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Lev
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I have an Alabama Sales Tax question, that reflects Sales in

Customer Question

I have an Alabama Sales Tax question, that reflects Sales in other states as well.

I resell Direct mail with my marketing company. I moved to Alabama a couple of years ago, along with my company that I work out of my home with.

Most all my business is out of the state of Alabama, so as I understand it, I am not required to pay or collect sales tax for any of those mailers, due to interstate commerce regulations I believe.

In Alabama itself, any business I re-sell to in this state, as i understand it, I am required to collect or pay for sales tax for what I charge my customers minus postage which is not taxable.

So in 2012, when it looked like I was going to sell 2 small accounts, I contacted the state to get the forms for re-sell and county taxes. The state sent back a letter stating I was not a re-seller, but rather a retail company, which I am not.

I have the printing and mailing done currently in Alabama for our company. They don't charge me sales tax because I am a reseller. I have had and may have other printers/mailing houses I use for our company mailers that we sell.

In Alabama I guess there is a county sales tax enrollment for every area separately, to need to submit for any business sold out those counties, as they vary in rates, so I submitted my annual one, which only came to about $17 for 2012, but I don't have a form to send in the sales tax for those 2 accounts for 2012 for the State, and don't want to get in trouble with them.

I guess what I'm saying, is that I want to get set up correctly with the State of Alabama for reselling our mailers, and am not sure if it makes a difference where I have them printed/mailed to qualify or not for needing to pay sales tax out of my customers' sales in this state or any other as a reseller.

If they already denied me a re-sell permit, what do I do? I don't want them to come back on me and penalize me for not having it set up with the state for 2012 either. I'm also concerned that without my permit, if they audit my printing/mailing resource and see they haven't been charging me sales tax and I don't have a resell permit, that there could be a problem there also.

My business checking account is still in South Dakota, but all my marketing material/website, and my personal office/residency that is not in my name for ownership of, is in Alabama.

Please advise how to get things set up correctly for Sales Tax, and whether I need to be concerned about other states wanting to collect sales tax from my company down the road because business was sold to them out of state.

I have an Independent Rep also in Wisonsin, and want to recruit many more Independents in other states this year, but do printing/mailing centrally wherever our resources are as a company. Does that make a difference in needing to charge sales tax for those areas also?

Thank you,
Tony LePera
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
Please see for reference - http://www.ador.alabama.gov/salestax/Rules/6335_02.cfm
810-6-3-.35.02. Interstate Commerce, Sales in.

(1) Sales are considered to be made outside Alabama and cannot be taxed by the Alabama Sales Tax Law where:
(a) The seller is required by the sales agreement to deliver the goods outside the state in the seller's equipment, or

(b) The seller delivers the goods to a common carrier or to the United States Postal Service for transportation outside the state regardless of any F.O.B. point, or

(c) The seller is required by the sales agreement to deliver the goods outside the state by the use of an independent trucker hired by the seller.
(2) Property is not sold outside Alabama, and therefore is subject to Alabama Sales Tax, when the buyer takes actual possession of the goods in this state or when an agent of the buyer accepts delivery for the buyer to make delivery outside the state at the buyer's direction. However, when the buyer contracts with a common carrier or the United States Postal Service to accept goods in this state for delivery outside this state at the buyer's direction, the sale is not subject to Alabama Sales Tax since the common carrier or United States Postal Service is the agent of the seller regardless of who selects the method of transportation. (Sections 40-23-1(a)(5) and 40-23-4(a)(17)) (Readopted through APA effective October 1, 1982, amended effective June 9, 1995, amended March 10, 1998)

LEV :

So far as long as sales are outside Alabama - such sales cannot be taxed by the Alabama Sales Tax.
That is regardless if you are a re-seller, or a retail.

LEV :

ON-LINE RETAIL SELLERS LOCATED IN ALABAMA: The retail sale of goods made over the Internet by Alabama retailers to Alabama customers are subject to Alabama Sales Tax. The tax reporting responsibility lies with the Alabama retail vendor to charge, collect and remit the Sales Tax on such sales, as these sales are treated the same as the retail sale of tangible personal property made through more traditional channels. Local sales tax or use tax also applies and should be remitted to the appropriate administering authorities.
LOCAL SALES TAX. In addition to the State Sales Tax, local sales taxes are also due, and these rates vary. The State of Alabama administers over 200 different city and county sales taxes; however, we do not administer all county or city sales taxes. Therefore, be advised to contact all counties and municipalities in which you do business in order to determine if you should register with them to collect their local tax. The local tax is due monthly, with returns and remittances to be filed on or before the 20th day of the month for the previous month's sales. However, a taxpayer may elect to file and pay state-administered local sales tax quarterly when the total state sales tax for which the taxpayer is liable averages less than $200 per month during the preceding calendar year. The election to file and pay quarterly shall be made in writing to the Department no later than February 20 of each year.
You may verify local tax rates for any specific locality here - http://www.ador.alabama.gov/salestax/Sales/index.cfm

LEV :

Be sure to ask for clarification as needed.

