap x figures. The sad thing is the safest way to respond is to pay it if in doubt, and if wrong file for a credit. It avoids the penalties and interest end of the tax department equation.

Like Nj has no sales tax on apparel. But if you do not roll up art charges into a per garment price, you need to charge sales tax. But we pay sales tax on many items we use to produce that garment. It's the "use" concept. I mean our TP is taxed. Our office supplies are taxed. We would use neither if we were not producing apparel, which is not taxed.

Only government can operate this way.

[Doug S]

This was very educational for us.  For example, I didn't know that now we have to charge sales tax on shipping now.  Also, if use use things like rubber gloves, cleanup cards or anything that you weren't charged sales tax for bought online from out of state, that you have to list those on your sales tax report and pay the tax on those items.

[Socalfmf]

here is another question for you Shirt...are you a corp or a LLC or a sole Prop? 

[Doug S]

here is another question for you Shirt...are you a corp or a LLC or a sole Prop? 

Sole proprietor

[mk162]

i would go llc to remove the liability from you personally.  check with your CPA on the benefits.

[Doug S]

i would go llc to remove the liability from you personally.  check with your CPA on the benefits.

Not a bad idea, I'll contact her tomorrow.  I think I'm screwed on this particular audit though.  Good thing we've saved for a rainy day.