Sales Tax Exemption

[Waxman]

Hello

My wash is in Massachusetts. I keep track and pay sales tax on vending items. Kleen Rite requires a sales tax exemption form. Is that something I should get? Do you have one?

Thanks!

 

[slash007]

It ends up the same. If you have the form, it's a resale form and you pay the tax later. If not, you've just already paid the tax when you buy from KR so you don't pay it again later.

 

[MEP001]

If it's the same as Texas, paying the tax for something you plan to resell isn't as simple as just paying the tax at the time of purchase. There's a profit that also must be taxed. It would be simpler IMO to just purchase tax-exempt and pay on what you vend it for. That's what all retail does in this case. Assuming you're trying to go "by the book," you'll also need to pay sales tax on items/product from Kleen-Rite that you use and don't actually sell (Sales use tax).

https://www.mass.gov/files/documents/2018/01/31/dor-sales-use-form-st-4.pdf

 

[Earl Weiss]

That's what all retail does in this case. Assuming you're trying to go "by the book," you'll also need to pay sales tax on items/product from Kleen-Rite that you use and don't actually sell (Sales use tax).

https://www.mass.gov/files/documents/2018/01/31/dor-sales-use-form-st-4.pdf

So, now the question is will you be able to designate on an order what is taxable and what is for re sale?

 

[mjwalsh]

So, now the question is will you be able to designate on an order what is taxable and what is for re sale?

Earl & others,

We have a sale tax exemption certificate that we use with all the locals that we get our vending items etc. With KR I parse out on a spreadsheet so we aren't double taxed on the vend items. MEP001 is right about the Use Tax requirement. Being audited & not being able to show 100% compliance is bad news with unreasonable back interest etc & possibly penalties ... been there.

Now that the Supreme Court ruled on new out-of-state collection requirements for significant out of state suppliers ... KR may have to set up a provision on its order form for the resale items so they meet their end of compliance. On fragrance trees & other car wash vended by us resale items ... hopefully we will check on a revised KR & others form & then we will no longer have parse it out from the "use tax for our own use items" after the transaction.

When will the out of state companies we buy from be required based on the very recent ruling? Is there a reasonable transition period?

When I testified several years & several times against additional regressive taxes at our legislature ... there seemed to be a frenzy from some lawmakers & some media who described that path to go as being "sooo sooo much more simple" than other taxes. Any thoughts from anybody who agrees with them on depending more on regressive vs income tax. I see the tax as "before we have even made it" & since passing on too many extra nickle & dime costs could make our service less popular. Earl ... is there any truth that some large oil companies subsidize their car washes with their gas sales from time to time? The number of oil companies car washes have really mushroomed here locally in the last ten years or so!

 

[Earl Weiss]

Earl & others,

Earl ... is there any truth that some large oil companies subsidize their car washes with their gas sales from time to time? The number of oil companies car washes have really mushroomed here locally in the last ten years or so!

Your experience differs than what we see in Chicagoland. Few locations are run by Oil Companies. They figured out they have a lot less headaches with Selling or leasing locations and tying them up with supply agreements. The most prominent marketing plan is to sell offer a discount of 10-20 cents a gallon below the street with purchase of a wash that usually has a base price of $4.00 or so. I have heard that 20% of those purchased washes are not redeemed.

Years ago when we leased from an oil company they wanted us to give away a wash to enhance gas sales. I sat with some oil company reps at an ICA show once and opined that they didn't care if the dealers busted their Butts and gave stuff so long as they sold their product. Their response was the profitability of the location was looked at in it's entirety. Then they promptly changed seats.

 

[Earl Weiss]

.

Any thoughts from anybody who agrees with them on depending more on regressive vs income tax.

My thought is the income tax system is broken beyond repair and should be eliminated in favor of a National Sales Tax. This can be less regressive by exempting necessities and having partial exemptions for other stuff. This will capture the "underground economy" such as criminal revenue and undocumented workers who pay no income tax. It will also simplify the system. The Fed can piggyback on State collections working out something for states without sales tax and let the states keep a portion for their collection efforts. This will almost eliminate the IRS, (Someone still needs to audit retail) as well as time, effort and costs for employer withholding.

 

[MEP001]

So, now the question is will you be able to designate on an order what is taxable and what is for re sale?

When I said "pay sales tax on items/product from Kleen-Rite that you use and don't actually sell," I meant to pay them to the tax assessor/collector. Kleen-Rite SHOULD let you order some items taxable and others exempt, but I wouldn't trust them to get it right. I feel it would be easier math to just order everything exempt and pay actual sales tax on items sold and sales use tax on the rest.

 

[mjwalsh]

When I said "pay sales tax on items/product from Kleen-Rite that you use and don't actually sell," I meant to pay them to the tax assessor/collector. Kleen-Rite SHOULD let you order some items taxable and others exempt, but I wouldn't trust them to get it right. I feel it would be easier math to just order everything exempt and pay actual sales tax on items sold and sales use tax on the rest.

