Sales Tax

[Talonewo]

Long story short, my boat is getting refit at a yard in Slidell Louisiana I live in Texas and will move the boat to Texas as soon as the boat is ready, they have been working on the boat for just over a year now.

Six months into the process I was going through some of the invoices with the yard manager and he said since my billing address was in Texas I was not responsible for Louisiana sales tax and credited my account just over $2500 that I had paid in tax to date and I have not been charged sales tax since. Of course I did what most of us would do with a $2500 wind fall.... I authorized the yard to do more work.

It is a small yard, with about six full time employees, I'm not sure what exactly happened but there was some drama at the yard and all but one of the staff quit overnight, including the book keeper and yard manager (I think they were all related to each other, so they "quit as a family").

The owner quickly got a new manager and workforce in place and I'm actually seeing the project progress faster. But the new manager said they brought in a new accountant and that I'm going to have to pay the La sales tax, don't have the exact number yet but I'm thinking around $4000.

What would you do? Complain to the owner of the yard ask him keep the word of his previous manager and to eat the cost?

One more odd ball question, when my boat first got to the yard they found and bought a used generator for me, I paid $4500 for it... they charged me sales tax(almost $400)... can the state collect sales tax on a used item? I can understand a used car dealer collecting sales tax, but a boat yard for a used generator? If I would have bought it on craigslist myself would I have been responsible for sales tax?

 

[bobsyiruncle]

taxing question

Can't say as I am any kind of expert on your area and I am not a lawyer or even a US citizen but I do qualify as cheap. Typically sales tax applies based on where you take delivery so in some jurisdictions if you took delivery out of state you would be responsible for assessment not from the producing state but in the receiving state. In many cases,this is self reporting. In some jurisdictions but most notably in Europe you can apply for a refund of tax paid as you leave the jurisdiction.

In your case you have to pay in one state or another but depending on the rules and delivery you might be able to shift it to the one with the lower rate. This is worth looking into and avoids a fight with the yard.

Alternatively, you may have a contractual beef with the yard. The duty to collect is imposed on them by the state, so even if they made an error in not collecting generally they can go back and charge you. If on the other hand, the freedom from tax was used as any kind of inducement to get your work you probably have a beef. It does not matter that they changed people. The first person was acting legitimately on their behalf at the time and bound the company to whatever they did.

 

[DavidM]

You are posing a very complex question that is no doubt specific to Louisiana sales tax law. I would sit down with the new accountant for the yard and ask him/her to explain the law to you. If what he says makes sense then suck it up and pay the $4,000.

David

 

[markpierce]

You pay sales tax to the state you were standing at the time of purchase. If I'm in Phoenix, AZ and purchase a tire for my California-registered, the Phoenix retailer collects the tax on behalf of the State of Arizona. If I ordered the tire remotely for shipping to California, I'd have to pay California use tax instead of Arizona sales tax. ... Your boatyard should be collecting the sales tax, because you took delivery (installed on your boat) at the boatyard. Yes, sales/use tax is due on both new and used items purchased unless you operate a business and will be reselling it and collect sales tax from the purchaser.

Contact the State of Louisiana to confirm. The state's website likely answers your question.

http://www.revenue.louisiana.gov/sections/faq/default.aspx?type=GEN&cat=SLS

 

[Bay Pelican]

Louisiana is unique in the United States in that it legal system is based on the civil code such as in Europe (France in particular) as opposed to the balance of the US states whose legal system is based on the English civil law. While there may be some odd ball in the Louisiana code that exempts Texans I doubt it.

The exemption for interstate commerce is US constitution based and not dependent on the individual states. This is the exemption which normally applies when a Texan orders goods form any other state and has the goods shipped to Texas. That exemption would not apply if the Texan is in the state in which he purchases and takes delivery of the goods. Thus since you purchased the goods in Louisiana and took delivery in Louisiana, Louisiana law applies (whatever that is). This would be the same as if you went to a local store and bought something.

