Be Aware of Use Tax: The Stealth Tax

Written by Peter Tran

June 25, 2017

When businesses are audited by the WV State Tax Department the result is often a very expensive vocabulary lesson that bold-stamps the term “use tax” into the owner’s lexicon. Most business owners are very familiar with the proper colleCTion and remittance of sales tax. sales tax’s cohort, use tax, however, often remains unnoticed until an […]

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When businesses are audited by the WV State Tax Department the result is often a very expense vocabulary lesson that boldstamps the term “use tax” into the owner’s lexicon. Most business owners are very familiar with the proper collection and remittance of sales tax. Sales tax’s cohort, use tax, however, often remains unnoticed until an auditor tallies up a jawdropping deficiency bill. In today’s article, we will discuss the basics of use tax as it applies to your business. Our goal is to help spark “use tax” recognition when you make an internet or outofstate purchase, not a few years later when an auditor asks to see receipts for all your major purchases.

According to the WV Department of Tax and Revenue “use tax is tax a 6% tax on the use of tangible personal property or services in West Virginia where sales tax has not been paid.” This means that if you or your business purchases an item from someone located out West Virginia and bring it into West Virginia (where it used or consumed), that purchase is subject to the same sales tax rules as any other West Virginia purchase. Under such circumstances the tax is called use tax, not sales tax, and it is the er’s responsibility to pay, not the sellers.
The er must report and pay use tax but gets a credit for any sale tax paid to the state where the items were originally purchased.

Here are some common situations that get taxpayers into trouble:

Your business s $10,000 worth of computer equipment for its West Virginia office from an online computer vendor. The vendor does not charge sales tax. Your business must remit the $600 (10,000 times 6%) in use tax to the West Virginia department of tax and revenue.

Your Business purchases a $30,000 piece of heavy equipment from an indidual (or at an auction) in another state and you bring it into West Virginia for use in your construction business. You do not pay sales tax on the purchase. You must remit $1,800 (30,000 times 6%) in use tax to WV.

You hire a doctor from another state who comes into West Virginia to conduct physicals on your loyees. Although the services are performed in West Virginia they are ext from sales tax as professional services and, therefore, are not taxable under use tax.

As a final example, conr this common scenario: Your office manager les in Virginia. She ronely purchases office supplies for your West Virginia office in Virginia. Over the course of the year, she purchases $10,000 of supplies using your business credit card. These purchases are subject to use tax but you get a credit for taxes paid to Virginia. Since Virginia has a tax rate of % (4% state and 1% local) you will get a credit for the $00 sales tax ($10,000 times %) paid to Virginia. However, be West Virginia has a tax rate f 6% you will still owe $100 ($10,000 * 6% = $600, minus $00 = $100) to West Virginia on these purchases.

Many would argue that the complexity and reporting requirements of use tax place an undue burden on taxpayers. Most business owners simply don’t have time to review every purchase for potential use tax liability and they don’t have the money to pay their accountant to analyze every receipt. On the other hand, the state might argue that noncompliance results in millions of lost tax dollars, a situation that has gotten worse with the growth of internet purchases. They might also argue that outofstate sellers who do not follow to same rules have an unfair advantage over instate sellers of the same products. This unfair advantage drains money from both the local economy as well as its tax base. Use tax simply levels the playing field.
Regardless of your opinion, Use Tax is here to stay. Longforgotten, receiptfilled shoe boxes will continue to provide a treasuretrove of unpaid Use Tax (plus penalty and interest, of course) for the unwary.

To reduce your chances of falling into the UseTaxTrap take the following steps:

First, make sure your internet and outofstate suppliers charge sales tax on all your purchases.
Second, remember infrequent outofstate purchases of highpriced equipment are major source of use tax liability. And finally, make a mental note of the term “use tax.” Simply recognizing potential liability and paying use tax when due can save thousands in penalties and interest down the road.

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Happiness is for those who plan well and pursue. A profound among us have been proven those who have true dream to live for likely REALIZED IT. It is just simply the person working toward the DREAM days and night until accomplishment. There is a phrase of efficiency a head of you. Steps and obstacles at first seem tremendous. However, just with some times those difficult steps and challenges are so easy performance for you. There are also plenty of tools including VISUALIZATIONS and helps are around you.

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When businesses are audited by the WV State Tax DepartmENT the result is often a very expensive vocabulary lesson that bold-stamps the term “use tax” into the owner’s lexicon. Most business owners are very familiar with the proper colleCTion and remittance of sales tax. Sales tax’s cohort, use tax, however, often remains unnoticed until an […]

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How To Really REALIZE DREAMS COME TRUE?

Happiness is for those who plan well and pursue. A profound among us have been proven those who have true dream to live for likely REALIZED IT. It is just simply the person working toward the DREAM days and night until accomplishment. There is a phrase of efficiency a head of you. Steps and obstacles at first seem tremendous. However, just with some times those difficult steps and challenges are so easy performance for you. There are also plenty of tools including VISUALIZATIONS and helps are around you.

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COVID-19
HOW TO DEFEAT DEADLY CORONAVIRUS EVERY TIME?

The Greatest Virus Surviving 10 Steps Guide

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Please Order If See Anything You Need? Mutual Reciprocal & Have Great Days!

 

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