Sales tax for mail order testing service

[jshoo]

What is the name of your state (only U.S. law)? California

I would like to start a company in California that will test drinking water. We will mail collection kits to homes via direct mail. Customers who wish to use our service will mail samples back to our lab via USPS whereupon we will test the water and email back the results. Does this sound as though I will be responsible for charging sales or usage taxes?

Thank You.

 

[justalayman]

what state(s) would you be providing services to?

Are you charging for the test kit?

 

[jshoo]

what state(s) would you be providing services to?

Are you charging for the test kit?

I will provide the service to the lower 48 states. The collection kits (essentially just a small tube) will be delivered free through direct mail. Those who decide to use the service will return a water sample along with payment information. Once we complete the tests we will charge them and email the results.

 

[tranquility]

What would happen if they requested a kit, but never sent it back?

 

[FlyingRon]

Do you have nexus in any other states? You must collect tax in California for sure.

 

[jshoo]

What would happen if they requested a kit, but never sent it back?

My primary sales method will be through direct (junk) mail and the vast majority of those kits will never be sent back and no sales transaction will take place.

However, if a customer requests a collection pack online I will send it to them for free and they will only be charged a fee if they return the water sample. If they do not return the pack it will be my loss.

 

[jshoo]

Do you have nexus in any other states? You must collect tax in California for sure.

Thanks very much for your advice.

With regard to our nexus (I had to read up on that term) all sales will take place through the mail or online and all testing will take place in California so I don't believe I have a presence in any other states. I may be required to visit other states in order to distribute bulk mail to local post offices. Kits will be assembled in California.

 

[Proserpina]

Thanks very much for your advice.

With regard to our nexus (I had to read up on that term) all sales will take place through the mail or online and all testing will take place in California so I don't believe I have a presence in any other states. I may be required to visit other states in order to distribute bulk mail to local post offices. Kits will be assembled in California.

Out of sheer curiosity, in what type of facility will the samples be tested? Is the equipment certified?

 

[tranquility]

It does not sound to me as though you are selling tangible personal property, but a service. Of course, without really looking at all the facts, one can't be sure. (Sometimes not even then.) But, I don't think you would be responsible for collecting sales tax.

 

[Ohiogal]

It does not sound to me as though you are selling tangible personal property, but a service. Of course, without really looking at all the facts, one can't be sure. (Sometimes not even then.) But, I don't think you would be responsible for collecting sales tax.

Governor Kasich in Ohio is going to be taxing services (attorneys and CPAs and bookkeepers would have to charge sales tax) unless the professionals get it overturned so this might be taxed in Ohio. OP needs to check each state's laws and go from there.

 

[tranquility]

California is my state and, while they keep floating such proposals, they have not been enacted.

 

[jshoo]

It does not sound to me as though you are selling tangible personal property, but a service. Of course, without really looking at all the facts, one can't be sure. (Sometimes not even then.) But, I don't think you would be responsible for collecting sales tax.

Thanks very much for your response. It's encouraging to hear that sales tax may not be required. I'll hire someone to take a closer look at my situation.

 

[jshoo]

Governor Kasich in Ohio is going to be taxing services (attorneys and CPAs and bookkeepers would have to charge sales tax) unless the professionals get it overturned so this might be taxed in Ohio. OP needs to check each state's laws and go from there.

Thank you.

 

[FlyingRon]

I guess if he is arguing he's selling the service of processing the test kits and not the kits themselves, he may escape California sales tax responsibility.

 

[tranquility]

I guess if he is arguing he's selling the service of processing the test kits and not the kits themselves, he may escape California sales tax responsibility.

That's why I asked the question I did. It seems the only thing the people get is a reporting of the data. If the kits are freely distributed and there is no penalty for not returning them, I'd say he is not selling the kits.