Use Tax Part 2
I’ve never heard of use tax. Why do I need to learn about it?
The states believe small business owners should read the whole small business tax code. They’ll fine you for noncompliance regardless of whether you’ve heard of it or not. However, most small business owners are trying to get their businesses up and running, and stay financially afloat, so don't have time to read the tax code. Plus, Texas has not updated the code/rules in quite some time, so a lot of technological advancement terminology has not been updated. Be Square is here to help. While we haven't memorized the whole tax code, we have a good knowledge base and we commonly call and work with the Texas sales tax office on confusing areas.
What are some common areas missing sales tax?
Janitorial help, Landscaping, Repairs & Maintenance — Many of these vendors charge sales tax, but don't separate it out on their invoices or receipts, or they might note "sales tax included.” If there is not a separate line for sales tax, and you find yourself in a sales tax audit, the state will say you didn't pay the tax and will fine you and accrue interest on the purchase.
Graphic Design, Hosting, Web Subscriptions such as Apple, Google and Facebook Ads — Some of these vendors exhibit blanket statements on their websites stating sales tax is included in states where applicable. This is not enough for the Texas sales tax office. They have to see on the actual receipt that sales tax is being charged. However, web-based transactions only require 80% of the normal sales tax rate.
Photography – Taxable, with some exceptions. We sometimes call the Texas sales tax office for our clients, as interpretation can be complicated.
Videography – Taxable, unless it’s for a deposition.
Secondhand buying — Yes, Texas gets to double dip. Even though these sellers likely already paid sales tax on the original purchases, and as individuals, will not charge you tax, you still have to accrue the tax for business purchases.
What if I have a resale certificate or a customer gives me one?
If you charge sales tax to your customers, make sure to give your vendors a resale certificate so they won’t charge tax on resale items/materials you purchase from them, since you’ll be collecting the tax from your end-user customers to pass on to the state. Alternatively, if you receive a resale certificate from a customer because they will not be the end-user of the product you’re selling to them, keep that certificate on file to document why you didn’t charge tax to them.
For an overview of Use Tax, see Use Tax Part 1.
Not a Be Square client? Contact us to set up a free introductory call to find out if we’re a good fit for your bookkeeping and payroll needs.
Publication 94-157 — Homebuilders and Real Property Services:
https://comptroller.texas.gov/taxes/publications/94-157.php
Publication 94-116 — Real Property Repair and Remodeling:
https://comptroller.texas.gov/taxes/publications/94-116.php