lonewolvie said:
Sales taxes are the most complicated of the tax codes. First sales taxes on items vary from state to state along with multiple rates and to further complicate this issue are the counties and cities that impose sales taxes. This is the ultimate tax nightmare for an interstate business. Walmart has an advantage here, with physical stores across the nation, walmart can draw on thousands of stores in thousands of tax jurisdictions to set the appropriate rate. This is a very bad idea.
Excellent observations LW, and reminds me of a tax collector from the State of Mississippi who showed up at my business door (in Louisiana) in the mid 1990's with a tax bill for work we'd done on wells located in his state. I guess he thought I'd just write him a check and send him on his way. Wrong thought.
I asked for a copy of the list of invoices, asked him some questions about how the taxes were calculated and then told him he could return the following month for a meeting to cover the issue and receive his check. His tax bill was something something on the order of $10,000. I consulted my company's CPA and then prepared for the meeting.
He showed up as promised and was in for a surprise. At the meeting I pointed out that our invoices covered such items as mileage charges, technician drive time and charges to collect the samples, meals, hotels where applicable, and the actual lab work performed on the samples.
Meals and hotels were a wash as these were billed to the client as charged to us. Since the meals and hotels stays were in Mississippi, the state had already collected taxes on those items.
Mileage charges and drive times I recalculated to reflect only those miles and hours that applied to the State of Mississippi. Afterall, we had to drive half-way across the State of Louisiana to arrive at the border. Drive time and mileage in the State of Louisiana applied to Louisiana, not Mississippi.
Finally, all of the lab work (the bulk of each invoice) was done in the State of Louisiana, not in the State of Mississippi so we didn't owe them squat for that either.
Some of the work done was also in offshore waters of the State of Mississippi and some beyond the 12 mile limit which meant these were actually federal waters, not state waters....ie, no taxes due the state.
Anyway, in the end I demonstrated his portion of the taxes was actually something on the order of $700, not $10,000 and that he could accept the $700 payment or we could go to arbitration. He left with the check for $700 and I never heard from the State of Mississippi again.
