Two More States Now Allow Businesses to Absorb Sales Tax

The recent changes in the tax law of two states Pennsylvania and Texas saw major changes. According to the newly passed legislation, businesses are allowed to absorb sales tax. This means that rather than collecting from the customer, businesses can now pay the due tax on the consumer’s behalf. As top law firm Rockville, we know that this is already legal in many states. This felt more like following a trend that was already there in states such as Maryland and which can be coming in other states soon. 

As per Pennsylvania laws before, absorbing sales tax was illegal but this decision will be welcomed by businesses as well as consumers. Prior to this new law, sellers were required to collect all the tax from the buyers and it was a punishable misdemeanor if businesses failed. It wasn’t a trifling matter since they used to pay up to $1000 or serve in prison for up to 1 year or both.

The flaw in the previous Pennsylvania law was that it allowed sellers without nexus from other states to absorb tax without any fine or penalty. It also allowed out-of-state sellers to advertise for prepaid services, prepaid telecommunications, or any service that didn’t involve the transfer of physical personal property

Absorbing sales tax in Pennsylvania

Starting from Jule 1, 2019, both the state sellers and outsiders selling in Pennsylvania are now allowed to pay some portion or all the tax owed, after the following conditions are fulfilled.

• All receipts and other documentation related to sales should state that seller will pay the tax at the place of the buyer.
• Sellers should not indicate, imply, or state that the transaction has no tax due. 
• All receipts, sales slips, invoices, etc. should state the tax amount separately.
• Sellers should separately record the buying price and the tax in their sales book and other records. 
• The tax amount should be calculated by multiplying rate of tax by the total purchase price. 

Absorbing Sales Tax in Texas

Another state, Texas is also about to implement a similar rule for the sales tax. As per the current situation, a business that advertises or anywhere else states that it will assume, absorb, or refund a part of or all the tax due on a transaction will be committing a misdemeanor. Not adding the tax to the actual sales price is also a misdemeanor for now and the penalty for these can be up to $500 of fine.  

Effective October 1, 2019, the businesses will be allowed to directly or indirectly advertise or state to the customers publically that the business will be paying the tax for the consumer if the following situations are fulfilled.

The business or retailer should state that it will be the tax on the customers' behalf.

The business doesn’t state or think that the sale will be excluded from taxation.

All the receipts, invoices, and sale statements clearly state the tax amount on a purchase and show that the retailer will be paying the tax.

States that Allow Business to Absorb Sales Tax

Apart from Pennsylvania and Texas, these are the states that allow retailers to absorb sales tax. 

• Georgia
• Hawaii
• Louisiana
• Maryland
• Massachusetts
• Michigan
• Missouri
• New Mexico
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas (as of October 1, 2019)
• Washington
• Wisconsin

Best Business Tax Information in Maryland

As the top law firm Rockville, we have managed to successfully help many businesses to absorb sales tax effectively. From maintaining sales records, receipts with proper indications of tax amount to handling all the tax-related queries, we have helped the varying size of business to save on tax. It is important to know about tax and law in all states to run a flawless business across the other states. All the states apart from the above-mentioned ones still have penalities and punishments for absorbing sales tax.