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Author: qwerty2001 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 80  
Subject: National Sales Tax Question Date: 6/5/2001 9:42 PM
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How can you be in favor of a National Sales Tax when you can't define the word "sale" in less than 10,000 words?

Of course, we have the same problem defining "taxable income" for our income tax.
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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 66 of 80
Subject: Re: National Sales Tax Question Date: 6/5/2001 9:52 PM
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<<can't define the word "sale" in less than 10,000 words?>>

Say what!!??

I don't think I understand this post.

Sam

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Author: qwerty2001 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 67 of 80
Subject: Re: National Sales Tax Question Date: 6/5/2001 10:36 PM
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As one example:

http://boards.fool.com/Message.asp?mid=15023124


I just happened to see this this morning.

If a National Sales Tax is sooooo simple then why do so many states
disagree on this.

If you don't want to read the entire post suffice it to say that "Alabama, Georgia, Missouri, Nebraska, New York, Texas and Washington all appear to follow the physical ingredient rule, while Arkansas, California, Colorado, Illinois, Ohio and Tennessee follow the primary purpose test."


Copyright from Deloitte and Touche
NEVADA
STATE EMPLOYS A “PRIMARY PURPOSE,” Nol “PHYSICAL INGREDIENT” TEST
In an issue of first impression, the Nevada Supreme Court ruled that state statutes employ a “primary purpose” test of taxability for items used in products manufactured for sale, instead of a “physical ingredient” test. Nevada Tax Commission v. Nevada Cement Co., Nev. (9/15/00).

Nevada Cement Company purchases steel grinding balls, steel kiln chains, kiln bricks and castable materials. During Nevada Cement's cement manufacturing process, these items disintegrate and become part of the end product. The Tax Commission appealed to the Nevada Supreme Court the District Court decision that stated that the items were not taxable because iron alumina and silica are necessary components of the cement, and that these four items, being composed of these elements, contribute significant amounts of such ingredients to the cement.

The Nevada Supreme Court framed the issue as being whether to apply the “physical ingredient” test or the “primary purpose” test. Under the physical ingredient test, an item meets the resale exemption when it becomes a physical ingredient or component
of the finished product. The primary purpose test holds that if a dual-purpose item is purchased, and the primary intent is not resale, then sales and use tax would apply.

The court analyzed through its ruling that the governing statute defines a retail sale to be “a sale for any purpose other than resale... “Thus, a dual-purpose item cannot meet the resale exemption, because the statutory exemption applies only to those items for which the resale is the primary intent of the purchase.

Deloitte & Touche Comment: As an indication of the degree of conflict between states in employing the different tests, in the dicta of Nevada Cement, the court noted that Alabama, Georgia, Missouri, Nebraska, New York, Texas and Washington all appear to follow the physical ingredient rule, while Arkansas, California, Colorado, Illinois, Ohio and Tennessee follow the primary purpose test.



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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 68 of 80
Subject: Re: National Sales Tax Question Date: 6/6/2001 10:46 AM
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gwerty2001-

It appears from your post that some states (and polititions) like to complicate things where no complication needs to exist.

I live in the State of Florida where we have a state sales tax and no income tax. One of the businesses I owned dealt with the manufacture and sale of wire products to the commercial fishing industry. I purchased product which I converted to an end product and was then sold to the customer or end user. At that time, I collected the tax and sent it to Tallahassee, no problem.

My company had a tax exempt number which allowed me to purchase all product tax free. The only time tax was applied was to the end user (no double or triple tax involved).

It seems to me, the states to which you refer, are implimenting a Value Added Tax. With this system, taxes are added through out the manufacturing process and at every stage of changing hands. This is a VERY complicated system and not to be confused with a straight sales tax

I think I am correct on this but if I am in error, someone here can straighten me out.

Sam

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Author: Nathar Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 69 of 80
Subject: Re: National Sales Tax Question Date: 6/6/2001 11:18 AM
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The confusion in implementing a sales tax is deciding what the final "sale" is. In a value added tax, as you mentioned, every step of the process is taxed. In some ways, this is actually simpler. For an end use tax, it's a little more complicated to determine what the end use of a product is. If you buy corks to stick in bottle for $1.00, you'd have to pay 25 cents in sales tax. If I buy corks to make fishing lures which I sell, I wouldn't have to pay the 25 cents sales tax. The huge temptation, then, is that if I want a cork to stick in a bottle I say that I'm using it to make a fishing lure instead, saving me 25 cents. Doesn't seem like a big deal, but think about how much a computer costs. If you're buying a computer for your business it would cost $500 less than if you were buying it for your personal use.

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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70 of 80
Subject: Re: National Sales Tax Question Date: 6/6/2001 11:27 AM
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Any time a tax is implimented, people begin figuring ways to get around it. Just human nature, I guess.

But if we're talking loopholes, I think the income tax wins hands down. If you don't believe this, just listen to all the tax gurus in the month of May just prior to tax time!! It is mind boggleing.

Sam

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Author: qwerty2001 Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 71 of 80
Subject: Re: National Sales Tax Question Date: 6/6/2001 9:59 PM
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The reason that most high sales tax places have a VAT is that a VAT gives the seller an incentive to report the sale since he will get a rebate on the VAT the seller paid.

I will discuss this with you in more detail if you wish.

How about this for a sale?

I want to sell you a desk for $1,000. You could pay me and we would owe sales tax.

Or....

I could lend you $2,027,000 at 18% for 1 day. Since I don't really trust you I won't actually let you touch the cash. In any event, the interest is $1,000. So, instead of 'selling' you the desk, I give you the desk cause I am a nice lady. You get your desk, I get your $1,000 and the tax people get NOTHING.

Or....

You lend me $1,000 at 4% a year interest. The loan capitalizes the interest and calls for a single payment of $1.079E+17 in the year 3001.

I get my $1,000. You get your desk. The tax people get NOTHING

Do you still think it is easy to define a sale?

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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 72 of 80
Subject: Re: National Sales Tax Question Date: 6/7/2001 1:41 PM
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<<rebate on the VAT the paid>>

In Florida, the vendor gets a percentage of the amount collected, albiet small, but it does cover the costs of submitting, in most cases.

<<How about this for a sale?>>

Really!! How many people do you think will go through these type gymnastics in order to save a few bucks sales tax? Besides, paying the tax is better than the alternative, going to jail.

The illustrations you submit show the genius of mankind being displayed in their devious ways to circumvent the system, any system, as refered to in one of my previuos posts. The current income tax system opens the door to many, many more of this type thing.

Sam



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Author: rosebear Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73 of 80
Subject: Re: National Sales Tax Question Date: 8/5/2001 7:34 PM
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Greetings.

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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 74 of 80
Subject: Re: National Sales Tax Question Date: 8/5/2001 9:26 PM
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<Greetings>

Hello to you rosebear.

Did you forget something!!??

Sam

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Author: sonnycher Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 77 of 80
Subject: Re: National Sales Tax Question Date: 8/23/2001 9:17 AM
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<Greetings>

Hello to you rosebear.

Did you forget something!!??

Sam


Forget what?

sonny - new here.

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Author: saml72933 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 78 of 80
Subject: Re: National Sales Tax Question Date: 8/23/2001 10:39 AM
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<sonny - new here>

Oh, Ok. Sorry 'bout that. Guess I'm a little slow to catch on.

Sam

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