Sunday, Sunday, Sunday! One day only, we’ll pay your sales tax!” It’s not an uncommon refrain at this time of year when attention on tax is high because of income tax season. With Memorial Day fast approaching, sales teams are dreaming up ways to bring in more customers—and they may not realize that your state’s laws probably prohibit them from advertising that sales tax is paid by the retailer instead of the customer. Many states, like Nebraska for example, prohibit language that implies that a sale is not subject to sales tax. The penalties for it can be severe. Sales tax in most states is a separate charge displayed to the customer so they know exactly what they’re paying in sales tax. In other countries where taxes are treated differently, especially where VAT is used, the tax is included in the price the customer sees.
In America, many of our laws have a foundation in tax transparency, and that includes separating sales tax out on invoices. While local laws can differ, it’s usually safe to assume that you’re required to spell out sales tax on a separate line item in an invoice or bill for your customers and in the advertisement of your prices. When a retailer says that they’re paying sales tax, their claim is in conflict with that requirement of sales tax transparency or abiding by the law that the customer is the one who pays sales tax in a transaction. In Nebraska, for instance, there are certain words and phrases prohibited in advertising, including but not limited to the following: Tax-Free Sale, Pay No Sales Tax, Purchases Will be Discounted by the Amount of the Sales Tax; We’ll Pay Your Sales Tax, Tax Credit Sale, Tax Rebate Sale.
The best way to find out if your sale advertisement goes against the law is by contacting your sales tax bureau at the revenue office or other sales tax entity. Keep in mind that prices sometimes fall into this trap too. If you have a price on a menu at a restaurant, for example, that includes the sales tax, it’s probably not legal. Restaurants that list the prices as $10- on their menus with a small note that “sales tax is included in these prices” need to be careful and check with their local laws to ensure they’re compliant. Before you shrug it off, keep in mind that for many states this kind of action is a misdemeanor, not punished with just a fine for non-compliance with sales tax laws. This can even mean jail time, depending on your state’s statutes.