Magazine article The CPA Journal

Centralized Purchasing and the Use Tax

Magazine article The CPA Journal

Centralized Purchasing and the Use Tax

Article excerpt

A company purchases and maintains an inventory of office supplies such as forms. The forms are purchased from a single vendor at a quantity discount and stored in public warehouses in both New York and New Jersey. The company reships the forms at the request of its branches in other states. Sales tax was paid to the vendor of the supplies upon the initial purchase. A centralized purchasing system of the like is highly desirable. A problem, however, develops many years later. The company has a use-tax audit at one of its branches (i.e., Minnesota). According to New York State sales tax regulations, "property which is purchased in bulk, which is stored but not used in the state and later reshipped to a point outside the state" is subject to a refund or credit. The refund claim must be made within three years after the tax is paid. This assumes a use tax is paid to another state. The credit is not predicated on this point. In New Jersey, no refund claims are allowed for bulk purchases, which are stored and later reshipped.

Minnesota allows a credit against use tax on any purchase where an item has been subject to a use tax. However, if the tax is subject to a refund from another state (e.g., New York) or was erroneously paid to another state, no credit is allowed. Minnesota requires a use-tax return to be filed if the tax rate in the state is higher than the tax rate in the state where the goods are purchased. In this case, the New York purchases that were shipped to Minnesota are subject to sales tax and the New Jersey purchases that were shipped to Minnesota are subject to the differential between the New Jersey rate paid and the Minnesota tax calculated. …

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