Examples of Credit for Taxes Paid to Other States (For discussion purposes Omaha, NE)

Transcription

1 Examples f Credit fr Taxes Paid t Other States (Fr discussin purpses Omaha, NE) 1. "Similar Taxes" Examples Scenari 1 State A impses a 5% mtr vehicle excise tax n sales f mtr vehicles. Fr mtr vehicle sales surced t State A, thse sales are subject t the 5% mtr vehicle excise tax. If a persn purchases a mtr vehicle in anther state and was nt required t pay the ther states' sales r use tax and then later stres, uses, r cnsumes the mtr vehicle in State A, State A requires the purchaser t pay its 5% mtr vehicle excise tax. If a persn purchases a mtr vehicle in anther state and was required t pay the ther states' sales r use tax, State A will give a credit fr that sales r use tax paid against its 5% mtr vehicle excise tax. State A's mtr vehicle excise tax is a "similar tax" Scenari 2 (N "use tax" impsed) Same as Scenari 1 except State A des nt impse its mtr vehicle excise tax n the purchaser fr string, using, r therwise cnsuming the mtr vehicle in State A. State A's mtr vehicle excise tax is nt a "similar tax" because there is n tax impsed n the purchaser fr string, using, r therwise cnsuming the mtr vehicle in State A. Therefre ther states d nt have t allw the mtr vehicle excise tax paid in State A as a credit against their state's sales r use tax. Scenari 3 (N credit allwed against it fr s/u tax paid in ther state) Same as Scenari 1, except that if a persn purchases a mtr vehicle in anther state and was required t pay the ther states' sales r use tax, State A will NOT give a credit fr that sales r use tax paid against its 5% mtr vehicle excise tax. State A's mtr vehicle excise tax is nt a "similar tax" because State A will nt give credit against its mtr vehicle excise tax fr a sales r use tax paid in anther state. Scenari 4 (Tax nt impsed as a percentage f sales/purchase price) Same as Scenari 1, except that the mtr vehicle excise tax is a flat $200 per vehicle. State A's mtr vehicle excise tax is nt a "similar tax" because the tax is nt measured as a percentage f the sales price f the mtr vehicle. 1

2 2. First Use and Subsequent Use Examples Scenari 1 Purchaser purchases taxable prduct in State A frm Seller fr $1,000. Purchaser receives pssessin f prduct at Seller's business lcatin. Seller charges State A's 5% sales tax and cllects the $50 tax frm Purchaser. Purchaser takes the prduct t State B where the state use tax rate is 6%. State B impses its tax based n the $1,000 purchase price f the prduct. State B must give credit fr the 5% sales tax purchaser paid t Seller ($50) in State A against the $60 ($1,000 x 6%) use tax due in State B. State B will receive $10 in use tax ($60 - $50) n this transactin. Purchaser paid a ttal f $60 in sales and use tax. Scenari 2 (Mved t third state tax based n sales price) Same as Scenari 1, except that after Purchaser paid the additinal $10 tax t State B, Purchaser takes the prduct t State C. The use tax rate in State C is 7%. State C impses its tax n the $1,000 purchase price f the prduct. State C must give credit fr the $50 tax paid t Seller in State A and the additinal $10 in tax paid in State B against the $70 ($1,000 X 7%) use tax due in State C. State C will receive $10 in use tax ($70 - $50 - $10) n this transactin. Purchaser paid a ttal f $70 in sales and use tax. Scenari 3 (Mved t third state tax based n depreciated value) Same as Scenari 1, except that after Purchaser paid the additinal $10 tax t State B, Purchaser takes the prduct t State C. The use tax rate in State C is 7%. State C impses its use tax based n the depreciated value f the prduct as f the time it is first used in State C. The depreciated value f the prduct at the time it is first used in State C is $800. Optin 1 cnsider actual tax paid in ther states State C must give credit fr the $50 tax paid t Seller in State A and the additinal $10 in tax paid in State B against the $56 ($800 X 7%) use tax due in State C. Therefre n additinal use tax will be due in State C ($56 - $50 - $10) n this transactin. Purchaser paid a ttal f $60 in sales and use tax. Optin 2 base tax n rate differential In cmputing the use tax due, State C must give credit fr the 5% tax paid t Seller in State A and the additinal 1% tax paid in State B against the 7% use tax due in State C. Therefre an additinal 1% use tax will be due in State C n the $800 measure which State C impses it use tax n in this transactin. Sate C will receive $8 in use tax n this transactin. 2

