Discussion:Sales Tax and 0% Financing deals
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Revision as of 12:03, 12 June 2009
Discussion Forum Index --> Advanced Tax Questions --> Sales Tax and 0% Financing deals
Discussion Forum Index --> Tax Questions --> Sales Tax and 0% Financing deals
| 11 June 2009 | |
| Client came in today asking how to do these two things the right way <yay. 2 points for client>, so I told him I would find out.
We are based in upstate NY Client has just started using one of those 0% financing companies. Client does not want to absorb the finance charge hit when a customer chooses this option. For example, if client sells a $4,000 piece of equipment, the customer finances the $4,000 plus sales tax for a total finance of $4,320. Based on the length of time the financing is for, the finance amount charged to the store <client> is either 3.5%, 6%, or 8% of the total amount financed. So, if it fell within the 6% term, the amount deposited into clients bank account would be $4060.80 <4320 less 259.20>. Client does not wish to absorb this charge as he has priced the equipment at his lowest acceptable point. He was at an industry conference and was told by a Texas guy that he charges the customer a service fee of $259.20. He doesn't try to hoodwink the customer, he shows them the amount that the store gets charged based on the amount borrowed and the term of the payback period. That if the customer wants this financed, the customer must absorb this charge. I can't imagine he can price his product at $4,000 and advertise 0% financing and then tell the customer they have to pay this charge. He'd also prefer not to have a cash price and a finance price because the charge to him changes based on the term of the loan. And he wants to be completely legal and above board. The financing available is at a reasonable rate and is way lower than credit cards that are out there. The guy in Texas rings up the fee as a finance charge and then does not pay sales tax on it. Thing 1 - How to structure the selling/financing above in a legitimate and legal way. I told him he could not advertise 0% financing and then charge a finance fee to the customer. Thing 2 - If he has to structure this as a cash price and a finance price, is there a way that it can be structured so that the client pays sales tax on the cash price and the imputed finance charge be considered sales tax exempt? Thanks, Fred | |