Here is some info: https://www.forbes.com/sites/greats...rts-internet-sales-tax-decision/#46b26bc53fbe
It appears that Kleen-Rite & others possibly will be able to do what you suggest depending on if a specific state does allow it for some specific customers. Time will tell on how flexible they will be. The state sales tax departments might decide it is easier to audit the supplier since the supplier might be selling to individuals. Individuals buying from out of state ... I don't believe were ever audited here in ND. That is what bothered me about the intense audit that I had to endure is that it appeared that they were going after businesses only on the "use tax" since they were much easier "pickings". The audit was their way of retroactively enforcing. 7 years back 12% interest back in 1999. Very sickening process since it pretty much made everyone vulnerable to being accused of breaking the law. Selective enforcement if you will.

 

[mjwalsh]

Your experience differs than what we see in Chicagoland. Few locations are run by Oil Companies. They figured out they have a lot less headaches with Selling or leasing locations and tying them up with supply agreements. The most prominent marketing plan is to sell offer a discount of 10-20 cents a gallon below the street with purchase of a wash that usually has a base price of $4.00 or so. I have heard that 20% of those purchased washes are not redeemed.

Years ago when we leased from an oil company they wanted us to give away a wash to enhance gas sales. I sat with some oil company reps at an ICA show once and opined that they didn't care if the dealers busted their Butts and gave stuff so long as they sold their product. Their response was the profitability of the location was looked at in it's entirety. Then they promptly changed seats.

Earl,

Back about 1991 I had a semi retired master mechanic on my payroll. Both him & his wife were also long term customers of our laundromat who became dear friends. They told me of some of the adventures they had when they leased as many as three Exxon Gas Stations all at one time in our small city. There was a huge excavated city block hole left in our downtown that was part of the mid sixties federal urban renewal. The elderly couple said that even though it did not come out in the media ... they explained it was affected by an underground leak from one of their Gas Stations. They pleaded with the "fresh out of college executives" about how the revenue did not match the amount of gas that they needed to keep replenishing. The big oil company executives just brushed them off even though they were persistent in letting them know.

They were part of "back in the day" when service stations were very much into vehicle tune-up work.

 

[MEP001]

Here is some info: https://www.forbes.com/sites/greats...rts-internet-sales-tax-decision/#46b26bc53fbe
It appears that Kleen-Rite & others possibly will be able to do what you suggest depending on if a specific state does allow it for some specific customers. Time will tell on how flexible they will be. The state sales tax departments might decide it is easier to audit the supplier since the supplier might be selling to individuals. Individuals buying from out of state ... I don't believe were ever audited here in ND. That is what bothered me about the intense audit that I had to endure is that it appeared that they were going after businesses only on the "use tax" since they were much easier "pickings". The audit was their way of retroactively enforcing. 7 years back 12% interest back in 1999. Very sickening process since it pretty much made everyone vulnerable to being accused of breaking the law. Selective enforcement if you will.

Of course Kleen-Rite can assess sales tax on some items and not on others. It's a per-item selection when they enter an order. All they need to know is which items are for resale and which are not. I feel the point is moot when Waxman can simply order everything under his tax permit and pay sales tax or sales use tax where needed, and Kleen-Rite can't get it wrong when his account is set sales tax exempt.

Massachusetts tax assessor is not going to audit a company in Pennsylvania.

 

[mjwalsh]

Massachusetts tax assessor is not going to audit a company in Pennsylvania.

No offense but sometimes we underestimate what can happen.

For the sake of all of us ... what you do suggest for the example of Waxman & KR does make sense IMHO. Then the burden will only be on Waxman (if audited by a Massachusetts sales tax auditor) to show that it was done that way for simplification purposes & not for avoiding whatever specific tax law process requirement.

At Sam's Club when we buy with a our business credit card ... the credit card receptacle specifically asks whether specific items are tax exempt since they have our sales tax certificate in their system.

 

[MEP001]

No offense but sometimes we underestimate what can happen.

Why would the Massachusetts tax assessor audit a seller in Pennsylvania? They're selling to their customer based on what that customer claims is taxable and what isn't. Kleen-Rite doesn't know what Waxman will do with their product. They'll audit the person with the exemption permit. They would have neither the authority nor the resources to go to Pennsylvania, nor would they gain anything they couldn't learn by just requesting a list of what he's purchased tax-exempt with his permit.

At Sam's Club when we buy with a our business credit card ... the credit card receptacle specifically asks whether specific items are tax exempt since they have our sales tax certificate in their system.

Exactly how Waxman can order certain things from Kleen-Rite tax exempt and pay sales tax on others.

 

[Earl Weiss]

Earl,............ They pleaded with the "fresh out of college executives" about how the revenue did not match the amount of gas that they needed to keep replenishing. The big oil company executives just brushed them off even though they were persistent in letting them know.

