Are You On Top of Equipment Sales and Use Tax?
Taxes are something we would all rather not think about, but I can tell you from personal experience that someone out there is thinking about taxing you, even if you're not thinking about them.
Case in point: When I was actively in the bankcard business, which seems like a lifetime ago, I was loaning equipment to a few of my merchants whose volume made the loan of a point-of-sale terminal make economic sense at the time. We called this a rental program even though the merchant really paid nothing.
From time to time a salesperson would move equipment from one merchant of this type to another, and of course sometimes equipment disappeared altogether. After all, bankcard sales were like the Old West in those days.
Well, I just received a tax bill in 1997 for a terminal that I lost track of in 1983, and that bill is from a Rhode Island taxing authority, for a merchant that I never had.
Tracking back
through my records, I found that the particular terminal, which was
indeed my property, had been "loaned" to an animal hospital in
Boston. How this terminal ended up in Rhode Island is still a
mystery, but the local taxing authority simply got my company name
off of the terminal and sent me a tax bill.
While better tax reporting would not have changed the result in my story, I can tell you that I was completely unaware that any tax could be due for a "loaner" terminal, much less a stolen one.
While I know that some ISOs in the industry are completely up to date on the "Tax" question, others are not so well versed (perhaps more like me) and would frankly benefit from some expert thoughts on the subject.
"Tax Compliance usually involves the collection of the necessary and appropriate taxes as required by each state and local jurisdictions. Calculating these taxes, collecting them, and filing the return along with payment due to the appropriate taxing jurisdictions, all in a timely manner, is a real challenge," says Gary M. Gibbs, President & CEO of Gibbs Management Group, Inc. in Duluth, Georgia.
Since the company's inception in 1988, Gibbs has strived to achieve complete tax compliance, earning them the reputation as the industry's most experienced service provider that addresses these complex sales tax issues.
As an example, all products and services purchased, rented, or leased through Gibbs are automatically taxed appropriately for the current city, county, and state regulations where the equipment resides.
"What many ISOs fail to understand is that when you rent or lease equipment, it creates an ongoing revenue stream which is subject to ongoing tax liability," explains Gary Gibbs. "This becomes a crucial issue when ISOs rent or lease point-of-sale equipment in multiple states."
Is something changing out there?:
The answer is yes, more cities, counties, and states want a tax bite from your sale. In 1993, the Federation of Tax Administrators created the Nationwide Information Sharing pact between 44 states and New York City. As one of many such interstate pacts, this unprecedented agreement promised a broader sharing of tax information between states. To you and your organization, this means increased chances for an audit, not only from the state in which your business resides, but also from all of the other states where you rent or lease equipment.
While you should, of course, try to find an equipment provider like Gibbs that will help you with tax compliance, or at the very least seek out some local tax advice, here are some additional thoughts that might help:
1. Ask yourself this question: Do I know if I have potential tax liabilities when it comes to rentals and leases, sales tax, personal property tax, or income tax?
2. If you don't know the answer to the above question, or you are concerned, consult with a tax expert to help your organization determine the extent of your tax exposure.
3. Take a closer look at your business relationships. Are your vendors and service providers increasing your tax exposure?
4. Are your client service providers registered tax agents in each of the states where you do business? A few phone calls can provide you with this valuable information!
Whatever your situation, you should do yourself a favor and check out the problem before it finds you.
If you are interested in the services of Gibbs Management Group, they can be reached by calling 800-581-8894.