Customer :

Thank you.

Customer :

Let me ask for specific clarification of what this means for my particular situation then...

LEV :

You are very welcome.
My goal is to provide EXCELLENT service. I will address all your tax related issues.

Customer :

1) The printer and mailing service I use where my company is in Alabama uses their bulk rate permit to mail out the postage to my company's customers every month, of which I pay them for before it's all mailed. Does it make a difference for sales tax qualifications if I do it this way or have my own postage indisia that they use instead on my mailers for our customers? Should the print/mailing house I use here not need to charge sales tax to my company then for anything printed and mailed for our company, which is for mailings done directly from their place to those businesses?

Customer :

2) Do I need to have a re-sale permit then only then for printing/mailing sold inside the State of Alabama, so they don't need to charge my company, but rather I collect from the customer myself, and pay the sales tax? I would actually not collect from them technically, but pay it myself, because our company charges a flat rate per piece for our mailers, with itemization of the amount that is postage on their invoice, so it's not applicable.

Customer :

3) If our company's independent rep is in another state selling our mailers as we do, with them not having any responsibility other than writing agreements for our company to mail for them, is that Independent rep, or our company responsible for any sales tax, since he does live in the state in which it's sold in our behalf?

Customer :

4) Do I have to show the Sales Tax Dept all sales generated outside the state of Alabama for our company if asked?

Customer :

5) How should I get set up to be in compliance with the State of Alabama's "State" Sales Tax revenues to pay for those mailers sold in this State minus the postage, which is not taxable correct? Since I ended up with about $3,000 in Taxable sales for Alabama in 2012, but didn't realize this is what I needed to do, and paid the county, but not the state, should I talk to them about it retroactively, or simply get registered correctly now for 2013?

LEV :

1. For mailing TO your business location - you may use resale permit. However because you are production company - not re-seller of goods - your purchases are subject of sales tax.
2. You do need re-sale permit to claim exclusion from sales tax. However exclusion will only affect items that you will re-sell. It will not affect items that you produce. If you have both - you should keep separate accounting for items that you strictly resell.
3. Having a representative in a different state has nothing to do with your AL sales tax responsibility. As long as you have a nexus in Alabama - you are required to change sales tax regardless if mailing is done from outside location.
4. Yes - you need to demonstrate all sales and keep proof for those that are not subject of sales tax.

LEV :

Except for supplies which qualify for the exemptions contained in Sections 40-23-4(a)(10), 40-23-4(a)(40), 40-23-4(a)(42)c, 40-23-62(12), 40-23-62(32), and 40-23-62(34)c, shipping supplies such as nails, lumber, metal straps, dunnage, and plates which are used for fastening or securing manufactured or compounded products into railroad cars, trucks, aircraft, or vessels for shipment are taxable at the time of purchase.
Purchases by retailers, wholesalers, and others of sales tickets, cash register receipt paper, invoice forms, bill of lading forms, and other forms for use in receipting, billing, invoicing, or shipping are taxable.

LEV :

810-6-1-.178. Transportation Charges.

(1) Where a seller delivers tangible personal property in his own equipment or in equipment leased by him, the transportation charges shall be considered a part of the selling price subject to sales or use tax. Said transportation charges are taxable even if billed separately. (2) Where delivery of tangible personal property is made by common carrier or the U. S. Postal Service, the transportation charges shall not be subject to sales or use tax if billed as a separate item and paid directly or indirectly by the purchaser. To be excluded from the measure of tax, these transportation charges must be separate and identifiable from other charges. Transportation charges are not separate and identifiable if included with other charges and billed as "shipping and handling" or "postage and handling". Indirect payment of the transportation charges shall include those instances where the seller prepays the freight to the common carrier or U. S. Postal Service and is reimbursed by the purchaser. (3) Where a seller contracts to sell and deliver tangible personal property to some designated place and makes arrangements for delivery of the property by means other than a common carrier or the U. S. Postal Service, the transportation charges shall be considered a part of the selling price subject to sales or use tax. Said transportation charges are taxable even if billed separately. (Sections 40-23-1(a)(5) and 40-23-1(a)(6)) (Amended August 16, 1974, amended October 29, 1976, readopted through APA effective October 1, 1982, amended April 3, 1987)

LEV :

You will find much details in this publication - http://revenue.alabama.gov/taxpayerassist/SalesTaxesBroch.pdf
F
or registration - follow instructions on this page - http://revenue.alabama.gov/salestax/register.cfm

Customer :

Couple questions please...

LEV :

Sure - go ahead.. just be patient as I might need some time to prepare the answer.