They were part of "back in the day" when service stations were very much into vehicle tune-up work.

Not sure of the point. Even though the owning oil companies likely owned and had the responsibility to maintain the tanks, (Law says owner is responsible, lease may have shifted the obligation) the operators had a responsibility to reconcile the inventory and see there was no loss of product thru leaks or badly calibrated pumps / dispensers. Made no sense for them to keep spending $ to put product in the ground. Over the years of oil company ownership issues were discovered and resolved.
Now, everything is easier / simpler / safer with double wall equipment and all sorts of sensors and automatic monitoring . gauging.

 

[Randy]

You guys should count your lucky stars you don’t have a business in Washington State. We pay 8.1% to 10.2% sales tax on all car wash sales, bay time, vac’s and vending. Anything we buy from out of state we pay “Use Tax” on, Use Tax is the same rate as our local sales tax. We don’t pay Use Tax on vending items, it’s collected when the item is sold. An audit by the State tax collector is not a fun experience, they flip over every pebble they can to find any money that’s owed.
A number of years ago a local car wash operator remodeled his car wash and had everything shipped to Oregon thinking he wouldn’t have to pay sales or use tax, they don’t have sales tax in Oregon. A few years later he was audited by the state and with all the penalties and interest he ended up paying a little less than $36,000. Last year he was audited again. This time he ended up paying around $15,000, same thing not paying the Use Tax. You’d think he would have learned the first time.
There is a movement by the local car wash association to have the Sales Tax on car washes repealed. That’ll happen about the time pigs grow wings and learn to fly, once the state gets a revenue stream they aren’t going to give it up.
A friend of mine in Connecticut just found out the hard way that he has to pay sales and use tax when he was audited by the state.

 

[mjwalsh]

Randy,

You shared what I both heard from other businesses & first hand about the bureaucrats & politicians ability to "waste small business owners time & money" Since Washington State will be getting a tax "windfall from the individuals now being held responsible for use tax" finally via the Supreme Court ruling. I believe went into effect yesterday Oct 1st???

Washington State supposedly touts their "no income tax" within their state & I am thinking some "deep pockets" large oil company - car wash owners have been an impediment in the past to you guys getting an exemption like the laundromat owners finally got via hard fought efforts. There can be a frenzy for getting rid of all income tax & the illusion that the feds will follow the states based on being on the receiving end of some of those zealots. Too many Lois Lerners & Eric Holders & they might get their wish for no fed income tax but at what cost in terms of even more "regressive" taxes.

When I was helping to lead our specific state away from the more "regressive taxes" .... there was an indelible memorable moment for me when I was visiting face to face with one of our former proven successful "referral kings". He asked me point blank "did they exempt advertising" I had to tell him "no". He said you do not have a "prayer". He was wrong ... we did turn around the frenzy that was happening at the time ... hopefully ... it will never be "revenge" time from some within "both political parties" & just as bad from too many in the "MEDIA"!!!

BTW, I have been getting a lot of supporting worthwhile info from cashessentials.org about tax dollars lost because of too much appeasement to the "100% cashless" crowd!!! This can be a bit related to the topic .... again ... too much power in the hands of too few IMHO!

 

[Earl Weiss]

!!n getting a lot of supporting worthwhile info from cashessentials.org about tax dollars lost because of too much appeasement to the "100% cashless" crowd!!! This can be a bit related to the topic .... again ... too much power in the hands of too few IMHO!

Luv to see a link. For years we heard about the cash society hiding income and therefore paying less taxes. Would luv to read how someone hides credit card sales.

 

[mjwalsh]

Luv to see a link. For years we heard about the cash society hiding income and therefore paying less taxes. Would luv to read how someone hides credit card sales.

Earl,

Since you & possibly others are willing to keep an open mind. Here is the link. This is one of the better ones it appears. I am still learning about what they have to say also.

https://cashessentials.org/

IMHO, 100% merchant fee based does leave the door open to more selective law enforcement.

Also as a former very popular governor of our state Ed Schafer would say about poor judgement "micromanagement" coming from the far left with their agenda. 100% tracking does have its downside in the hands of the "power of might" vs the "vindication of right" authorities who happen to be in power at whatever given time!

 

[Earl Weiss]

Earl,

Since you & possibly others are willing to keep an open mind. Here is the link. This is one of the better ones it appears. I am still learning about what they have to say also.

https://cashessentials.org/

!

Followed the link which contained numerous articles none of which had any intro claiming

"Quote Originally Posted by mjwalsh View Post

!!n getting a lot of supporting worthwhile info from cashessentials.org about tax dollars lost because of too much appeasement to the "100% cashless" crowd!!! "

Can you provide a more specific link / direction that explains how tax dollars are lost by going cashless or to less cash?