Sales tax for ad sales?

[Ledrak]

I have a magazine with an office in the state of Florida. We are planning to sell ad space to clients from all over the US. I'm trying to find out if by operating in Florida I have to include Florida sales tax to the ad space we sell to clients in the magazine or not? As I understand it, advertising sales usually aren't subject to sales tax since it's not tangible goods. But I'm sure this varies from state to state. So would sales taxes based on the location of our company, or based on the location of the client buying the ad space?

Another words, if we sell ad space to a company in California, do we need to know the California tax regulations or do we simply abide by the Florida ones? And to take it a step further, does it matter where our company is incorporated? If our company is incorporated in NJ, but we have our office in FL, which tax laws do we abide by (if applicable)?

 

[FlyingRon]

It all comes down to whether you have situs in the state that the consumer is in. If you have an office in Florida, that most likely gives you situs there and you have to collect sales tax even if you are a foreign (i.e., in another state) corporation. Back when I ran a smaller company, we had offices in Virginia, Maryland, Colorado, and Minnesota. We had to deal with tax issues in all those states even though we were a Virginia corporation.

 

[tranquility]

The term is nexus, but other than that, I agree with FlyingRon.

 

[FlyingRon]

The term is nexus, but other than that, I agree with FlyingRon.

Well, that depends on what you are referring to. The business has nexus, the transaction has situs.

You're as likely or not to find either term in a state's sales tax statute.

 

[tranquility]

But you will find the term nexus in the Supreme Court case (and lower court progeny) describing the factors which would put the business at risk of state enforcement of sales tax.

 

[Ledrak]

Ok, that makes sense. Another question... would it be legally possible for our company to add a clause in our sales contract stating that the client is responsible for all sales or use tax, thus relieving us of the responsibility?

 

[tranquility]

No, you can't do a private contract with a client to relieve you of your legal responsibilities.

 

[davew128]

would it be legally possible for our company to add a clause in our sales contract stating that the client is responsible for all sales or use tax, thus relieving us of the responsibility?

Absolutely not. You are responsible for collecting the sales tax at point of sale for any transaction subject to sales tax in a state you have nexus in. If you were to be audited and it is found you did not do so you would be held responsible to remit that sales tax.

 

[Ledrak]

Yeah, I saw another company do that so I thought it might be possible. Guess they'll be in trouble soon enough. But are magazine ad sales in fact taxable in most states, despite them not being tangible goods? I was always told (perhaps incorrectly) that if it's not tangible you normally don't have to pay tax on it.

 

[davew128]

I was always told (perhaps incorrectly) that if it's not tangible you normally don't have to pay tax on it.

You were told incorrectly. What is taxable is whatever the state in question SAYS is taxable.

 

[FlyingRon]

Ok, that makes sense. Another question... would it be legally possible for our company to add a clause in our sales contract stating that the client is responsible for all sales or use tax, thus relieving us of the responsibility?

Any state you have nexus in you can not delegate responsibility for the tax collection.
Many contracts state for states you don't have nexus that it is the customers responsibility for use tax (which goes without saying anyhow).