Section 16 – Taxes
Section 16.4 – Sales and Use Tax
Date: 11/2/06 — Approved: Finance Board
Note: This policy is intended for the purpose of informing AS employees and other AS-related individuals about relevant tax issues. This policy does not constitute legal or tax advice. Individuals should consult with their attorneys or tax professionals for advice on personal issues.
OVERVIEW
Sales tax is imposed on a seller's (retailer and serviceperson) receipts from sales of certain tangible personal property for use or consumption (not for resale). For purposes of this section, retailers are individuals engaged in the business of selling tangible personal property, service persons are individuals engaged in the business of making sales of service, and tangible personal property does not include real estate or investment assets, such as stocks or bonds.
Sales tax is comprised of state, local, county and district taxes. Sellers may reimburse themselves by collecting the tax from the consumers; however, sellers are responsible for properly collecting, reporting, and remitting the tax to the State Board of Equalization (Board).
CATEGORIES AND DEFINITIONS
Taxability of Sales
Reportable sales are categorized as either taxable or tax-exempt, which the AS is required to report to the Board.
Taxable - Reportable sales that do not qualify for a specific exemption provided under the Board and/or the Board Regulations are classified as taxable reportable sales.
Tax-exempt - Reportable sales that are not subject to taxation due to a specific exemption provided under the Board and/or the Board Regulations are classified as tax-exempt reportable sales. The Accounting Manager will be considered the expert in determining if a transaction is subject to sales tax. Examples of exemptions include, but are not limited to:
Exempt organizations-- This exemption occurs when the AS sells to an organization that is formed and operated exclusively for religious, educational, or charitable purposes, or any state, local, or federal governmental body. In order to substantiate the tax-exempt status, the AS division should obtain a copy of the organization's sales tax exemption letter, which includes the exemption identification number ("E" number) issued by the Board. (For organizations located in other states, see Sales to Clients in Other States later in this document.) The number will begin with an "E", followed by two nines, then eight digits, for example, E9901-2345-04. The last two numbers indicate the number of times the exemption letter has been renewed.
Sales to accredited foreign diplomatic and consular officials, who have been issued tax exemption identification cards by the U.S. State Department, are exempt from taxation as indicated on the individual card. Units should obtain the exemption card number.
Unless specifically exempted by the Board, sales to otherwise exempt organizations, including AS divisions, are taxable when an individual is the ultimate consumer of the property transferred and the same individual reimburses the exempt organization or AS division for the expense incurred. This reimbursement may take the form of a single registration or conference fee that includes provisions for food and housing.
Sales of service-- Sales of service occur when tangible personal property is transferred by means of providing service(s) to a customer, such as when service work is performed on equipment and sales tax is charged on the cost of the parts installed. The entire sale is reported to the Board; however, the labor portion plus the markup over cost on the parts installed may be claimed as deductions.
REPORTING OF SALES
The AS division that is conducting the transaction is responsible for collecting the appropriate tax from the customer, and the accounting department is responsible for reporting sales and taxes directly to the Board.
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