The sales tax rate is added to each auction within the "Edit Auction" page.
Determining the correct sales tax rate to apply to an auction is critical as sales taxes are a major revenue source for most states; meaning they pay close attention and levy major fines for errors and omissions.
Affiliates conducting taxable sales are responsible for collecting and submitting the appropriate sales tax amount to the applicable state.
In case of a sales tax audit, it's wise to keep detailed records for every auction, just in case it's necessary to defend the accuracy of the sales taxes paid. Always require tax exempt buyers to provide a completed and signed ST3 form for every sale. Sellers may not be exempt for every purchase -- if it's discovered taxes were due for certain items on an invoice and the affiliate has a completed ST3 attached to the invoice, it's the buyer who will be held liable for the unpaid taxes and penalties. Without one, it could be the affiliate paying the taxes and penalties.
In order to apply the correct sales tax rate to an auction, the affiliate must know the full street address, city and state of the auction site. Since sales tax rates are subject to change and the rates can vary within the same county, the same city, and even on the same street. It's well worth the minute or two it takes to check the Dept. of Revenue website to make sure the sales taxes you're charging for the auction are accurate.
As an example, below are the steps an affiliate would follow if they wanted to find out the sales tax rate for K-BID's address: 5030 Highway 12, Maple Plain, MN 55359.
If the 9 digit zip code is known
- On the MN Dept. of Revenue website, access the sales and use tax calculator: http://www.revenue.state.mn.us/businesses/sut/Pages/SalesTaxCalculator.aspx
- Enter the 9 digit zip code and adjust the Effective period (if needed) so the auction closing date falls within the Effective period. The sales tax rate will be displayed — also shown will be a percentage breakdown of the sales taxes charged by the state, county, city, and for transit improvement. Since the MN Dept. of Revenue requires businesses to report their sales taxes using the percentage breakdowns, be sure to enter sales taxes into the auction software in this format so the sales tax reports reflect the proper breakdowns.
If the 9 digit zip code is unknown
- Go to the USPS.com, Look Up Zip Codes website and enter the street address, city and state, click on FIND and the 9 digit zip code will be displayed:https://tools.usps.com/go/ZipLookupAction%21input.action.
The rate entered into the software is the rate that will be charged for every taxable lot in the auction. If a lot is not taxable, (check the state's fact sheets)per the state's fact sheets, the affiliate must uncheck the 'Is Taxable' box in the item description prior to posting the auction.
Sales Tax Reports
Affiliates are responsible for the accuracy of the sales tax reports they submit to the Department of Revenue. The sales tax report on K-BID's website should be used as a tool to verify the affiliate's sales tax records. Below are a few issues an affiliate should be aware of when using the sales tax report on K-BID's website:
The report is a direct reflection of the information entered into the system by the affiliate — tax rates, tax rate breakdowns, whether a lot is taxable or not, if an invoice is tax exempt, etc.
The sales tax report only shows the sales taxes collected on the bid price and the buyer's premium. If an affiliate adds a taxable fee to a lot or an invoice, the sales taxes collected for the fee will not be included on the sales tax report.