CPA Practice Advisor

MAR 2016

Today's Technology for Tomorrow's Firm.

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March 2016 • www.CPAPracticeAdvisor.com 19 T he t h ing is – excise ta xes a re typically based on the volume sold for a specifed unit of measurement, while sales ta x is a percentage (ad valorem) tax based on the price of a good or service. Additionally, excise taxes ofen have many more variables that are used to determine the ta x rate. Let's look at fuel as an example, t he posit ion i n t he supply cha i n where the transaction takes place, the origin of the fuel and the licenses held by the parties involved all play a part in the amount of excise tax due. Sales tax calculation has diferent challenges. Te same product can have a diferent tax rate, or no sales tax obligations at all, from one street to the next based on jurisdictional boundaries. For example, in some states like New York, propane and electricit y that is sold for use in a commercial seting is charged the s t ate sa le s t a x , howe ver i f t he se products/services are sold for resi- dential use, state sales tax does not apply, but cou nt y, c it y a nd SPD (special purpose districts) sale taxes are charged. Believe it or not, some states create specia l pu r pose ta x d i st r ic t s for t he sole pu r pose of taxing specifc products or services. Tese districts are most ofen cre- ated around schools and hospitals. Often sales taxes must be calcu- lated as a "gross receipts tax," meaning The Sticky Business of Excise and Sales Tax Requirements By Gail Cole M any industries find them - selves with a unique ta x conundr um … they are required to calculate and fle both sales and excise taxes to run their day-to-day busi- ness. So, what's the big deal? A Year in the Life of a SALT Accountant is sponsored by Avalara y B u s i n e s s c c o u n t a n t b y A v a l a r a Excise Tax - Handy Links » IRS General Summary www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Excise- Tax IRS Excise Tax Forms: » Form 2290 Heavy Highway Vehicle Use Tax www.irs.gov/uac/About-Form-2290 » Form 730: Monthly Return for Wagers www.irs.gov/uac/Form-730,-Monthly-Tax-Return-for-Wagers » Form 11-C: Occupational Tax and Registration Return for Wagering www.irs.gov/uac/Form-11-C,-Occupational-Tax-and-Registration- Return-for-Wagering » Form 720: Quarterly Federal Excise Tax Return www.irs.gov/uac/Form-720,-Quarterly- Federal-Excise-Tax-Return State Excise Taxes: » Gasoline taxfoundation.org/blog/how-high- are-gas-taxes-your-state » Cigarettes www.tobaccofreekids.org/re - search/factsheets/pdf/0097.pdf » Liquor taxfoundation.org/blog/map-state- spirits-excise-tax-rates-2015 » Wine www.wineinstitute.org/fles/ State%20Wine%20Excise%20Tax%20 Rates.pdf » Beer www.brewersassociation.org/ government-affairs/laws/state- excise-tax-rates/ Gail Cole is a sales tax expert with Avalara who has a penchant for dig- ging through the depths of BOE sites and discovering and reporting rate changes across the country. t h at t he t a x mu s t b e c a lc u - lated on the total of the product and the excise taxes collected. Tis puts an extra burden on the tax calculation process, since excise and sales taxes can't be c a lc u l ated i ndepen- dently. Te excise tax must be determined and calcu- lated f irst, then the result added to the product price to create the basis for the subse- quent sales tax calculation. I ndu s t r ie s l i k e propa ne d istr ibutors, electr icit y and nat ura l gas prov iders, home heating oil distributors, tobacco w holesa lers, a nd equ ipment rental businesses are faced with the challenge of calculating both excise and sales tax correctly in order to achieve tax compliance. Now let 's an swer our or ig inal question – so, what 's the big deal? To be able to accurately calculate both tax types, companies must be able to pinpoint sales tax rates at a specif ic point on a map as well as keep up w it h a l l of t he rates a nd rules of the excise ta xes they owe. Tis is no task. Does your business have the tools to achieve tax compli- ance today?

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