If there’s one thing any real estate agent will smash through a concrete wall like the Kool-Aid Man to tell you, it’s that location matters.
This is very true for businesses leasing equipment, who may not be aware of the impact their state’s tax laws can have on those equipment leases. You could be getting bilked on sales tax by your home state or—and this is the circumstance you really want to be aware of—by multiple states thanks to what’s grimly known as a nexus.
There’s two things you should be aware of before letting the ink dry on a lease agreement, and both of them pertain to state taxes. Let Direct Capital take you through.
We’d like to tip our caps to the folks at Construction Equipment Distribution magazine and specifically writer Jim Margner, who has a thoughtful article about sales tax you need to read.
In essence, a nexus allows a state to collect sales tax on leased equipment. If you lease a piece of equipment from out of state, in other words, you’ll be paying sales tax from that state. Not only can the tax be higher, but there are actually states that require you to pay the entire sales tax up front. That’s not at all a pleasant surprise for your business.
Be aware of how the states involved do their taxes, which states you’ll be expected to pay to and if you can get an exemption. Know how you do that?
The Need For Research
Do research. Generally speaking, you can find the tax codes for various states online on their governmental websites, which certainly makes the process easier than it used to be. Here’s my home state, for example.
I’m a firm believer in knowing what you’re getting yourself into. A scrupulous lessor will try to fill you in on the various state laws involved, but you can’t count on them covering all the ground you need them to cover. Do your research and you’ll save yourself a lot of wallet-ache later. That’s totally a word.
How’s the sales tax in your home state?
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