Strategy

Paperwork for Customers in Tax-Free States

What paperwork does a seller need to prove tax-exempt status from buyers in tax-free states?
CFO.com StaffJuly 20, 2001

Q: I have been told by one of our clients that is located in Oregon that the state has no sales tax. As a result they do not utilize or have available tax exempt certificates. In order to protect ourselves during a tax audit what paperwork would we need to have on hand?

Kevin J. Kohut
Chicago

From your question, I presume that your company is selling and shipping tangible personal property into Oregon.

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I also presume that the seller is seeking protection from an Oregon audit. Sales tax is triggered based on the destination state. So, if your Illinois company is shipping into Oregon, then Oregon’s sales/use tax, if there was one, would apply. Since Oregon does not have a sales/use tax there is no protection needed from an Oregon auditor.

If you are seeking protection from an Illinois auditor, then the documents needed to support the exempt sales would be a purchase order indicating that the goods are shipped to Oregon, that title and possession pass in Oregon. Illinois would not look at the transaction.

Don Orr, Tax Manager
PricewaterhouseCoopers LLP

See previous “Ask the Experts” columns:

Licensing Fees in Japan

Software Leasing

Buy-out Legal Fees and Treasury Stock

A Merger Accounting Scenario

Use Tax

A FAS 133 Example

Leasing Accounting

Goodwill Taxing

Recognizing Upfront Fees

Proving Tax-exempt Status

The ABCs of OECD

Credentials for Credit

Big Five Audits and Venture Funding

GAAP for Private Firms

Transfer-Pricing Guidelines

Insurance for E- business Infrastructure

401(k) Brokerage Links

Navigating the Rough Waters of Sales Tax

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