Sales/Use Tax Changeability
Can you please guide me on chargeability of Sales Tax for below scenario?
One of our vendors in MA providing headhunt services has charged Sales Tax on invoice to us. We are operating in NY with our company registered in NJ. We do not normally pay Sales/Use tax on services. Can they charge Sales Tax to us?
Purchases made online are generally not exempt from tax. If the retailer does not collect the sales tax, the purchaser has the obligation to pay the use tax directly to the state where the property is used as long as the item is taxable.
Doing a quick google search provided this:
Charging Out-of-State Sales Taxes in Destination-Based Tax States
Most states have a destination-based sales tax. Each sale is considered to take place in the jurisdiction where the product is ultimately used — where it’s shipped or picked up from. If someone from Florida purchases an item from your Georgia brick-and-mortar store, you would charge Georgia’s sales tax because the customer takes possession of the product there.
But if you ship the product to Florida, you must charge Florida’s sales tax and file a corresponding Florida sales tax return. You would charge the destination state’s rate, in addition to any local or county sales taxes for the address to which you’re shipping.
Hope that helps 🙂
Thanks Matthew for the reply but i am asking about Services. Services are normally exempt but our vendor is charging Sales Tax. Need advice on it if we are liable to pay it or not as we are in NY/NJ and vendor is in MA and nature of services procured is Headhunting services.
Did extra research for you 🙂
Per MA sales and use tax ‘Professional Services’ are considered exempt from sales tax. MA is quite clear with tangible items being taxable while services rendered are not.
Service Enterprises are defined further here (for any company or scenario struggling with sales and use tax).
By my understanding, you should not be charged for any sales or use tax by your scenario. Further, I would consider reporting the company for misuse of taxable goods by contacting:
Department of Revenue
Rulings and Regulations Bureau
P.O. Box 9566, Boston, MA 02114-9566
Hope this helps as well
I also searched further and found out that MA charges sales tax based on destination and in NY professional services are exempt therefore we are not subject to sales tax on services.
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