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Use Tax Liability — Wider Than You Might Think

Les Rosenbaum 04.07.2011 | Practice Made Perfect

It’s not always obvious when your firm is liable for use tax. Most firms know that when the out–of–state vendor is not required to collect NY State and City sales tax, you must pay the tax for office supplies, office furniture, fixtures, and equipment, but that is hardly the full picture.

You may not be aware that you are liable for certain aspects of renovations that don’t qualify as capital improvements, among them new carpeting, cubicles and partitions, and retractable walls. And there are other areas that can escape notice.

Software purchases have their own peculiar rules. Over–the–counter software purchases are subject to tax while software that is custom–designed specifically for a firm is not. To complicate matters, when you purchase over–the–counter software (taxable) that is then customized for your firm (not taxable), the vendor must separately state the charges for the custom work or the entire charge will be taxed. Also, the state recently required law firms to pay tax on abstracts of title and other types of information services.

It’s important to note that when a law firm is audited, all purchases are open to review — a strong impetus to see that you are covered on the use tax front.