Tax Tips Blog

Kelly writes:Hi! Ok…so I applied for a State Tax ID in June online. I lost the form I needed to send in to get my permit. So I never sold anything or charged tax I got a quarterly form to fole and threw it away :0 I then got a form with a fee and penelty with an amount due of 1100. That form was I guess due paid in full by 12/22 or another 10% fee would be added. I did not send that in either. (my lack of reading fine print is killing me). Now I have another quarter form due. I have still not recieved my permit or sold anything…can I fight having to pay the fees and penelties? By the way I am in the state of Texas.

My reply:Kelly,

I’m sorry to hear about your frustrations with the State of Texas. Usually the sales tax permit is automatically issued when you apply online, so I’m sure the State of Texas believes you received that.

Even if you do not owe sales tax you are required to complete the form otherwise you will be subject to a “Failure to File” penalty. In addition, if you do not complete the form in a timely manner you will be subject to a “late filing” penalty.

If you actually never collected any sales tax then most, if not all, of your penalties may be able to be removed if you simply complete their form and send it in with a letter of explanation.

Best wishes,
Gina

Follow up:Thank you for your help and quick response. I did talk to them and I have telafiled that quarter and ALL fees were removed. =) I also asked where to get another signature form to file, and I was given the website. I will now be aboe to get the permit and start to sale. Thanks again for your time and help!
Kelly

Sandra writes: Dear Gina,

A friend of mine saves EVERY gasoline receipt after she fills up her (personal use) car. She claims she can deduct ~ ~ 38 cents per gallon of gas because the Federal and State Gasoline taxes..are tax deductible.

Is she correct?

My reply:Sandra,

Thanks so much for visiting.

Someone actually asked me a similar question almost a year ago. My response to that question is here: http://glgcpa.com/blog/2008/01/11/sales-tax-or-state-tax-deduction/

In short, Federal excise taxes are NOT deductible. In addition, environmental fees are NOT deductible. Most gas stations (I actually don’t know of one that doesn’t do it this way), include their environmental fees as part of the tax we pay at the pump. So, if for some reason your friend happens to know the exact amount of all the fees and taxes which are not deductible for each purchase of gasoline that she makes, then she could compute the potentially deductible portion, but that would be a lot of work. In addition to keeping all of her receipts she would have to have some sort of a spreadsheet to compute the amount of deductible taxes at each location. In case of audit, she would also need “proof” of the amounts she used for the environmental fees and any other fees that a particular station may have included as “gas tax”.

So in conclusion, if she’s really able to separate out all the fees and taxes, then yes the state, county and local sales tax portion is deductible.

Best wishes,
Gina

Joe asks:

Can multiple purchases be grouped together for itemized deduction of sales tax for major purchases (multiple small Home Depot and Lowes purchases for landscaping or remodel)?

My reply:

Hello Joe!

You have the option of taking either your State Income Taxes or Sales Taxes as an itemized deduction. If you choose to take the Sales Tax deduction then you have the option of adding up all the sales tax you paid for the year (this would require you keeping every single receipt for the year) and deducting that amount OR using the IRS tax tables plus “big-ticket” items.

Big Ticket items are just that - a car, a boat, etc. There is no specific deduction for landscaping or remodeling. It would have to be considered a substantial addition or major renovation.

A substantial addition to your home or major renovation is considered a big ticket item IF the tax rate was the same as the general sales tax rate AND any of the following applies:
1. Your state or locality charges a general sales tax on the sale of a home, substantial addition to a home or major renovation of a home.

2. You purchased the materials to build the substantial addition or major renovation yourself and paid the general sales tax directly.

3. Under your state law your contractor is considered your agent in the substantial addition or major renovation of your home.

4. None of these items were used in your trade or business.

Assuming you qualify, then yes, you may add up all the sales tax associated with the substantial addition or major renovation.

Best wishes,

Gina

Please accept my profound apologies for such a long leave of absence. And without further delay….

Jonathan writes: Hello,
I recently started my own DJ business. I was just wondering what form I needed to fill out to get a tax id number for Texas sales tax. I have an EIN given to me by the IRS. But is there something else that I need to fill out? Any help is appreciated.

Thanks.
Jonathan

My reply:Hi Jonathan, thanks for visiting!

Your sales tax number is issued by the state, so the easiest thing to do is to download the form from your state’s website. For Texas you can find it here: http://www.window.state.tx.us/taxpermit/. Just follow the instructions on the screen and you should be all set.

By the way, if you do business in other states you may need to get a temporary or permanent sales tax id number for those states as well.

Best wishes,

Gina

Brett asks:I bought a new car last year and I think I’ll get a larger deduction if I deduct my sales tax instead of my state income tax. When I calculate my sales tax deduction do I get to include all the sales tax I paid on my gasoline?

My reply: Hello Brett! Interesting question.

The tax on gasoline isn’t just one tax - it could be several different kinds of tax. First you have your Federal excise tax, then your State excise tax, then your general sales tax, your county and local sales tax, environmental fees and wholesale taxes.

State excise taxes are anywhere from about 8 cents a gallon to 33 cents a gallon. Federal excise taxes are about 18 - 20 cents a gallon. The actual sales tax on gas is anywhere from about 3% to maybe as high as 10% of the total retail price of the gas. Since this is rarely, if ever broken out, I would have to believe it would be extremely hard to go through all your receipts for the year and determine, based on where you purchased the gas, exactly how much of the taxes that you paid were actually sales taxes.

However, if you do decide to do that, the general sales tax on gasoline is potential deductible on your income taxes. It’s only deductible if you itemize your deductions, choose the option of taking your sales tax instead of your state income tax and use actual expense method of computing the sales tax and you qualify for the itemized deduction and your itemized deductions are not phased out and you’re not subject to AMT, etc.

Good question though.

Best wishes,

Gina

The time has come once again for Texas shoppers to save some tax dollars, and lawmakers to feel good about it. On August 4, 5 & 6 anyone shopping in Texas will not have to pay state or local sales tax on most clothing and footwear priced under $100. This $99.99 limit applies to each item you buy, not your total bill. Many advertisers promote this weekend as a way to save on back to school supplies (sorry, backpacks are taxable), but these savings also apply to baby clothes, diapers, jogging apparel, pajamas, work clothes, uniforms and more. For a complete list of what is taxable and what is not visit http://tinyurl.com/4mcbv. A couple of tips for retailers:

1. If you plan on selling qualifying clothing or footwear tax-free during this year’s sales tax holiday, include the amount in Total Sales (Item 1), but not Taxable Sales (Item 2) of your sales tax return. However, if you collected tax, then you must send it to the state.
2. If you have qualifying items that are $100, you may want to discount these items to $99, such that your customers don’t have to pay the sales tax. It just might generate you an extra sale.