Sales Tax and Barbie in the Real World

Imagine if Barbie had to pay sales tax?

Barbie lives in a glamorous world. She has closets full of clothes, glittery shoes, a pink convertible, and her well-known dream house in Malibu. And she never even has to think about taxes, including sales tax. But what happens when Barbie comes to the real world?

Out of Barbie Land, where are clothes/shoes subject to sales tax?

Living in Malibu, the purchase of all those clothes and shoes is suddenly subject to tax. California has no clothing exemption. But, if she were to move to New York instead, clothing and footwear sold for less than $110 per item or pair is exempt from the New York State sales tax and the New York City local sales tax. However, outside New York City clothing and footwear is still subject to the local sales tax rate, in most counties.

Please…no sales tax on the pink convertible!

Barbie’s iconic pink convertible is easily recognizable. But when vacationing in New York, she would fly rather than drive from California, leaving her car back in Malibu. If she rented a car in New York, she would get hit with regular sales tax, special tax specifically imposed on passenger car rentals, and if renting a car in certain downstate counties, a special supplemental tax is imposed. That means the tax on renting a car could be over 20% in New York!  That’s enough to even shock Barbie!

We must talk about the Dream House!

Barbie’s Dream House is all pink and shiny and has everything she may need. Do you think Barbie used an interior decorator? In California, interior decorator fees that directly relate to the sale of taxable merchandise are subject to sales tax. Design services alone that do not relate to the sale of taxable products are not subject to sales tax. In New York, interior decorating and design services are subject to both State and local tax but if the work is performed in New York City, it is only subject to the State tax rate. It does not matter if the professional is not selling property and is simply doing design work.

Sales Tax Defense LLC can help!

If you have taxability questions in California, New York, or any other State, call Sales Tax Defense!

We can help you with sales tax!

Success Story

LLC Treatment Obtained

A taxpayer came to us who was a 2% owner of an LLC.  She had simply invested money in a company but was not involved in the day-to-day operations or the financial aspects of it. The business owed sales tax. As an owner, the taxpayer was personally assessed 100% of the sales tax due. The New York State notice was mailed to an old address and therefore, never received and never protested within the 90-day deadline. The Taxpayer was not aware of the assessment until a levy was issued to her bank.

Sales Tax Defense was able to get New York State to issue a levy hold to the bank while we presented documentation to show her personal liability should be reduced to her ownership percentage. After proving New York State mailed the notice to the wrong address, the State was agreeable to reviewing the case. After review of the documentation presented, the State agreed to reduce the taxpayer’s liability to her ownership percentage, saving her millions of dollars!