Sales Tax

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Old 12-03-19, 10:25 AM
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Sales Tax

I'm in the process of purchasing a new dirt bike and the dealer is charging sales tax on the entire amount, which includes a processing fee, title fee, and freight charge. Shouldn't sales tax only be charged on the actual bike? How can they charge sales tax on fees and freight?
 
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Old 12-03-19, 10:34 AM
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From the Internet

For taxable sales, separately stated delivery charges are exempt but delivery charges that are included are taxable. Handling charges are always taxable, as are combined shipping and handling charges.
Delivery charges and handling fees are a service just like any service is. And therefore taxable.
 
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Old 12-03-19, 10:36 AM
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Okay. I was thinking a service was considered labor, which wouldn't be taxable.

They can't tax a titling fee though can they? Not that it would amount to much.
 
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Old 12-03-19, 10:50 AM
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Also, the dealer just informed me that since there will be a lien on the bike, that I am required to pay Virginia sales tax (the dealer is in Maryland), whereas if I was paying cash, I would not have to pay sales tax. Does this make sense? Guess I should move this to the financial forum.
 
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Old 12-03-19, 11:08 AM
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Don't see how cash transaction makes a difference. Unless he isn't reporting it.
 
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Old 12-03-19, 11:15 AM
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The reason given initially when I said it would be a cash purchase (meaning not financed through them), was that since there will be no title issued, there is no sales tax. I would receive a certificate of origin only.
 
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Old 12-03-19, 11:18 AM
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cash purchase (meaning not financed through them), was that since there will be no title issued, there is no sales tax. I would receive a certificate of origin only.
Interesting. That's the same thing I was told when I bought my UTV from Cabela's. I have a certificate of origin but no title.
 
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Old 12-03-19, 11:31 AM
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What's taxable and what's not, is entirely dependent on your state's laws. In PA, EVERYTHING is taxable. Products, labor, shipping charges, etc. but not food unless it's restaurant or take out food, then it's considered a luxury. Pet food is also taxable.
You should be able to go into your state's website and it should all be there. Usually motor vehicles are taxed at the state and city you live in, not where it's purchased.
I agree with Norm that paying cash should make no difference unless they're not reporting it. But seems that could leave you in trouble eventually.

ETA, I moved this to Taxes.
 
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Old 12-03-19, 11:36 AM
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I'm reading a website that says in Virginia, services are generally not taxable. Can you cite your source?
 
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Old 12-03-19, 11:39 AM
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I'll check out the VA website. Sounds like if the service is normally charged as part of the transaction (such as a freight charge and processing fee), then they are taxable.
 
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Old 12-03-19, 11:52 AM
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Your state's tax section isn't very clear on what's taxable or not, in fact I can't find anything for some reason. PA's is pretty simple to follow.
Anyway, so I found another site, https://www.taxjar.com/ that says this:

Should you collect sales tax on shipping charges in Virginia?

As long as you separately state the shipping charges on your bill to your customer, you do not have to charge sales tax on shipping.If you combine shipping and handlings charges together, then that amount is taxable. Handling charges must be separately stated from shipping charges.If you include shipping in the price of the product you sell the customer, then shipping is considered part of the taxable transaction and Virginia declares that you must collect sales tax on shipping.
If they're 100% legit and accurate, I don't really know.
 
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Old 12-03-19, 11:59 AM
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I saw that too. The freight charge is always charged, so I guess that means it is taxable? Although the freight charge is listed as a separate line item, so it's not technically included in the price of the bike. However, I'm not being charged freight for shipping the bike to me, it's the freight charge that the dealer had to pay the manufacturer, so I suppose this is different.
 
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Old 12-03-19, 12:06 PM
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It sounds like it's not taxable if listed separately.

As long as you separately state the shipping charges on your bill to your customer, you do not have to charge sales tax on shipping.
 
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Old 12-03-19, 12:08 PM
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I would probably show his this and see what he says. If he's not from Virginia, he may not be aware of this fact.
 
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Old 12-03-19, 12:19 PM
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Found my answer:
Regarding freight charge (manufacturer to dealer):

23VAC10-210-6000. Transportation or Delivery Charges.

A. Generally. The tax does not apply to transportation or delivery charges added to a taxable sale provided such transportation charges are separately stated on the invoice to the customer. If the transportation or delivery charges are not separately stated on the invoice, they will become part of the sales price of the property and will be subject to the tax.

Where the use tax is applicable, separately stated transportation charges are also excludable in the computation of cost price.

B. "Transportation" and "delivery charges," defined. As used in this section the terms "transportation" and "delivery charges" mean charges for delivery from the seller to the purchaser, commonly known as "transportation-out," and include postage or common carrier charges. Transportation and delivery charges do not include charges from a manufacturer to a retailer's place of business relative to purchases for resale, nor do they include handling charges.

Regarding services (dealer build and prep, processing fee):

23VAC10-210-4040. Services.
A. Generally. Charges for services generally are exempt from the retail sales and use tax. However, services provided in connection with sales of tangible personal property are taxable.
B. Taxable services. Charges made for the following are taxable:

1. Any services included in or in connection with the sale of tangible personal property;
 
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Old 12-03-19, 12:22 PM
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It sounds like it's not taxable if listed separately.

Quote:
As long as you separately state the shipping charges on your bill to your customer, you do not have to charge sales tax on shipping.
That is true for dealer-to-seller shipping. I was referring to the freight charge from manufacturer to dealer, which I just determined is taxable. Sorry if I didn't make that clear.
 
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Old 12-03-19, 12:36 PM
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Okay, so you just wasted everyone's time on a very important fact you left out.
 
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Old 12-03-19, 12:46 PM
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Aw, don't be so critical, it was good conversation and I think we all had something to think about.


side note....The store I work at just a had wake up call from the state finance and tax taxation. Up until now, if we needed supplies or tools we would take one off the shelf and remove it from inventory and charge the cost to overhead/operating cost/etc...We now must sell it to ourselves and charge state tax. They always get their cut. I think loan sharks are more honest and up front. Pay up or die! Seems fair. You know where you stand.
 
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Old 12-03-19, 01:33 PM
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https://www.dmv.virginia.gov/vehicles/#atv_offroad.asp

If you buy the dirt bike out of state for cash, you will be required to pay the sales tax in Virginia when you register it. Check out the above link.
 
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