Sales Tax Solutions 2000

If you rarely make retail sales, you may prefer not to use a resale certificate when making purchases for your practice. If you do resell items, you may be able to take a “tax-paid purchases resold prior to use” deduction. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

If your organization meets all of the following qualifications, your sales are not subject to sales or use tax. The organization must: Be formed and operated for charitable purposes. Qualify, under Revenue and Taxation Code section 214, for the “welfare exemption” from property taxation on the retail site where you sell merchandise. Or if the organization does not own the store, the organization must qualify for the welfare exemption on its personal property located there, such as the store fixtures and equipment. Carry out activities that relieve poverty and distress. Sell or donate items principally to assist purchasers or recipients in distressed financial condition. Make, prepare, assemble, or manufacture the items it sells or donates. “Preparation” includes cleaning, repairing, or reconditioning items. “Assembly” includes gathering together items at one or more locations for sale or donation. Example Your 501(c)(3) charitable nonprofit corporation, which conducts a rehabilitation ...

Tax generally applies to your purchases of items you will consume in your practice. However, if you use a resale certificate to purchase merchandise you will resell, tax will not apply to the transaction. If you purchase property for resale but use it for another purpose, you may be required to pay use tax. The following slides describe common situations in which sales or use tax may apply to your purchases. Generally, you should use a resale certificate to purchase items you will sell at retail, and pay sales tax reimbursement to your suppliers or use tax on purchases of items you will consume. However, it may be difficult for you to apply this to all of your purchases, since you may both resell and consume certain products you buy for your practice. You may find it helpful to adopt one of the following purchasing methods and use it consistently in your practice. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california...

Nonprofit organizations generally need a seller’s permit if they make sales of goods or merchandise in California. This is true even if the sales are not taxable. In limited instances, when the organization makes sales only occasionally, CDTFA can issue a temporary seller’s permit. Permit requirements are explained in more detail in the organization-specific sections of this course. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-exemptions-nonprofits

Charges for professional services and boarding charges that do not include taxable sales of products are not subject to tax. Receipts from these services included in Total gross sales on your sales and use tax return should be deducted under Other deductions before you calculate the tax you owe. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

As noted above, a sale of merchandise or goods is generally taxable unless it’s covered by a specific exemption or exclusion. A sale is an exchange of merchandise or goods for something else of value: money, barter, or trade. The barter or trade doesn’t have to be a two-way exchange of merchandise. It also includes an exchange of merchandise for services. For example, if you give meals to your accountant in your museum café in exchange for accounting services, that’s considered a sale of the meals. Nonprofits commonly conduct a variety of activities that are considered sales. These include (but are not limited to) the following: Sales of food, meals, beverages, and similar items under a number of different circumstances. Sales of tickets that buyers will exchange for food, beverages, or other physical products. Sales of booklets, books, pamphlets, etc. Sales of tickets for fundraising events when the ticket price includes amounts for food or beverages. Sales of items at rummage sales, ...

If you reported tax on a sale and have been unable to collect payment from your customer, you may claim a deduction for the bad debt. Bad debts may take the form of: Checks returned unpaid by the purchaser’s bank which you have determined to be uncollectible, or Accounts from charge or credit sales found worthless. You must charge off the bad debts for income tax purposes or charge them off in accordance with generally accepted accounting principles. You should claim the deduction on the return filed for the period in which you found the account worthless and wrote it off. Your deduction cannot include the amount of tax applied to the sale, or any other nontaxable charges included in your total loss. When you calculate your deduction, make sure to deduct tax from the total loss at the rate in effect when the sale was made. You cannot deduct amounts you paid to collect the funds due. If you later collect the money due for a bad debt (including worthless checks), any amount you previousl...

Although many nonprofit and religious organizations are exempt from federal and state income tax, there is no similar broad exemption from California sales and use tax. Generally, a nonprofit’s sales and purchases are taxable. In other words, nonprofit and religious organizations, in general, are treated just like other California sellers and buyers for sales and use tax purposes. However, there are special exemptions and exclusions available for certain nonprofit and religious organizations. Some organizations may not owe tax on their sales, whereas some organizations may owe tax on certain types of sales, but not all sales. Other organizations may be responsible for tax just like other California sellers. It all depends on what type of organization you are and what your organization’s practices and activities are. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-exemptions-nonprofits

A cash discount on a retail sale is not subject to sales tax. For example, if you sell a dog kennel for $350 less a ten percent discount ($35), tax would be due on $315, the total amount you received in connection with the sale ($350 price minus $35 discount = $315). Your invoice or receipt should clearly list the original price, amount of discount, amount subject to tax, and the amount of tax applicable to the sale. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

Similarly, use tax applies to the purchase of taxable merchandise that will be used, consumed, stored, or given away in this state unless the purchase is exempt or excluded from tax. Individuals, business, and groups must pay use tax on their taxable purchases. The state use tax is complementary to, and mutually exclusive of, the state sales tax. Tax generally applies regardless of whether the items you sell or purchase are new, used, donated, or homemade. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-exemptions-nonprofits

