Portable Sanitation Association International

ASSOCIATIONINSIGHT Portable Sanitation Association International News BIWEEKLY EDITION DECEMBER 9, 2020 Page 6 Sales Tax Issues Frustrate Portable Sanitation Companies…Continued from page 5 Gott purchased portable toilets and did not remit sales or use tax when he did so, according to the state Department of Revenue's brief to the state Supreme Court. The department audited Gott for the calendar years 2014 to 2016 and determined he owed unpaid sales taxes. Gott appealed the department's determination to the commission, which affirmed the determination, after which Gott appealed to the state Supreme Court. At this point, it is unclear when and how the Missouri Supreme Court will rule. Whatever they find will only apply to sales taxes in Missouri. But the issue is important for the rest of the industry because it underscores the costly nature of misunderstanding or being at odds with sales tax laws. Whether or not Mr. Gott ends up paying $56,900 in back taxes, it is highly likely the matter has cost his firm far more in lost time, attorney's fees, and reputational damage. Nobody wants that. So what should a portable sanitation company do? In its simplest form, managing sales tax for your business boils down to: 1. Determining whether your equipment, service, or both are subject to sales tax 2. Registering for a sales tax permit in each jurisdiction requiring it 3. Calculating the sales tax rate that you must charge 4. Collecting the sales tax 5. Sending sales tax return and payment to the taxing authority on a timely basis How you carry out these steps will vary greatly between states and localities. In some places, only rental is taxable. In others, only service is taxable, and in still others, both are taxable. In some places, you don't have to pay sales tax on supplies you buy, but you have to charge tax to your customers when you deploy those supplies in the field. In other words, it's complicated and highly dependent upon: (a) where you are, (b) in what states/counties/ municipalities you do business, and (c) what equipment/services you offer. Rule of thumb #1: Don't take short cuts on learning about your taxable activities. Talk to the department of revenue in every state and municipality where you do business. Making assumptions can be very costly. Rule of thumb #2: It is smart money to talk with a tax expert in your area and make sure you understand the various ways you should collect, account for, and remit the sales taxes for which you are liable so that you are both following the law and managing cash flow in the most strategic way for your business. Rule of thumb #3: Be transparent with customers and protect yourself in the process. Separate the sales taxes you charge on your invoices as line items. This shows customers how much of what they pay is pass-through money, and it also makes it much easier to get through an audit if authorities come knocking on your door. Rule of thumb #4: Be cautious about tax minimization tactics and make sure you have sound advice from a tax expert. A few years ago, the PSAI office took a call from a company leader who was having to pay more than $30,000 in back taxes and penalties. Her state taxed only the rental, and the taxing authorities viewed her firm's billing split between rental versus service fees as extreme and unrealistic. For more information—usually for free or very low cost—check with your local Small Business Administration Development Center or with the Service Core of Retired Executives (SCORE). While they won't do the work for you, mentors at SCORE and SBDCs can guide you to resources, or help you determine some good next steps. v

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