Barb's Stuff

Notes on the day to day life of a person making their living by selling their art. The trials and tribulations of working from home and life in general. The joy of creating and beading to your hearts content.

Name: Barb
Location: Oh Little Town of Bethlehem, PA, United States

April 03, 2007

PA Use Tax

I received a letter from the PA Department of Revenue stating that I had not paid Use Tax in 3 years and they were allowing me to catch up without penalty. They included a brochure explaining what Use Tax is. I had never read anything that had led me to believe I owed this tax. I thought it was a tax on rentals & leases. Boy was I wrong.

Use tax is tax on anything you purchase that is normally taxable and that you did not pay tax on. For example, let's say you purchase something off the Internet for use in your office. Most companies do not charge tax on the Internet. You have 1 month to pay the tax on that item to the state of Pennsylvania.

My first question is ... why? The item was not manufactured in the sate, it was not sold in the state, they had nothing to do with this transaction. Why do they think they have a right to money? Simply because I am in this state they think they deserve money. Don't they get enough from my state, local, and real estate taxes plus sales tax I pay in this state (don't even get me started on the high tax we pay here for gasoline)?

Plus if you purchase something you normally do not pay tax on but use it in a different way - you have to figure out how much you used and what the tax on that portion is and pay that. For example: You build items from wood. Normally there is no tax on any item that you use in making your product. If you take part of a shipment of wood and use it to fix a floor for example you have to pay tax on the portion used to fix the floor.

I had to go back three years and find out what I had not paid tax on or those items I did not pay the full 6% on and pay the difference. I wonder if there were items I paid 8% on would I be able to deduct that 2% - probably not. It took 4 days basically to find the records, go through them, and work up the forms.

I do it all - production, marketing, bookkeeping, sales, paperwork, customer calls, research and development, purchasing. Since I am a one person operation this shut me down for 4 days.

My tax came to less than $25 for 3 years. I could have produced product in those 4 days whose tax upon sale would be more than what I owed. So this I think was really worth my while and the effort of the PA Department of Revenue.

Plus I really love the wording they use in all tax information. Is it really English or just something they came up with that resembles English? The letter said to use the enclosed form for filing tax and the computed penalty and interest. The very next line says If paid by the due date all penalties will be waived. I read this 3 or 4 times before I called to verify. Yes, penalties are waived but interest is still due. Would it have killed them to put in: "penalties will be waived but all interest is still due"? A person not versed in tax lingo may read what they sent and figure as long as they pay on time they owe nothing else but the 6% tax.

I also had a question about tax on the items used to package my items for sale. I did not know if I owed tax on that or not. I went to their website and finally found the following:
The tax does not apply to the following:

(5) Wrapping paper, wrapping twine, bags, cartons, tape, rope, labels, nonreturnable containers and other wrapping supplies, when the use is incidental to the delivery of tangible personal property. Charges for wrapping or packaging are subject to tax.
(This was cut and pasted from their site)

Upon first reading this it seems contradictory - all these items are not taxable but they are according to the last line. I read it several more times before interpreting that the items used to package are not taxable but if I pay someone to actually do the wrapping or packaging that is taxable. I sure hope that is the correct interpretation.

The amount of taxes paid annually by an average person is staggering anymore. My husband loses almost 40% of his bonus each year to taxes. It is getting to the point you have to wonder if it is worth working if the governments are going to take 30% - 40% of what you earn. That means the person working 40 hours a week are actually working 12-16 hours a week for taxes. Didn't our ancestors start a revolution over taxation problems (in part)?

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2 Comments:

Blogger Allen said...

Ok... I have the same letter. rec'd on a weekend. I'll call my accountant Monday. He'd better have answers. That's why I pay him. Just where did this come rom and why. I've been in business for 17 years and never heard a word about it before. Another Guv'mint legal scam?

June 8, 2008 9:48 AM  
Blogger Emma Larkins said...

I also just received this letter. And my company isn't even located in Pennsylvania! Do they send letters to everyone within a 50 mile radius of the state, just to make sure? Anyways, I called the phone number listed, and it sounds like we received the use tax return because one of our employees lives in PA. I'm just putting down zero for everything and sending it back ASAP. They get more from the 'late fees' they charge on bogus claims than the actual tax, I imagine.

July 18, 2008 2:51 PM  

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