It would be a different situation if you were buying the boat from the marina and as part of the contract and sales price demanded that certain work take place before you took delivery and ownership. Then pursuant to agreement among the states the "sales tax" would be collected by the state in which the boat/car is register - provided you got the boat/car out of the purchase state within the required number of days.

The tax by the way is not a "sales tax", it is a retail occupation tax on the person who sells something at retail in that state. The tax is added to the sales price, but is essentially a tax for doing retail business in that state.

Won't comment on your agreement with the prior manager, that is just a dispute as to pricing.

Marty

 

[Richard W]

From my experience with out of state purchases and online purchases, the state tax does not apply if you as a purchaser are out of state and goods are to be delivered to your out of state address. For example ... if I buy online from business operating in NYC while I reside in NJ, and the goods are delivered to my NJ address ... no NY State tax. If I pick the goods up from NYC store location ... the NY State tax applies.

It seems that the first accountant interpretation was wrong and you were on the hook for the outstanding state sales taxes, but it was not your mistake ... the business should deal with it now ... they just had given you a discount then ...

The state sales taxes apply to all sales the business makes, does not matter if the goods are new, used, or scrap ... anytime the invoice is generated the state sales tax is to be collected sans state specific exclusions/exemptions.

 

[tinped]

as a retailer once said to me,"i do not charge sales tax,i simply collect it".Unless your contact says tax included in the price,you will not have a leg to stand on.If the tax is on your final bill for the whole job,and you refuse to pay it,the state will go after you,not the yard.Be careful!

 

[bobsyiruncle]

I just looked up the map for Slidell Louisiana and I think the out of state delivery ploy kind of sucks. As well, on a re-read the inducement is pretty feeble too.
I think I would take cash, wave it and whine and cry a bit about the misunderstanding. Most merchants are human and will give it some consideration - maybe not the full amount but some nevertheless. If you are going to try this, make sure you are doing your act in front of the person with authority to make the deal.

 

[Steve]

You are talking about a good bit of money why not check with an independent tax accountant who would not be influenced by the seller or the state.

 

[Off Duty]

You are talking about a good bit of money why not check with an independent tax accountant who would not be influenced by the seller or the state.

^^^^^^
Probably the best advise I've read, except that I'd review the state's tax law as well.

I'd be willing to guess that the taxes have to be paid regardless.
And if it has to be paid, somebody's going to have to pay it.
I wouldn't hold my breath for the yard or it's new owners to pay it.

As mentioned, if your contract says "taxes included" then you seem to have some bargaining chips. If not, then you're probably screwed.

Good luck...

OD

 

[FF]

Most marine parts have a far larger markup than the sales tax.

They should honor the agreement and eat the tax , IF they expect more work from you.

40% on a cleat or thru hill trumps 10% sales tax easily.

 

[MC Escher]

Long story short...


One more odd ball question... can the state collect sales tax on a used item?

Well, long story short...

Your boat is in a boat yard in Louisiana and the work is being done there, thus you are purchasing the service in LA.

So, yeah...
You owe the same tax on it that you would owe if you were a resident.

The generator is interesting.
A sale of a used item is generally called a "Casual Sale" where the seller is not normally in the business of selling things for profit. Think in terms of a garage sale or Craigslist. That's not taxable.

However, you probably got a receipt, which means that you DIDN'T buy it from a private individual, you bought it from the boat yard and they are most definitely in the business of selling things. That's NOT a private sale, that's an ordinary business sale and you do owe tax on that. As to the question of used, if you buy a car or boat that's used, you pay tax for that, right? I mean unless you "declare" on the registration paperwork that you paid a dollar for it or something. Technically that's a crime but you'd have to REALLY irritate the government for them to come after you for something like that.



Look, there are few things in this world that make me happier than tearing up parking tickets or cheating on my taxes, but sometimes you're just stuck.


I suspect that OLD accountant was willing to play fast and loose with the rules where he knew he could get away with it and the new one isn't.


You could always talk to the yard owner, explain that you know this is a lousy situation all around and that his options are limited, but if he comes up with any ideas to lighten the blow that it would be appreciated.

