Question

Concord Publishing House, Inc. vs. Director of Revenue

(1) In Concord Publishing, the court construed the statute as exempting from sales and use tax "machinery and equipment" (a) used directly (b) in manufacturing (c) a product which is intended to be sold ultimately for final use or consumption (d) if the machinery or equipment was purchased to replace existing equipment or to expand existing manufacturing.

What could be the legislative purpose behind these conditions?

(2) What is a resale exemption? How far must a vendor go in verifying its customer's assertion that it is purchasing goods for resale?

(3) Can a use tax (complementary tax to sales tax) apply to a broader set of transactions than those to which the sales tax applies?

(4) Are exemptions or exclusions applicable to the sales tax also applicable to the use tax?

(5) What is the purpose of the Streamlined Sales and Use Tax Agreement? What are the SSUTA sourcing rules for sales and use tax?

Answer 1

1. Legislative Purpose behind these conditions is that there should not be double taxation which will increase the price of product at final consumption stage. Hence, only final end sales or retail sales are taxable. All medieval sales or sales before reaching the stage of final end sales/retail are exempt from sales tax.

A product should only be taxed when it is to be sold for final use or consumption.

2. Resale exemption is the exemption from sales tax granted on those purchase of goods which are to be resold by the purchaser. Purchasers are required to pay sales tax unless they present the seller with certification that the purchase is exempt from tax (exemption certificate). Hence, there is no obligation on vendor for verifying its customer's assertion.

3. Use Tax is applicable to all those transactions which are taxable by the law and on which sales tax is not to be paid. Examples are Use of all tangible personal property. Use Tax is a self-assessed tax by buyer who has not paid sales tax on taxable purchase.

4. Yes.

5. The purpose of the Agreement is to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance. The Agreement focuses on improving sales and use tax administration systems for all sellers and for all types of commerce through all of the following:

a. State level administration of sales and use tax collections.
b. Uniformity in the state and local tax bases.
c. Uniformity of major tax base definitions.
d. Central, electronic registration system for all member states.
e. Simplification of state and local tax rates.
f. Uniform sourcing rules for all taxable transactions.
g. Simplified administration of exemptions.
h. Simplified tax returns.
i. Simplification of tax remittances.
j. Protection of consumer privacy.

The Streamlined states have standard and simple rules for how they source transactions to state and local jurisdictions. A business does not have to worry that two states will try to tax the same sale and will have clear rules on which state's sales tax to charge.