3 3. "Sales Price" and "Purchase Price" Differences Examples Scenari 1 (Delivery charges excluded frm "crediting states" definitin f "sales price" but included in definitin f "sales price" in state where sale was surced) Purchaser purchases taxable prduct in State A frm Seller fr $10,000 plus $1,000 delivery charge fr a ttal f $11,000. Prduct is delivered t Purchaser at Purchaser's business lcatin in State A. State A includes "delivery charges" in its definitin f "sales price." Seller charges State A's 5% sales tax and cllects the $550 tax frm Purchaser. Purchaser takes the prduct t State B where the state use tax rate is 6%. State B des nt include "delivery charges" in its definitin f "sales price." State B impses its tax based n the $10,000 purchase price f the prduct. Optin 1 credit fr actual tax paid in ther state State B must give credit fr the 5% sales tax purchaser paid t Seller ($550) in State A against the $600 ($10,000 x 6%) use tax due in State B. State B will receive $50 in use tax ($600 - $550) n this transactin. Purchaser paid a ttal f $600 in sales and use tax. Optin 2 credit fr actual tax paid in ther state n same measure nly. N credit fr items excluded frm definitin f "sales price" r "purchase price" in crediting state. State B must nly give credit fr the 5% sales tax purchaser paid t Seller in State A n the same measure f the "sales price" r "purchase price" that State B is impsing its use tax ($10,000). State B must nly give credit fr the $500 in sales tax Purchaser paid n the $10,000 measure against the $600 ($10,000 x 6%) use tax due in State B. State B will receive $100 in use tax ($600 - $500) n this transactin. Purchaser paid a ttal f $650 in sales and use tax. State B des nt have t give credit fr the additinal $50 in use tax that Purchaser paid in State A n the separately stated delivery charges since State B des nt include "delivery charges" in its definitin f "sales price" r "purchase price." Optin 3 rate differential n measure based n crediting states definitin In cmputing the use tax due, State B must give credit fr the 5% tax paid t Seller in State A n the same measure that State B impses its tax n. Therefre an additinal 1% (6% - 5%) use tax will be due in State B n the $10,000 measure which State B impses it use tax n in this transactin. State B will receive $100 in use tax n this transactin. State B des nt have t give credit fr the 5% sales tax paid n the $1,000 delivery charge since State B des nt include "delivery charges" in its definitin f "sales price" r "purchase price." 3

4 Scenari 2 (Delivery charges included in "crediting states" definitin f "sales price" but excluded frm definitin f "sales price" in state where sale was surced) Purchaser purchases taxable prduct in State X frm Seller fr $10,000 plus $1,000 delivery charge fr a ttal f $11,000. Prduct is delivered t Purchaser at Purchaser's business lcatin in State X. State X des nt include "delivery charges" in its definitin f "sales price." Seller charges State X's 5% sales tax and cllects the $500 tax ($10,000 x 5%) frm Purchaser. Purchaser takes the prduct t State Y where the state use tax rate is 6%. State Y includes "delivery charges" in its definitin f "sales price." State Y impses its tax based n the $11,000 purchase price f the prduct. Optin 1 credit fr actual tax paid in ther state State Y must give credit fr the 5% sales tax purchaser paid t Seller ($500) in State X against the $660 ($11,000 x 6%) use tax due in State Y. State Y will receive $160 in use tax ($660 - $500) n this transactin. Purchaser paid a ttal f $660 in sales and use tax. Optin 2 credit fr actual tax paid in ther state n same measure plus tax due n additinal items included in crediting states definitin f "sales price" and "purchase price" State Y must give credit fr the 5% sales tax purchaser paid t Seller in State X n the same measure f the "sales price" r "purchase price" that State Y is impsing its use tax ($10,000) up t the amunt f tax Purchaser actually paid in State X. State Y must give credit fr the $500 in sales tax Purchaser paid n the $10,000 measure against the $600 ($10,000 x 6%) use tax due in State Y n that same measure. State Y may als impse its 6% tax n the additinal $1,000 delivery charges that were excluded frm the measure upn which Purchaser paid tax in State X. State Y will receive $160 in use tax ($660 - $500) n this transactin. Purchaser paid a ttal f $660 in sales and use tax. Optin 3 rate differential n same measure taxed in bth states plus full tax rate n additinal items included in crediting states definitin f "sales price" and "purchase price" but excluded frm definitin in state t which sale was surced In cmputing the use tax due, State Y must give credit fr the 5% tax paid t Seller in State X n the same measure that State Y impses its tax n, up t the amunt f tax actually paid by Purchaser in State X. Therefre an additinal 1% use tax will be due in State Y n the $10,000 measure which State Y impses it use tax n in this transactin. In additin, State Y may impse its full 6% rate n the delivery charges that were excluded frm the definitin f "sales price" in State X. State Y will receive $160 in use tax n this transactin ($10,000 x 1% plus $1,000 x 6%). 4