 

[cowdogs]

So if I live in TX, and buy a VHF radio from company in LA, and they ship it to me then no sales tax is charged/paid. Everyone seems to agree.

How about if I send an empty box from TX to LA, have them package the VHF in the box, and ship the box back to TX?

How about if I send my boat from TX to LA, have them install the VHF in the boat, and ship the boat back to TX?

I must be bored...

 

[Bay Pelican]

Cowdogs

All three of your examples would likely be exempt. The third would have to be done correctly, i.e. the yard would have to handle delivery of the boat back to Texas. The third is commonly seen in the repair business, think SSB radios which are sent to the manufacturer in another state and then shipped back to the customer repaired or with an added feature.

Marty

 

[Tonic]

So if I live in TX, and buy a VHF radio from company in LA, and they ship it to me then no sales tax is charged/paid. Everyone seems to agree.

Ah, but the State of Texas does not agree.
Use Tax

Texas, like here is Washington, and I suspect most states that have sales tax, has a use tax for items purchased outside of the state. The residents of those states are responsible for reporting said purchases and paying the appropriate tax. In practice I doubt that 5% of out-of-state internet purchases are reported by the consumers, but the laws are in place and the states would like you to be good citizens, fess up, and pay the taxes.

 

[THD]

Sales Tax questions seems to arise with regularity here, although usually with regard to a boat purchase, not repair bills. As a tax attorney, I can offer the following, although with the usual caveat that it is not nor intended to be legal advice.

In the OP's situation, Yes, the boat yard should be collecting sales tax on the repairs done to your boat and the hardgoods they have purchased to go into your boat, including the generator, absent some specific exemption in La law. The work was done at a physical location in La, that is the determining factor. Your residence has no relevance. As to repaying the past refunded sales tax-that is a matter for negotiation between you and the boatyard. But, the boatyard will have to remit the sales tax to the state when it reports its monthly revenues whether you pay them or not.

I would add that you should make sure you keep all your invoices showing the sales tax actually paid in La. it is likely that when you return the boat to Tx, they will want to collect Use Tax on the value of the boat. You can offset that by the amounts of Sales Tax paid to another state.

In the other situations mentioned here, online sales, out-of-state sales, etc, that is currently an area of huge concern among the states. States lose billions of $$ to online/ctalog and similar sales. The general rule in all states is that any business having a physical place of business in the state must collect sales tax for sales delivered in that state. In the old days, that meant simply that a company had a store in a state. Now, the meaning has been stretched to include any type of physical presence. Thus Amazon collects sales tax in about 25 states, mostly because it has distribution centers or server facilities in a state. So, if you live in one of those states and buy from Amazon, they will charge you sales tax. Doesn't matter where your purchase is shipped from, just the fact that Amazon has a physical presence in your state means you pay sales tax on Amazon purchases.

Because this is such a hot button issue right now, in less than 5 (maybe even 3) you will see online retailers collecting sales tax on every purchase. One of my clients has a company that develops and sells software to do just that for online retailers. They have the sales tax laws for over 100,000 jurisdictions (states, counties, towns, etc.) in their database. From your delivery address, their software will compute the correct sales tax in about a half a second. For an idea as to how hot this issue is? A big VC firm just invested $25M in his company.

 

[Bay Pelican]

When you discuss the sales tax remember it is actually a retail occupation tax for the services provided to a retailer in that state, thus the state has no claim to a tax on the out of state retailer. (Use tax is different.). As to congress requiring that out of state retailers collect the use tax in the future one of the problems is a practical one, as of 2008 (I retired) no one could tell on any given day the tax rates of all 43,000 some different and overlapping jurisdictions that collect the retail occupation tax in the United States. Thus some streamlining of the tax would be required so that someone in a little town in Maine would know what tax to collect in an unincorporated section of New Mexico outside of Santa Fe. One problem is that the city and zip code of the mailing addresses for many people in the United States do no reflect their taxing jurisdictions and you would need software that goes by street address. Having used both MapQuest and my TomTom GPS I know many addresses aren't even located.

