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View Full Version : Is it common to apply "sales" tax to simple services?


guizot
02-02-2011, 11:33 AM
I've noticed that my Netflix bill has a tax, which is about equal to local sales tax. But I don't actually buy anything from them. Wouldn't that be the same thing as a landlord adding tax to apartment rent? Or the equipment company to the snake I rent? (It doesn't actually say what kind of tax it is, though.) I know that Rahm Emanuel is allegedly proposing a "service" tax on things like plastic surgery, but that would be clearly distinguished from sales tax, I think.

They say:Depending on your state, this may be a rental tax, sales tax and/or use tax.
Of course, tax percentage rates are different from state to state. In addition, some states calculate tax based on the "ship to" address (your address), while others calculate tax based on the "ship from" address (Netflix). Please check your state and local tax code for more information.(I'd rather avoid doing that.) So if this tax is going to the state (California), I'm curious what label it has. And if the tax if for streaming movies (and supposing that's all I do with Netflix), then is the local movie theater also charging a tax?

anson2995
02-02-2011, 11:46 AM
I've noticed that my Netflix bill has a tax, which is about equal to local sales tax. But I don't actually buy anything from them.

You buy a service from them, and that's taxable in (almost) every state

And if the tax if for streaming movies (and supposing that's all I do with Netflix), then is the local movie theater also charging a tax?

Movie theaters don't charge a tax on tickets in any states that I'm aware of (although it has been proposed in New York).

Acsenray
02-02-2011, 11:52 AM
Movie theaters don't charge a tax on tickets in any states that I'm aware of (although it has been proposed in New York).

I was under the impression that taxes are already included in the ticket price.

Harmonious Discord
02-02-2011, 11:53 AM
A place does have to tell you what tax you are paying if you ask. Ask them. It's up to you to notify them and supply the required documentation if you're exempt.

Really Not All That Bright
02-02-2011, 12:11 PM
Here's what Florida's 6% sales tax applies to:
* Sales of taxable items at retail.
* Repairs or alterations of tangible personal property.
* Rentals, leases, or licenses to use real property (for example, commercial office space, mini-warehouses, or short-term living accommodations).
* Rentals of short term living accommodations (for example motel/hotel rooms, beach houses, condominiums, vacation houses, travel parks, etc).
* Rental or lease of personal property (for example, vehicles, machinery, equipment, or other goods).
* Charges for admission to any place of amusement, sport, or recreation.
* Operating private membership clubs that provide recreational or physical fitness facilities.
* Manufacturing or producing goods for sale at retail.
* Importing goods from any state or foreign country, for sale at retail or for use in the business or for pleasure.
* Selling service warranty contracts.
* Ordering and using, on a regular basis, mail-order products on which no sales tax was charged.
* Operating vending or amusement machines.
* Providing taxable services (for example, investigative and crime protection services, interior nonresidential cleaning services, and nonresidential pest control services).

RealityChuck
02-02-2011, 12:30 PM
It's usually called a "Sales and Use Tax," which means it applies to services.

dracoi
02-02-2011, 12:56 PM
It's usually called a "Sales and Use Tax," which means it applies to services.

Use Tax doesn't mean it applies to services. A use tax means that you pay sales tax to your state on something that hasn't already had sales tax paid. A common scenario is that a business buys 100 items of inventory to sell, but then uses two internally, so they owe "use tax" for that. (This is because purchases for resale are not subject to sales tax.) The name sticks even when "use tax" means paying tax on something bought out of state and brought in. Different states have slightly different interpretations of what is subject to use tax. In WA, only businesses pay it, but I know that some states hold everyone liable.

The taxability of "services" depends on the definitions set up by each state. In the case of WA state and NetFlix, everything NetFlix offers is taxable - both the DVD rentals (as a rental of "personal property") and the streaming downloads (as a "digital product") are subject to retail sales tax in WA.

Really Not All That Bright
02-02-2011, 01:23 PM
What dracoi said.

suranyi
02-02-2011, 01:30 PM
I've noticed that my Netflix bill has a tax, which is about equal to local sales tax. But I don't actually buy anything from them. Wouldn't that be the same thing as a landlord adding tax to apartment rent? Or the equipment company to the snake I rent? (It doesn't actually say what kind of tax it is, though.) I know that Rahm Emanuel is allegedly proposing a "service" tax on things like plastic surgery, but that would be clearly distinguished from sales tax, I think.

They say:(I'd rather avoid doing that.) So if this tax is going to the state (California), I'm curious what label it has. And if the tax if for streaming movies (and supposing that's all I do with Netflix), then is the local movie theater also charging a tax?

To answer your question: "Is it common to apply sales tax to simple services", the answer is yes. The details are complicated and vary by jurisdiction but fundamentally, it is common to tax services.

Markxxx
02-02-2011, 01:52 PM
When I was the asst controller of a hotel, taxes were quite an issue as there were a lot of local taxing authorities.

I contacted the Illinois Controller's office and was told that it wasn't wrong or illegal to collect money as a tax, even if not required, so long as you REPORT it as tax.

I have worked in hotels were we would ring liquor up as a charge and then back out the tax, and I've worked at others where we'd ring up the sales tax as seperate.

It all depends on how a company wants to break it out.