Hi everyone.
Today’s tax tip is about sales tax and equipment.
Generally, equipment that is used in a business is going to be subject to sales and use tax. That means, unless the business meets a specific scenario where sales and use tax would not be due, a business should be prepared to pay sales tax on equipment that they use and accrue use tax on the equipment in the “taxable purchases” section of their sales and use tax return, if the vendor does not charge the appropriate sales tax.
All equipment that a company uses is always taxable. Equipment that is used by the company is usually taxable unless there is a specific exemption or carve-out that is applicable. For example, there are multiple sales tax exemptions available to manufacturers, depending on the taxing jurisdiction. Those exemptions can extend to the equipment used by the manufacturer. The key takeaway is that the business must meet the taxing jurisdiction’s definition of a manufacturer. In this example, the appropriate sales tax treatment is based on the applicable tax laws in the jurisdiction as well as what the equipment does, what it is used for and how it is it used. There are also sales tax exemptions available for equipment that is part of a rental fleet, items that are resold, etc.
As always, to understand your sales and use tax responsibilities, you must understand the applicable tax laws in the jurisdictions where you conduct business.
And that is your tip for the week.
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