An additional technical problem is what location to use. We think of a shipping address rather than the ordering address. Illinois, for example, uses the ordering address so that a company based in Chicago cannot have its goods shipped to an unincorporated section of another county and save millions (United Airline case) by avoiding the Chicago tax.

Marty

 

[denverd0n]

When you discuss the sales tax remember it is actually a retail occupation tax...

That may be the case in Illinois, but here in Florida the statute that lays out sales taxes specifically calls it a "sales tax." I find nothing at all, in any of the Florida statutes, about a "retail occupation tax."

The point being that, when it comes to these things, every state is different. You need to know the specific laws for the state that you are talking about, and there is no single answer that applies to all states.

 

[HopCar]

THD, since I have both a brick and mortar store and an online store I'm concerned about having to collect the out of state taxes. I figure when it happens there will be software available that will help me collect it. What I'm worried about is how will I submit the tax to the correct taxing authority. Right now I just collect Florida sales tax and I have to register with the state and buy special software each year just so I can give the money collected to the state. Will I have to do this with another 49 states? What a nightmare!

"When you discuss the sales tax remember it is actually a retail occupation tax for the services provided to a retailer in that state..."
Not in Florida. Sales tax is what funds most of the state government. We have no income tax. The purchaser is required to pay the tax, not the retailer. In fact if a resident of Florida orders something on the internet, and doesn't pay sales tax on it, he is required to submit the tax directly to the state. No body does it, but that's the law.

 

[cowdogs]

Cowdogs

All three of your examples would likely be exempt. The third would have to be done correctly, i.e. the yard would have to handle delivery of the boat back to Texas. The third is commonly seen in the repair business, think SSB radios which are sent to the manufacturer in another state and then shipped back to the customer repaired or with an added feature.

Marty

My example ignores that fact many (most) states actually say you must pay tax on your mail order purchases. However, as we know nearly no one does. I find it interested that the law might draw a distinction on who delivers the item? If I lived near a state line with an excellent boat yard 10 miles across the state line, I suppose I could "mail order" a $50K boat refitting.

 

[THD]

Hop-it indeed is an issue. Our client is working with jurisdictions to streamline reporting and have it all done electronically. Most larger jurisdictions now are "report and pay" online, but many smaller ones are not. There is a huge retail lobby out there that argues, rightfully so in my mind, that the avoidance of sales tax collection by online retailers gives them an unfair advantage. The cost to states, in lousy economic times, is in the billions. The sticking point has always been the "physical presence" test. State courts have been increasingly willing to stretch what constitutes a "physical presence" in the state. Just in the last 2 months, Amazon lost a case in NY. The NY court found that if Amazon had any relationship at all with a NY-based website, and paid the website for traffic redirected to an Amazon site, i.e. the Amazon agents program, that was a sufficient nexus to require Amazon to collect NY State sales tax.

Plus, states are putting a lot more emphasis on the Use tax for businesses. I have two clients who just underwent WA sales tax audits and the auditors spent most of their time looking the companies' out-of-state purchases to see if use tax was due, rather than looking at their revenues and their sales tax collections.

 

[THD]

Hop-I hope this is not breaking any TOS-if your online sales are growing, you might want to check out www.avalara.com. They do have sales tax solutions for small/medium sized businesses and they are integrated into a lot of existing ecommerce software.

Disclosure-they are a client, but only trying to be helpful!

 

[Bay Pelican]

Don

Thanks for raising the Florida issue it is a good example. The heading of Section 212.05 refers to Sales etc. However the heading is not a section of the statute. The statute itself refers to a tax on the retail occupation:

212.05 Sales, storage, use tax.—It is hereby declared to be the legislative intent that every person is exercising a taxable privilege who engages in the business of selling tangible personal property at retail in this state, including the business of making mail order sales, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this state any item or article of tangible personal property as defined herein and who leases or rents such property within the state.
(1) For the exercise of such privilege, a tax is levied on each taxable transaction or incident, which tax is due and payable as follows:
(a)1.a. At the rate of 6 percent of the sales price of each item or article of tangible personal property when sold at retail in this state, computed on each taxable sale for the purpose of remitting the amount of tax due the state, and including each and every retail sale.

