In addition to years of shrinking tax collections during the recession, state and local governments are facing reduced income from federal revenue sharing programs and increased costs for healthcare and infrastructure investment. Exacerbating the issue, political leaders at every level are reticent to endorse tax hikes. The result: governments are scrambling to find new funding sources.
Where can they turn? One direction is to aggressively enforce current tax laws, particularly sales and use taxes – and the hospitality industry is a favorite target. Tax compliance can be complex, but the rule of thumb is that if FF&E items are purchased for installation at your property, you are required to pay either a “sales” tax on your vendor invoice or a “use” tax on the purchase.
The rule of thumb applies whether the vendor is in or out of state, a point reinforced December 2, when the U.S. Supreme Court declined to hear an appeal from Amazon to overturn a New York State law allowing the collection of taxes on internet sales.
For a significant FF&E project – replacement, renovation or new construction – sales or use taxes can be substantial. When your property is selected for a sales tax audit and the taxman shows up at your front desk, the impact on your business of unpaid sales and use taxes, penalties and interest can be devastating.
As an integral part of our commitment to supporting our clients throughout the FF&E acquisition process, PPI stays abreast of current tax rates, rules and exemptions for the tax jurisdictions where our FF&E products are shipped. As an accommodation to our customers, we are registered to collect taxes in the principal states where they have properties, and we collect and remit taxes on your FF&E purchases, including freight and labor if applicable. We are proud to have a spotless track record with audits by the states where we are registered.
At first blush, pricing from suppliers who do not include these taxes can look more attractive to a property owner. But that kind of appeal vanishes quickly when the tax auditor shows up and that supplier is nowhere to be found.
Since 1992, our goal has been to guide our clients throughout the entire FF&E purchase, including doing our part to help you comply with sales tax laws. Helping customers survive a tax audit is one more way we work to contribute to their long-term success. This makes all the sense in the world for us because we’re in it for the long haul as well.