Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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R

460.0000 REIMBURSEMENT FOR SALES TAX—Regulation 1700

Annotation 460.0198

460.0198 Rounding Off to Nearest Nickel. A taxpayer is proposing to round the total of its charge, after sales tax reimbursement is added to the nearest nickel. For example, when the food and beverage is $24.45 and tax reimbursement is $2.08, totaling $26.53, the taxpayer proposes to round the total up by 2 cents (to $26.55) and still report and pay the sales tax of $2.08 on $24.45. As an example of rounding down, when the food and beverage is $24.40 and tax reimbursement is $2.07, totaling $26.47, the taxpayer proposes to round the total down by 2 cents and still report and pay sales tax of $2.07 on $24.40.

If the taxpayer does not indicate to the customer that the additional 2 cents (rounding up) is sales tax (reimbursement), the taxpayer would be increasing its gross receipts by 2 cents but not reporting sales tax on those additional gross receipts. On the other hand, if the taxpayer indicates to the customer that the additional amount for rounding up were sales tax (reimbursement), the taxpayer would be collecting 2 cents excess tax reimbursement. The taxpayer may not do so.

In the example for rounding down, if the taxpayer does not indicate to the customer that the 2 cents being deducted is taken from sales tax (reimbursement), the gross receipts would be decreased by 2 cents but the taxpayer would be collecting excess sales tax reimbursement which the taxpayer may not do (that is, the taxpayer would be collecting tax reimbursement on $24.40 but receiving taxable gross receipts of only $24.38). On the other hand, if the taxpayer indicates to the customer that the 2 cents rounding down is reducing the sales tax (reimbursement), the taxpayer would be undercollecting sales tax (reimbursement). The taxpayer may undercollect sales tax reimbursement as long as the taxpayer reports and remits to the Board the sales tax based on the actual gross receipts, which in this case would be $24.40.

In summary, this proposal results in improperly collecting and remitting to the Board either more tax than is due or less tax than is due. 4/4/94.