Ok Old Jack...

[TaxBird]

>>Hopefully I can find what I need online without bothering the rest of you. *Sigh* <<

>>Go ahead and bother us.. this message board is getting boring without Snag. (Old Jack in 'Help with California' post<<

...since you asked.

I have a Michigan based client who has gotten it in his head to traipse around the country buying equipment at auction - sometimes for consumption sometimes for resale (aka scrap). never knows for sure until he gets there (consumption or resale - depends on the deal).

Next stop Tennessee.

In looking at the state regs, there exists a Industrial Equipment Exemption. Can anyone tell me if he needs to register for authority in TN in order to be eligible for this?

Further, this client travels around the country anyway performing services (mostly repairs)for manufacturing companies, staying at most a few months in each State.

Problem is, he's like Waldo, meaning, I never know where he is until he shows up somewhere. Lately he's gotten better at telling me of these things ahead of time but I still feel behind the eight ball. Plus he's a relatively new client for me and he's one of the only ones with this specialty so there's not much research/guidance available.

Anyone have a client like this who could advise me on some goods rules of thumbs for providing accounting and tax services for gypsies? I seem to attract a lot of them.

Thank you in advance.

[OldJack]

Well... I have had clients similar to your client. The best thing if possible for this client is to be a Corporation. The reason is that it is the only way you will get a guy like this to "account" for his expenses so they are properly documented. You give him a travel type expense form to fill out for "each trip", or each week, and have him pay for the expenses out of his own pocket (cr card), then submit the travel expense form with receipts for reimbursement from the corp bank account. Most guys simply will not do this if it is a personal bank account. If you can get him to think this way you will have records for taxes. I would expect that most of his expenses, if properly documented, will be deductible.

As to TN... I am not in that state and can't help you on that subject.

[TaxBird]

Well... I have had clients similar to your client. The best thing if possible for this client is to be a Corporation. The reason is that it is the only way you will get a guy like this to "account" for his expenses so they are properly documented. You give him a travel type expense form to fill out for "each trip", or each week, and have him pay for the expenses out of his own pocket (cr card), then submit the travel expense form with receipts for reimbursement from the corp bank account. Most guys simply will not do this if it is a personal bank account. If you can get him to think this way you will have records for taxes. I would expect that most of his expenses, if properly documented, will be deductible.

As to TN... I am not in that state and can't help you on that subject.

Looks like I'm on the right track, then.

Thanks Old Jack!

[CMTaxA]

I am not familiar with Michigan sales tax, but if your client is hopping all over the country buying things, I don't think registering for sales tax in any of those states is necessary as long as he remits any sales tax on those purchases in Michigan, in accordance with Michigan state sales tax provisions. If the non-resident state were to ask your client why he didn't pay the tax, he could simply say that it was paid to his home state.

I work for a manufacturing company that quite often purchases from out-of-state vendors, and our approach varies depending on the nature of the vendor: if he charges us sales tax, we will pay the tax unless we can easily justify our reason for not paying. If he doesn't charge us the tax, we look at our local laws for sales tax on purchases, and remit the tax to the state.

Sales tax registering for non-residents is a particularly dicey area, especially if he stays in the state for a couple months. Many states see sales tax registeration as a tap to further revenue, and your client could be staring straight into the jaws of nexus.

In my experience, if a non-resident state (in your case, TN) were to ask why tax wasn't paid (and it's usually the original vendor being audited by the state who will contact your client), then proof of payment for MI tax could be submitted, and the differential would be assessed, or, upon assessment your client would pay the full tax to TN, but then deduct it on his next MI sales tax return. It's a small price to pay for slipping under the nexus radar

[TaxBird]

I am not familiar with Michigan sales tax, but if your client is hopping all over the country buying things, I don't think registering for sales tax in any of those states is necessary as long as he remits any sales tax on those purchases in Michigan, in accordance with Michigan state sales tax provisions. If the non-resident state were to ask your client why he didn't pay the tax, he could simply say that it was paid to his home state.

I work for a manufacturing company that quite often purchases from out-of-state vendors, and our approach varies depending on the nature of the vendor: if he charges us sales tax, we will pay the tax unless we can easily justify our reason for not paying. If he doesn't charge us the tax, we look at our local laws for sales tax on purchases, and remit the tax to the state.

Sales tax registering for non-residents is a particularly dicey area, especially if he stays in the state for a couple months. Many states see sales tax registeration as a tap to further revenue, and your client could be staring straight into the jaws of nexus.

In my experience, if a non-resident state (in your case, TN) were to ask why tax wasn't paid (and it's usually the original vendor being audited by the state who will contact your client), then proof of payment for MI tax could be submitted, and the differential would be assessed, or, your client would pay the tax to TN, but then deduct it on his next MI sales tax return. It's a small price to pay for slipping under the nexus radar

Thank you for reading through my mumbo jumbo and responding to the heart of my issue. I believe, as you do, the registration 'opens nexus doors', as it were and I was looking for some legitimate work arounds.

This is a good strategy.

Thank you.

[Snaggletooth]

Tennessee Industrial Exemption

Sorry I didn't jump in earlier.

Tennessee has a reduced "use" tax for buyers of equipment for industrial use.
I could be wrong, but I believe the equipment must be used in Tennessee. Issuance of such an industrial exemption is concurrent with sales/use tax exemption, and those who receive it are expected to file sales & use tax returns forever.

I believe the best thing for your client would be to arrange to take delivery of this machinery outside the states where they were bought. Of course, that means paying freight, but if they're all going to end up in Michigan anyway, the transportation costs will not be avoided.

[TaxBird]

Sorry I didn't jump in earlier.

Tennessee has a reduced "use" tax for buyers of equipment for industrial use.
I could be wrong, but I believe the equipment must be used in Tennessee. Issuance of such an industrial exemption is concurrent with sales/use tax exemption, and those who receive it are expected to file sales & use tax returns forever.

I believe the best thing for your client would be to arrange to take delivery of this machinery outside the states where they were bought. Of course, that means paying freight, but if they're all going to end up in Michigan anyway, the transportation costs will not be avoided.

Thank you. I suspected as much.

So really, a good rule of thumb would be to take delivery outside the State. In general, in such cases then, your home State rules would apply. Is that a good way to look at it?