Re: Taxable Freight? -- BPCS-L

As I understand from the debate over future Internet Taxes, there was a US 
Supreme Court ruling that one state of the USA cannot charge taxes on a 
transaction from out of state to one of their residents or resident 
companies, precisely because the States have made Local Tax law too 
complicated.  I can back track cite the particular reference if you 
interested.  There are several internet lists that I think are doing a 
responsible job of exploring this reality .. the Euro connection for example.

There are several experiments at the State Governor level to do some 
cooperative taxation, in which in your case you would pay the taxes to the 
state in which you are in business, with very heavy paperwork burden 
explaining what state the sale was made into so that state will be paid by 
your state.  In other words, several states are trying to circumvent the 
spirit of the US Supreme ruling.

This is why people who buy things from out of state within the USA are 
required under current court rulings & current laws as consumers to pay USE 
TAXES which are just like SALES TAXES except instead of being paid by the 
SELLER they are paid by the BUYER.  Another exception is that there is 
neither tax burden if the purchase was made over the internet thanks to a 
Federal Moratorium on Internet Taxes that is half way to expiration, so there 
is some debate ... if the feds do not renew this ... what then?  

This means that under US Law, your customer has legal obligation to pay taxes 
TO THEIR STATE & you have NO LEGAL obligation to pay sales taxes to any state 
other than the ones you are officially operating in, unless the two of you 
happen to be in the states involved in the experiments to circumvent the US 
Supreme ruling.  

But they are your biggest customer & they do not want to follow standard tax 
laws, they want you to pay the taxes FOR them to save them the trouble of 
doing it themselves.  They want you to provide a service like H+R Block 
offers to individual tax payers.

Thus the issue here is not one of you having a tax obligation in a state that 
is foreign to your state of business, rather it is one of a customer having a 
special need & you want to satisfy their special need because they are your 
biggest customer.

In other words, they want to pay their tax obligation to you & have you pay 
their tax obligation to their state for them.  You will have to check with 
the state to find out if this is permitted under that state's laws & what 
special forms are needed.

If you are going to do it, I see only two ways to handle it.
Either you modify BPCS to do something different for THIS CUSTOMER, or your 
accounting department do THEIR WORK and have a secondary invoice system.

1. Regular invoice, do not include freight charges.
2. Second invoice for the freight.
3. Third invoice for the WA tax on the freight.
4. Fourth invoice for your expenses doing their tax work for them.

Perhaps it would be real smart for your CEO & their CEO to touch base with 
your respective TAX auditors & make absolutely for sure understanding that 
this is what the two companies want, that it is not a misunderstanding from 
some accounting clerks who do not understand tax law.

The excess money they have sent you is money owed their state in taxes, that 
if not paid by some deadline will result in penalties & interest for some 
company.

This issue needs to be resolved rapidly.  Otherwise when the tax auditors 
check your customer & find out that they paid their tax obligation to YOU, 
this can lead to a visit from out of state tax auditors that is unwelcome 
expense ... you need to protect yourslelf from this risk ASAP.  Even though 
the US Supremes made a ruling, a lot of people are ignorant of it, and at the 
very least you are a recipient of money that should have been paid to the 
state of your customer.

MacWheel99@aol.com (Alister Wm Macintyre) (Al Mac)


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