Selling Used Equipment

Most businesses do a very good job of collecting and remitting sales tax for their retail items, but tax on the purchase or sale of used business equipment is often overlooked. In retail sales the seller is responsible for the sales tax on items sold, whether the sales tax is collected from the customer or not.

Use tax is generally imposed on the purchaser of tangible personal property that is used, consumed or stored in California. Sales and use tax rates are the same, and one or the other will be paid, but never both on the same transaction.

The business equipment you purchase and later sell as used equipment may be subject to use tax, unless sales tax was paid when you purchased the equipment, and should be reported and paid to the California State Board of Equalization. The sales and use tax rules are among the most enforced by the Franchise Tax Board with some businesses having audits every few years. Making sure that you are collecting and remitting sales tax and making use tax payments as required will help prevent undesirable audit adjustments.

November 2011

Pursuant to IRS Circular 230, the Internal Revenue Service requires us to inform you that any tax advice included herein is not intended or written to be used, and it cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed by the IRS on the taxpayer. That said, please do not hesitate to contact us if you have any further questions regarding this matter.

Tags: Sales Tax, Wineries