The point of drafting the statue so as to tax the retail occupation is to avoid a state taxing interstate commerce which in the 20th century was defined as almost everything.

 

[cardude01]

Ok, speaking of tax, let's say I buy a boat in a state that has no or little sales tax-- like SC, where it is capped at $300. Can I document this vessel with the Coast Guard and avoid titling (and subsequent sales tax) it in my home state?

 

[psneeld]

Ok, speaking of tax, let's say I buy a boat in a state that has no or little sales tax-- like SC, where it is capped at $300. Can I document this vessel with the Coast Guard and avoid titling (and subsequent sales tax) it in my home state?

Depends on your home state laws, how they are worded and how far are you willing to interpret them in your favor...if you lived in NJ the answer would be no...you would pay the diff of $300 and a total of 7% of the purchase. price....assuming you paid the $300 to SC.

 

[THD]

Cardude-yours is the question that comes up regularly as I referred to in an earlier post. Sales/Use tax depends on physical location, for a boat as well as for a store. You can buy your boat anywhere. When you move it into your home jurisdiction, the boat is subject to the sales/use tax laws there. Whether the boat is documented or not generally makes no difference, where the boat is home-ported for documentation makes no difference. What matters is where you keep the boat and for how long (states have different periods to subject the boat to state jurisdiction).

An example of the trouble that can arise-here is Seattle (8.5% sales/use tax with no upper limit), a 400 foot yacht came in from Victoria, valued at close to $125M. They docked for a few weeks and were going to do some work on the boat. The time period in WA is 60 days. If the boat is in the state for 60 days, it must be registered and sales/use tax paid on the value of the boat. You can get a permit for an additional 60 days. The Captain or owner did not get a permit-the state tax folks showed up with a bill for 8.5% of $125M! That is a $10M tax bill! They ended up getting a waiver for the repair time and quickly left the state!

 

[cardude01]

Who will find me and turn me in in my home state?

Cardude-yours is the
question that comes up regularly as I referred to in an earlier post. Sales/Use tax depends on physical location, for a boat as well as for a store. You can buy your boat anywhere. When you move it into your home jurisdiction, the boat is subject to the sales/use tax laws there. Whether the boat is documented or not generally makes no difference, where the boat is home-ported for documentation makes no difference. What matters is where you keep the boat and for how long (states have different periods to subject the boat to state jurisdiction). An example of the trouble that can arise-here is Seattle (8.5% sales/use tax with no upper limit), a 400 foot yacht came in from Victoria, valued at close to $125M. They docked for a few weeks and were going to do some work on the boat. The time period in WA is 60 days. If the boat is in the state for 60 days, it must be registered and sales/use tax paid on the value of the boat. You can get a permit for an additional 60 days. The Captain or owner did not get a permit-the state tax folks showed up with a bill for 8.5% of $125M! That is a $10M tax bill! They ended up getting a waiver for the repair time and quickly left the state!

 

[Moonstruck]

Who will find me and turn me in in my home state?

Does Texas require state registration on a federally documented vessel? As far as I know (I have paid the SC sales tax on two boats) SC does not notify your home state. If you bought the boat in FL with a 90 day cruise permit, FL notifies your home state.

In Tennessee the TWRC visits the marinas, and walk the docks once per year. They will give an unregistered boat a citation. If Texas does not have boat title or registration laws you possibly could get a pass.

 

[THD]

Cardude-Texas requires all boats to be registered. If you are in Texas waters, or in a Texas marina without a registration sticker, you will get hit. To get the registration, you have to show proof that the sales/use tax was paid.

 

[SaltyDog]

Is the labor portion of the refit subject to sales/use tax?

Maybe services are not taxed in LA.