Customer :

#1 stated above: Perhaps I didn't explain what our company is very well. We are NOT a production company. We are a marketing company. We don't print or mail or have the mailing lists ourselves as a company. We purchase those services locally, and sometimes out of state (from list companies and whoever we deem for printing/mailing), then re-sell the printing and mailing that the production companies provide for us whereas they mail the finished product out of state in our behalf from their location. Some of these accounts will be in the state of Alabama now. We don't handle anything as a company for labor or products other than customer service. We consult with Retailers and Restaurants to help them grow their business, but dont' charge them for consulting services. We guide them to use our niche birthday mailer program to help them grow their sales, along with Thank You follow up mailers thereafter. If they accept the idea, we then strictly place the orders, and do the invoicing to our customers that pay us for those services with the markup we add above the cost we paid for printing and mailing. Thus pay a flat cost per piece that includes everything from us. Broken down by printing/lists and postage on their invoice we send to them. It has been my understanding since we've been doing this for almost 9 years now that if our "mailers" as described are sold out of state from where the main company is located, then we don't need to charge or pay for sales tax. If it's in the state our company is in that we sell the mailers, then we do need to charge sales tax or pay sales tax out of our profits, which excludes sales tax on postage. This is what I'm trying to confirm as being correct, or not, and what if so, what I need to do, to get compliant with Alabama's Sales Tax Dept here for taxable sales in Alabama. Then again, if I should be requesting a re-sell permit from Alabama for those accounts sold in this state or not, based on the way our business is operated as described. PLease clarify as this is a big deal to our company. Then secondly if I am under the correct understanding, any printer or mail house, or list company we purchase products from for our company to produce toward what we sell out-of-state should not need to charge us sales tax either correct?

LEV :

When you purchase good or purchase services - that is different. When you re-sell goods - you keep your inventory. If you are registered reseller - you do not pay sales tax on purchases - but charge sales tax from customers on taxable sales. When you resell services - you either receive commissions only or you actually provide services to customers using contractors who produce services. If these are taxable services and you is the one who charges customers - you are required to collect sales tax.

LEV :

In order to be in compliance - your first step - to determine if your goods or services are taxable. If yes - you are required to collect sales tax because you have a nexus in Alabama. If you have taxable and not taxable sales - you are required to account for those separately - otherwise - all sales will be assumed as taxable.
Sales taxes are calculated based on the sale price - on on profit. However - you are correct - shiping charges are excluded - see reference above.

LEV :

In order to collect sales taxes - you must be registered. I post a link above for registration page.
When you purchase goods to resell - that is your inventory. Generally any purchase is subject of sales tax. However if you provide to the printer or mail house - your reseller permit and indicate that you purchase items to resell them - your purchases would be excluded from sales taxes. Still you need to charge sales tazx from customers to whom items are sold.

Customer :

(1) Sales are considered to be made outside Alabama and cannot be taxed by the Alabama Sales Tax Law where: (a) The seller is required by the sales agreement to deliver the goods outside the state in the seller's equipment, or

(b) The seller delivers the goods to a common carrier or to the United States Postal Service for transportation outside the state regardless of any F.O.B. point

Customer :

I think I'm getting very confused now. For my company's particular situaiton only, do either 1 or both of these references you gave me originally listed above qualify my company to NOT pay or charge sales tax for any of our customers we sell to out of the state of Alabama. If we wouldn't qualify, please state why.

Customer :

(1) Sales are considered to be made outside Alabama and cannot be taxed by the Alabama Sales Tax Law where: (a) The seller is required by the sales agreement to deliver the goods outside the state in the seller's equipment, or

(b) The seller delivers the goods to a common carrier or to the United States Postal Service for transportation outside the state regardless of any F.O.B. point, or

Customer :

However, when the buyer contracts with a common carrier or the United States Postal Service to accept goods in this state for delivery outside this state at the buyer's direction, the sale is not subject to Alabama Sales Tax since the common carrier or United States Postal Service is the agent of the seller regardless of who selects the method of transportation. (Sections 40-23-1(a)(5) and 40-23-4(a)(

LEV :

Sales taxes are paid by purchasers - not by sellers.
The seller might have or not have obligations to COLLECT sales tax.
So - when you PURCHASE items - the seller is required to collect sales tax from you. If you provide the seller with a reseller's permit - your purchases are not subject of sales tax. If for any reason the seller doesn't charge sales tax from you - for instance if the seller is out of Alabama - then you are required to pay use tax on that purchases.
When you SELL items to ALABAMA customers - you are required to change sales tax from these customers. If you sell items to customers located outside of Alabama - you are NOT required to collect Alabama sales tax - but depending on other circumstances such sales might be subject of sales tax in that state.
To avoid confusions - I want these issues to be clear before we may discuss treatment of transportation charges.

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