Are you a retailer that sells merchandise with a manufacturer’s rebate? If so, make sure that you are charging sales tax on the amount of the rebate as well. If you are undergoing a sales tax audit, call us to discuss rebates.
Transcript
What are the sales tax implications of manufacturers’ rebates? I’m Mansoor Ansari with Nexus Tax Defense. We’re all happy when we see the sign “rebate” obviously, because we know we’re going to get a big discount. But the tax implications work differently. For example, if a machine costs $100,000, and you get a rebate for $20,000, one would think to themselves that they actually have to pay tax on $80,000. So assuming that tax is 8%, you might think that your bill is actually $6,400. But that’s not true. What you really need to do is take the $100,000, multiply that by the tax of 8%, which gives you $8,000. So from this example you can see that you’re actually off by $1,600. If you are undergoing an audit for a period where you had manufacturers rebates, you want to make sure that you were charging tax on the actual amount of the rebate. Otherwise you might end up paying those taxes yourself. Give us a call if you have any questions.