5 Scenari 3 (Delivery charges included in "crediting states" definitin f "sales price" but excluded frm definitin f "sales price" in state where sale was surced) Purchaser purchases taxable prduct in State L frm Seller fr $10,000 plus $1,000 delivery charge fr a ttal f $11,000. Prduct is delivered t Purchaser at Purchaser's business lcatin in State L. State L des nt include "delivery charges" in its definitin f "sales price." Seller charges State L's 6% sales tax and cllects the $600 tax ($10,000 x 6%) frm Purchaser. Purchaser takes the prduct t State M where the state use tax rate is 5%. State M includes "delivery charges" in its definitin f "sales price." State M impses its tax based n the $11,000 purchase price f the prduct. Optin 1 credit fr actual tax paid in ther state State M must give credit fr the 6% sales tax purchaser paid t Seller ($600) in State L against the $550 ($11,000 x 5%) use tax due in State M. Since the tax paid in State L is equal t r greater that the tax due in State M, State M will nt receive any additinal use tax n this transactin. Purchaser paid a ttal f $600 in sales and use tax. Optin 2 credit fr actual tax paid in ther state n same measure plus full tax rate due n additinal items included in crediting states definitin f "sales price" and "purchase price" State M must give credit fr the 6% sales tax Purchaser paid t Seller in State L n the same measure f the "sales price" r "purchase price" upn which State M is impsing its use tax ($11,000) up t the measure f tax Purchaser actually paid tax n in State L ($10,000). State M must give credit fr the $600 in sales tax Purchaser paid in State L n the $10,000 measure against the $500 ($10,000 x 5%) use tax due in State M. (Nte: Althugh Purchaser paid $600 in tax, the measure upn which that tax was paid was nly $10,000. Therefre Purchaser can ffset nly the tax ($500) due n $10,000 in State M.) State M may impse its 5% tax n the additinal $1,000 State M includes in its definitin f "sales price" r "purchase price" relating t the delivery charges. State M will receive $50 in use tax ($1,000 x 5%) n this transactin. Purchaser paid a ttal f $650 in sales and use tax. Optin 3 rate differential n same measure taxed in bth states plus full tax rate n additinal items included in crediting states definitin f "sales price" and "purchase price" but excluded frm definitin in state t which sale was surced In cmputing the use tax due, State M must give credit fr the 6% tax paid t Seller in State L n the same measure that State M impses its tax n ($10,000), up t the amunt f tax actually paid by Purchaser in State L. Since the rate paid in State L (6%) is equal t r greater than the rate due in State M (5%) n the $10,000 measure, n additinal tax is due n this prtin f the transactin. State M may impse its full 5% rate n the delivery charges ($1,000) that were nt subject t tax in State L. State M will receive $50 in use tax n this transactin ($1,000 x 5%). The "excess" tax that Purchaser paid t State L n the $10,000 may nt be used t ffset the tax due n the additinal $1,000 measure that State M impses its tax n. 5

