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Sales Tax Attorney Woodlands

By June 19, 2016April 28th, 2022News and Articles

Sales Tax Attorney Woodlands

When you are undergoing a sales tax audit, you may regret selling tangible items along with your service. If you have not taxed the entire sale, then, the auditor will look at the true object of the sale.

When you provide a physical good along with a service e.g., (heart treatment along with a heart monitor), but the good is secondary to the service, taxability is based on the real object of the transaction: the service provided.

In order to comply with the sales tax laws of your state, determine the intended use of the good or service. Is the service you’re providing secondary in importance (“incidental”) to the installation of the equipment?

To help make the determination, a number of state taxing authorities developed an analysis called the “true object test” which they apply to the total transaction. Using the true object test, you can get a better idea of whether a transaction will be taxable by determining whether the service provided or the property acquired is the main purpose–or the true object–of the transaction. To apply the true object test, look up the rules of the state in which you’re conducting business.

What’s responsible for audit flags and potential penalties? Tax obligations service-based businesses don’t think they have. For companies servicing installation contracts, technical support, or other business services, sales tax can become a problem if not addressed promptly. Similar at-risk businesses include construction services, manufacturers that provide services along with products, and many other service-based businesses along the supply chain. As ecommerce shrinks the time between order and delivery, the sales tax risk for supply chain providers grows.

Sales Tax Attorney Woodlands

Mansoor Ansari

Author Mansoor Ansari

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