An article on businessweek got my attention today. From the headline:
A Texas software vendor we have purchased from for years got audited by the California State Board of Equalization because they never billed for use tax. After the audit, they sent us a past-due use-tax bill, which we paid right away.
This raises some red flags in my head. The main question is: who is responsible for collecting a Use tax for a customer in another state? I always assumed Use Taxes were always calculated and paid by the customer directly to their own state.
In this particular situation, I'm pretty sure that the vendor must have some operating presence in California to be audited in the first place. However, wouldn't that make it a sales tax? And in the case of being retroactive, should a company be collecting and paying taxes for their out-of-state clients on the off chance that they ever open an office in another state?
For me, this is theoretical since I'm not selling software yet. But I plan to do so in the not too distant future, and that plan will likely include being incorporated as an LLC, in case that makes any difference.