If you pay an amount for sales or use tax on the purchase of an item and then resell the item before using it, you can take a deduction on your tax return. When you report the sale, you may deduct your cost for the item, not including any applicable tax, under Cost of Tax-Paid Purchases Resold Prior to Use. If you do not take the deduction, you may pay more tax than you owe. Example You purchase a case of prescription diet dog food for $20. Since you intend to use the dog food in a way that qualifies you as its consumer, your supplier applies tax to your purchase. Later, a customer comes into your practice with a prescription for diet dog food from another veterinarian. You sell the customer the case of dog food for $35 without providing any related professional services. The transaction is considered a retail sale. You are required to report the $35 sale on your sales and use tax return (included in your gross receipts) and to pay sales tax on the transaction. However, since sales tax...

In California, sales tax applies to the sale of tangible personal property (referred to as “merchandise” or “goods” in this course) unless the sale is covered by a specific legal exemption or exclusion. Individuals, businesses, and groups that sell taxable merchandise in California must pay sales tax on their taxable sales. Sellers may charge their customers for sales tax reimbursement (referred to as “sales tax”). Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-exemptions-nonprofits

There is no required form for exemption certificates. Other forms are acceptable provided they contain all of the information shown on the samples. CDTFA does not provide blank certificates, you may reproduce the samples shown earlier. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

When you make a nontaxable sale of drugs or medicine, your sale should be supported by a drug exemption certificate completed by the purchaser. A sample certificate is shown on the next slide. These rules also apply to your purchases of drugs and medicines. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

Under certain circumstances, your sale or use of a veterinary drug or medicine is not taxable. The product must be sold for the prevention or control of disease in food animals, or in animals that will be sold by the purchaser in the regular course of business. For animals that will be sold, the drug or medicine must be intended for administration as an additive to feed or water rather than for direct administration. The table on the next slide summarizes how tax applies to the sale or use of drugs and medicines. Direct administration includes oral, hypodermic, external, or topical application, including injections, implants, drenches, repellents, and pour-ons. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

Your sale or use of feed for food animals is not subject to tax. Food animals are considered to be those animals, birds, or insects commonly used to produce food items that people eat, such as meat products, dairy products, eggs, and honey. Examples include cattle, chickens, sheep, goats, quail, ostriches, turkeys, and bees. This tax exemption applies regardless of the method you use to bill your customer. Feed, for sales and use tax purposes, includes products such as grain, hay, seed, and similar products. It does not include sand, charcoal, granite grit, or sulfur. In addition, your purchases of feed for food animals are not taxable. Exemption Certificate If you sell feed for food animals and that feed can also be used for nonfood animals, you may need to obtain a feed exemption certificate from the purchaser (see sample on next slide). However, a certificate is not required for sales of: Two or fewer standard sacks of grain, and/or four or fewer bales of hay (for use as feed) Feed ...

Sales you make to others for resale are not subject to tax, provided you obtain a valid resale certificate from the purchaser. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

It is important that you maintain proper documentation for all tax-exempt sales and other deductions you claim on your sales and use tax return. You should be sure to maintain resale and exemption certificates and indicate purchasers’ names on corresponding sales invoices, and to maintain other information necessary to substantiate each exemption or deduction. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

Although you must report all of your sales on your sales and use tax return, you may deduct amounts included for nontaxable sales or other allowable deductions before you calculate the tax you owe. The following slides describe some of the more common nontaxable sales and deductions that may apply in your practice. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

You are required to pay tax on all of your taxable sales despite any loss of proceeds from them. As a result, you may not take a deduction for a loss due to robbery, theft, or shoplifting. Although you cannot deduct such losses, you must document them in your records. Acceptable forms of documentation include police reports, insurance claims, reports from private investigating agencies, and so forth. It is important that you be able to account for all of your inventory and income if your practice is audited. Source: California Department of Tax & Fee Administration (CDTFA) Course: https://salestaxsolutions2000.com/california-sales-tax-veterinarians

Tax for an item sold on credit is due with the tax return for the reporting period in which you make the sale, even though you may not receive full payment until a later date. Tax is due on the full selling price. Example You perform surgery on a horse in March and keep the animal at your clinic for two days for observation. On your bill, you separately state a $50 charge for the horse’s feed (as explained earlier, when related to professional services and listed as a separate charge, the sale of feed is generally considered a taxable retail sale). Your client pays you $25, and agrees to pay the balance in future months. Regardless of when you receive the balance due, the $50 selling price of the feed must be included on your tax return for the reporting period that includes the month of March. You may exclude amounts for insurance, interest, finance, and carrying charges from the taxable selling price you report for a credit sale, provided you keep adequate and complete records itemiz...