6 4. Labr Charge Differences Examples Scenari 1 (Labr charges nt taxed by "crediting states" but taxed in state where sale was surced) Purchaser has a taxable prduct repaired in State A by Seller. Seller charges $6,000 fr parts plus $4,000 fr labr. Prduct is delivered t Purchaser at Purchaser's business lcatin in State A. State A impses tax n the parts and labr. Seller charges State A's 5% sales tax and cllects the $500 tax frm Purchaser. Purchaser takes this prduct t State B where the state use tax rate is 6%. State B des nt impse tax n labr charges. State B impses its tax nly based n the $6,000 charge fr the parts. Optin 1 credit fr actual tax paid in ther state State B must give credit fr the 5% sales tax purchaser paid t Seller ($500) in State A against the $360 ($6,000 x 6%) use tax due in State B. Since the tax paid in State A ($500) was equal t r greater than the tax due in State B, State B will nt receive any use tax n this transactin. Optin 2 credit fr actual tax paid in ther state n same measure nly. N credit fr tax paid n items nt taxed in crediting state. State B must nly give credit fr the 5% sales tax purchaser paid t Seller in State A n the same measure that State B is impsing its use tax n ($6,000). State B must nly give credit fr the $300 ($6,000 x 5%) in sales tax Purchaser paid n the $6,000 measure against the $360 ($6,000 x 6%) use tax due in State B. State B will receive $60 in use tax ($360 - $300) n this transactin. State B des nt have t give credit fr the additinal $200 ($4,000 x 5%) in sales r use tax that Purchaser paid in State A n the separately stated labr charges since State B des nt impse its tax n labr charges. Optin 3 rate differential n measure based n what crediting state taxes plus full tax rate n additinal items crediting state taxes but which were nt taxed by the state t which sale was surced In cmputing the use tax due, State B must give credit fr the 5% tax paid t Seller in State A n the same measure that State B impses its tax n. Therefre an additinal 1% (6% - 5%) use tax will be due in State B n the $6,000 measure which State B impses it use tax n in this transactin. State B will receive $60 in use tax n this transactin. State B des nt have t give credit fr the 5% sales tax paid n the $4,000 labr charge since State B des nt impse its tax n labr charges. 6

7 Scenari 2 (Labr charges taxed in "crediting state" but nt taxed in state where sale was surced) Purchaser has a taxable prduct repaired in State X. Seller charges $6,000 fr repair parts and $4,000 fr labr. Prduct is delivered t Purchaser at Purchaser's business lcatin in State X. State X impses 5% tax n the $6,000 charge fr the parts, but nt n the labr. Seller charges State X's 5% sales tax and cllects the $300 ($6,000 x 5%) tax frm Purchaser. Purchaser takes the prduct t State Y where the state use tax rate is 6%. State Y impses its 6% tax n bth the $6,000 charge fr the parts and the $4,000 labr charge fr a ttal f $600 ($10,000 x 6%). Optin 1 credit fr actual tax paid in ther state State Y must give credit fr the 5% sales tax purchaser paid t Seller ($300) n the charge fr the parts in State X against the $600 ($10,000 x 6%) use tax due in State Y. State Y will receive $300 in use tax ($600 - $300) n this transactin. Purchaser paid a ttal f $600 in sales and use tax. Optin 2 credit fr actual tax paid in ther state n same measure plus tax due n additinal items taxed in crediting state State Y must give credit fr the 5% sales tax ($300) purchaser paid t Seller in State X n the repair parts against the use tax ($360) that State Y is impsing n the repair parts ($6,000 x 6%). State Y may als impse its 6% tax n the additinal $4,000 labr charge that was nt taxed in State X ($240). State Y will receive a ttal f $300 in use tax ($600 - $300) n this transactin. Purchaser paid a ttal f $600 in sales and use tax. Optin 3 rate differential n same measure taxed in bth states plus full tax rate n additinal items included in crediting states definitin f "sales price" and "purchase price" but excluded frm definitin in state t which sale was surced In cmputing the use tax due, State Y must give credit fr the 5% tax paid t Seller in State X n the same measure that State Y impses its tax n, up t the amunt f tax actually paid by Purchaser in State X. Therefre an additinal 1% use tax ($60) will be due in State Y n the $6,000 charge fr the parts which State Y impses it use tax n. In additin, State Y may impse its full 6% rate n the $4,000 labr charge since it was nt taxed in State X. State Y will receive $300 in use tax n this transactin ($6,000 x 1% plus $4,000 x 6%). 7

