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New York Sales Tax - Who Owes What?

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The Green Group
July 17th, 2013

One of our clients recently had a situation regarding sales tax and using sub-contractors.  Below is the synopsis of the situation as well as how it was handled and the different state tax parameters of New York.

Company A has been hired by Company B as a subcontractor to complete a customer's request.  The contract indicated that for payment purposes, Company B would send an invoice to the customer and Company A would invoice Company B to be paid for their contracted work.  Upon completion of the contract, Company A sent an invoice to Company B for payment which included a sales tax charge.  Company B went back to Company A and said that it should not be charged this sales tax.  They took the stance that they are exempt from sales tax in this given situation since they include sales tax on any invoices to customers.

In this situation, it was determined that Company B was correct in its stance and should not have been charged the sales tax from Company A.  Here’s why:

In NY a purchaser has the right to forego paying sales tax if they have the correct forms filed. The most basic of the two being the NY Certificate of Authority which indicates the purchaser is within an industry that exempts them from paying sales tax. The second form is ST-120 – Resale Certificate which indicates who the purchaser is buying the product or service. This form also confirms that the purchaser will ultimately pass the sales tax burden to its client or customer. Eventually the sales tax that is collected must be remitted to the state of NY in a timely fashion.

There are many intricacies based on the type of industry. At The Green Group we can successfully guide you as the seller or purchaser through any exempt sales tax transaction.

This situation is tailored to New York, please note that every state has it's own rules and regulations to be followed.

Comment below if you’d like to know about your state’s sales tax laws and we’ll have someone respond!  Contact us if you have in depth questions about your own situation!

Tim Torres – ttorres@greenco.com

www.greenco.com

Pursuant to IRS Circular 230 regulation: "Any tax advice expressed was not intended or written to be used, and cannot be used, by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. If this advice was written to support the promotion or marketing of partnership or other entity, investment plan, or arrangement to any taxpayer then the advice was written to support the promotion or marketing of the matters addressed by the written advice and the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax adviser."

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Taxonomy: 

One of our clients recently had a situation regarding sales tax and using sub-contractors.  Below is the synopsis of the situation as well as how it was handled and the different state tax parameters of New York.

Company A has been hired by Company B as a subcontractor to complete a customer's request.  The contract indicated that for payment purposes, Company B would send an invoice to the customer and Company A would invoice Company B to be paid for their contracted work.  Upon completion of the contract, Company A sent an invoice to Company B for payment which included a sales tax charge.  Company B went back to Company A and said that it should not be charged this sales tax.  They took the stance that they are exempt from sales tax in this given situation since they include sales tax on any invoices to customers.

In this situation, it was determined that Company B was correct in its stance and should not have been charged the sales tax from Company A.  Here’s why:

In NY a purchaser has the right to forego paying sales tax if they have the correct forms filed. The most basic of the two being the NY Certificate of Authority which indicates the purchaser is within an industry that exempts them from paying sales tax. The second form is ST-120 – Resale Certificate which indicates who the purchaser is buying the product or service. This form also confirms that the purchaser will ultimately pass the sales tax burden to its client or customer. Eventually the sales tax that is collected must be remitted to the state of NY in a timely fashion.

There are many intricacies based on the type of industry. At The Green Group we can successfully guide you as the seller or purchaser through any exempt sales tax transaction.

This situation is tailored to New York, please note that every state has it's own rules and regulations to be followed.

Comment below if you’d like to know about your state’s sales tax laws and we’ll have someone respond!  Contact us if you have in depth questions about your own situation!

Tim Torres – ttorres@greenco.com

www.greenco.com

Pursuant to IRS Circular 230 regulation: "Any tax advice expressed was not intended or written to be used, and cannot be used, by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. If this advice was written to support the promotion or marketing of partnership or other entity, investment plan, or arrangement to any taxpayer then the advice was written to support the promotion or marketing of the matters addressed by the written advice and the taxpayer should seek advice based on the taxpayer's particular circumstances from an independent tax adviser."