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Suppose I have a company in New Hampshire that contracts with

Customer Question

Suppose I have a company in New Hampshire that contracts with a government agency in New Jersey. The contract is to deliver $100,000 worth of goods to a location in New Jersey. The terms of the contract are FOB Destination, so I am the one responsible for shipping the goods and insuring it on the way. It becomes the property of the government at the drop off point in New Jersey where they receive it. I arrange to have FedEx freight pick up from my NH location and take the stuff down to Jersey. I have no other business operations (offices, employees, etc) of any kind in any other state. 30 days after delivery in Jersey, the government wires $100,000 to my bank account and our business in concluded.

My questions are:
1. NH has no sales tax, so it is neither a destination or origin based state. NJ has a sales tax of 7%. It is a destination based state. According to the law, I am not liable for collecting and turning over a sales tax to NJ government for this transaction as I have no presence in NJ. That is purely the recipient's responsibility to pay applicable sales tax. This is true for all destination based states. Am I correct?
2. Payments for delivery on contracts are considered earned once all of my duties are concluded, that being by physically handing over the goods in NJ. Since the terms of the contract is FOB destination, I am liable for a state income tax on the money earned in New Jersey and not New Hampshire on this specific contract. Am I correct?
3. If the terms of this contract were FOB origin and the contracting agency in NJ had sent a common carrier or representative to pick up the goods at my NH location, then I am liable for income taxes in NH. Am I correct?
Submitted: 1 year ago.
Category: Tax
Expert:  CGCPA replied 1 year ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

 

1. You are correct but not for the reasons you seem to believe. There is no NJ sales tax because a government agency is not a taxable entity. It is an exempt agency. Otherwise, yes, the receiver/purchaser is obligated for any sales tax.

2. You are responsible for any NH tax on the profit from the delivery. Since you have no physical presence in NJ (nexus) and are using a common carrier (FedEx) for the delivery you have no NJ tax obligation.

3. Correct completely.

Customer: replied 1 year ago.

My name isXXXXX you please take a look at this set of Q and As between me and another expert. I suspect he is wrong.

Suppose I have a company in New Hampshire that contracts with a government agency in New Jersey. The contract is to deliver $100,000 worth of goods to a location in New Jersey. The terms of the contract are FOB Destination, so I am the one responsible for shipping the goods and insuring it on the way. It becomes the property of the government at the drop off point in New Jersey where they receive it. I arrange to have FedEx freight pick up from my NH location and take the stuff down to Jersey. I have no other business operations (offices, employees, etc) of any kind in any other state. 30 days after delivery in Jersey, the government wires $100,000 to my bank account and our business in concluded.

My questions are:
1. NH has no sales tax, so it is neither a destination or origin based state. NJ has a sales tax of 7%. It is a destination based state. According to the law, I am not liable for collecting and turning over a sales tax to NJ government for this transaction as I have no presence in NJ. That is purely the recipient's responsibility to pay applicable sales tax. This is true for all destination based states. Am I correct?
2. Payments for delivery on contracts are considered earned once all of my duties are concluded, that being by physically handing over the goods in NJ. Since the terms of the contract is FOB destination, I am liable for a state income tax on the money earned in New Jersey and not New Hampshire on this specific contract. Am I correct?
3. If the terms of this contract were FOB origin and the contracting agency in NJ had sent a common carrier or representative to pick up the goods at my NH location, then I am liable for income taxes in NH. Am I correct?
Edit Price


From Charles Greiner

Wednesday, September 26, 2012 7:13 AM EST

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

1. You are correct but not for the reasons you seem to believe. There is no NJ sales tax because a government agency is not a taxable entity. It is an exempt agency. Otherwise, yes, the receiver/purchaser is obligated for any sales tax.
2. You are responsible for any NH tax on the profit from the delivery. Since you have no physical presence in NJ (nexus) and are using a common carrier (FedEx) for the delivery you have no NJ tax obligation.
3. Correct completely.

My questions:

1. if it is not taxable, why does the gov ask me to include sales taxes in the price quote I give them??

2. Then why doesn't Amazon just set up in a 0% tax state like TX and ship everything FOB origin. the response I got to #2 is odd because it conflicts with almost everything I've read and been told. I've been told to get a good CPA to do multiple state income tax returns, and his response contradicted that.

I've repeatedly been told that the state in which the hand off of goods occurs is the state in which the contract money is earned. Since the terms are FOB destination, the hand off of my goods so that it becomes the government's is occuring in jersey, not NH. So I owe tax in NJ, not NH. right?

Expert:  Angie replied 1 year ago.
Government agencies are not taxable. I'm not sure why they ask for the price including sales tax. You would need to ask them why they requested this since the government does not pay sales tax.

Even if you were selling to a non-government buyer, you would not be responsible for sales tax. If your state does not have a sales tax, and the purchaser takes possession outside of your state, the purchaser is responsible for paying what is referred to normally as a "use" tax. In most states, this is done on the honor system, but some states are cracking down on internet sales etc and using alternate methods to find people who are avoiding the "use' tax. As an example... a person in Tennessee crosses the border and purchases furniture in North Carolina and having it shipped to Tennessee, They have not paid sales tax in either state (took possession outside of NC thus no tax) shipped to TN, (TN tax due through the use tax) Using credit card, shipping records etc... the purchaser receives a bill through the state of TN if they did not pay the "Use" tax.

I cannot really answer for Amazon, but I do know that in many states, Amazon works out "deal" with the government to get tax breaks in return they provide "x" number of jobs in that state.

You will not need to do multiple state returns unless you physically are doing business in multiple states... ie... you open an office in NJ and hire someone to run it for you there, then you would owe NJ sales tax. The only tax that you will owe is Income tax on the income you receive.

I hope this helps!
Customer: replied 1 year ago.

so, basically, all the income I make, regardless of where or how the goods are delivered to the government procurement office, is taxable in NH provided that my company exists and operated entirely within NH.. correct?

Expert:  Angie replied 1 year ago.
Yes that is correct.
Angie, Tax Preparer
Category: Tax
Satisfied Customers: 56
Experience: All types of US Taxes, Tennessee taxes, Personal, business, payroll, sales tax etc.
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