8 Scenari 3 (Labr charges taxed in "crediting state" but nt taxed in state where sale was surced) Purchaser has a taxable prduct repaired by Seller in State L. Seller charges Purchaser $6,000 fr repair parts plus $4,000 fr repair labr. Prduct is delivered t Purchaser at Purchaser's business lcatin in State L. State L des nt impse its tax n labr charges. Seller charges State L's 6% sales tax n the repair parts and cllects the $360 tax ($6,000 x 6%) frm Purchaser. Purchaser takes the prduct t State M where the state use tax rate is 5%. State M impses its tax n bth repair parts ($6,000) and repair labr ($4,000). Optin 1 credit fr actual tax paid in ther state State M must give credit fr the 6% sales tax purchaser paid t Seller ($360) in State L against the $500 ($10,000 x 5%) use tax due in State M. State M will nly receive $140 ($500 - $360) in additinal use tax n this transactin. Purchaser paid a ttal f $500 in sales and use tax. Optin 2 credit fr actual tax paid in ther state n same measure plus full tax rate due n additinal items taxed in crediting state but nt tax in state t which sale was surced State M must give credit fr State L's 6% sales tax Purchaser paid t Seller ($360) in State L n the same measure (i.e.,$6,000 fr repair parts) that State M is impsing its use tax ($300) n, up t the amunt f tax due n the repair parts in State M ($300). (Nte: Althugh Purchaser paid $360 in tax, the measure upn which that tax was paid was nly $6,000 (i.e., just the repair parts). Therefre Purchaser can ffset nly the tax due n $6,000 in State M.) State M may als impse its 5% tax n the additinal $4,000 labr charge. State M will receive $200 in use tax ($4,000 x 5%) n this transactin. Purchaser paid a ttal f $560 in sales and use tax ($360 in State L and $200 in State M). Optin 3 rate differential n same measure taxed in bth states plus full tax rate n additinal items taxed in crediting states but excluded frm tax in the state t which sale was surced In cmputing the use tax due, State M must give credit fr the 6% tax paid t Seller in State L n the same measure that State M impses its tax n ($6,000 fr the repair parts). Since the rate paid in State L (6%) is equal t r greater than the rate due in State M (5%) n the $6,000 measure, n additinal tax is due n this prtin f the transactin. State M may impse its full 5% rate n the labr charges that were nt subject t tax in State L. State M will receive $200 ($4,000 x 5%) in use tax n this transactin. The "excess" tax that Purchaser paid t State L n the $6,000 parts charge may nt be used t ffset the tax due n the additinal $4,000 labr charges that State M impses its tax n. 8

9 5. Lcal Taxes Examples Scenari 1 (State and lcal tax paid in state t which sale was surced but n lcal tax impsed by state in which prduct was used) Purchaser purchases taxable prduct frm Seller in State A fr $1,000. Purchaser takes pssessin f the prduct at Seller's lcatin in State A. Seller charges State A's 5% state sales tax ($50) and 1% lcal sales tax ($10) n the transactin. Purchaser takes the prduct t State B where the state use tax rate is 7%. State B des nt impse any lcal taxes. State B must give credit fr the 5% state and 1% lcal sales tax Purchaser paid t Seller ($60) in State A against the $70 ($1,000 x 7%) use tax due in State B. State B will receive $10 in use tax ($70 - $60) n this transactin. Purchaser paid a ttal f $70 in sales and use tax. Scenari 2 (State rate paid in state t which sale was surced exceeds cmbined state and lcal tax rates where prduct is used) Purchase purchases taxable prduct frm Seller in State X fr $1,000. Purchaser takes pssessin f the prduct at Seller's lcatin in State X. Seller charges State X's 7% state sales tax n the transactin. State X des nt impse any lcal sales r use taxes. Purchaser takes the prduct t State Y. State Y impses a 5% state sales tax and 1% lcal tax n the transactin. State Y must give credit fr the 7% state sales tax Purchaser paid t Seller ($70) in State X against the $60 ($1,000 x 5% plus $1,000 x 1%) state and lcal sales and use taxes due in State Y. State Y will nt receive any use tax n this transactin since the 7% rate paid in State X exceeded the cmbined state and lcal rate due in State Y 9

10 6. Allcatins f Taxes Paid t Other States Between State and Lcal Taxes Due in Subsequent States Scenari 1 (Cmbined rate the same in bth states) Purchaser purchases taxable prduct frm Seller in State A fr $1,000. Purchaser takes pssessin f the prduct at Seller's lcatin in State A. Seller charges State A's 5% state sales tax ($50) and 1% lcal sales tax ($10) n the transactin. Purchaser takes the prduct t State B where the state use tax rate is 4% and the lcal use tax rate is 2%. State B must give credit fr the 5% state and 1% lcal sales tax Purchaser paid t Seller ($60) in State A against the $60 in use tax ($1,000 x 4% state and 2% lcal tax cmbined rate) due in State B. N additinal state r lcal tax is due in this scenari. State B may nt require Purchaser t ffset state tax against state tax and lcal tax against lcal tax such that Purchaser wuld we an additinal 1% lcal use tax since Purchaser nly paid 1% lcal tax in State A (i.e., the excess state tax must be allwed as a credit against the lcal tax due). Scenari 2 (Cmbined rate paid less than the cmbined rate due in subsequent state) Purchaser purchases taxable prduct frm Seller in State A fr $1,000. Purchaser takes pssessin f the prduct at Seller's lcatin in State A. Seller charges State A's 5% state sales tax ($50) and 1% lcal sales tax ($10) n the transactin. Purchaser takes the prduct t State X where the state use tax rate is 6% and the lcal use tax rate is 3%. State X must give credit fr the 5% state and 1% lcal sales tax Purchaser paid t Seller ($60) in State A against the $90 in use tax ($1,000 x 6% state tax plus $1,000 x 3% lcal tax) due in State X. State X may nt require Purchaser t track and ffset state tax against state tax and lcal tax against lcal tax such that Purchaser wuld we an additinal 1% state use tax and 2% lcal use tax. State X may require Purchaser t allcate the additinal $30 in cmbined state and lcal use tax due (3% cmbined state and lcal tax rate differential x sales price r purchase price) in any manner which des nt require Purchaser t track the tax paid t the ther state based n whether it was a state tax r lcal tax paid t the ther state. 10

11 7. Credits fr Taxes Paid in Errr Scenari 1 (Purchaser can get tax back frm state in which tax paid in errr) Purchaser purchases taxable prduct frm Seller in State A fr $1,000. Purchaser has prduct delivered t Purchaser's lcatin in State B. Seller incrrectly charges State A's 5% state sales tax ($50) n the transactin. Purchaser uses the prduct in State B where the state use tax rate is 6%. State B cntacts Purchaser and infrms Purchaser that State B's 6% sales r use tax is due n the prduct. Purchaser prvides receipt shwing Purchaser paid State A's 5% state sales tax. State B indicates that since the transactin was prperly surced t State B, Seller incrrectly cllected State A's sales tax and n credit wuld be given fr that tax and the full 6% tax was due t State B. Purchaser cntacts Seller (r State A) and is able t get a refund f State A's tax that was paid in errr. Purchaser wes State B's sales r use tax n this transactin. Scenari 2 (Purchaser cannt get tax back frm state in which tax was paid in errr) Same as Scenari 1, except that Purchaser is nt able t get a refund f the tax imprperly paid t State A frm State A r Seller. Purchaser still wes 6% sales r use tax t State B and State B is nt required t give credit fr the tax Purchaser imprperly paid t State A. 11