Sales Tax and Artificial Intelligence

What is the future of AI?

Artificial Intelligence (“AI”) such as ChatGPT is becoming more popular. Is this how it starts and, in the future, will we have robots to do our bidding? As seen in every SciFi movie, AI evolves as it learns. It eventually becomes self-aware. But could evolution lead to anarchy? Will we one day be living in a world like Will Smith in I, Robot? And, what effect will AI have on Sales Tax?

Will Sales Tax laws change because of AI?

Sales tax laws are archaic and slow to change. New York labels animals such as dogs and cats as tangible personal property. Therefore, a service like dog sitting is taxable. When we have robots, they too will likely be seen as tangible personal property, owned by humans. Downloads of software to upgrade the robot will be subject to sales tax in New York. Software, no matter how it is delivered, is taxable. But educational classes are exempt from tax.

When a person buys a house, there is no sales tax due because it is real property. But not all homes are considered equal. When you buy a doghouse, or a guinea pig cage, or a chicken coop – that is all taxable as the purchase of tangible personal property.

Many states have clothing exemptions. Items of clothing costing under $110 are not subject to New York State or New York City sales tax. (Clothing is subject to local sales tax in many other New York counties.) However, there is no such clothing exemption for dog booties or bandanas or other pet clothing items. If robots adapt to human modesty and wear clothing, New York sales tax law would see that as simply putting a decorative, but unnecessary, raincoat on your dog. The raincoat would be subject to sales tax. For you Star Trek fans out there, Lt. Commander Data always wore a uniform.

Aaahh! Where do we go for help with Sales Tax?

Whether you have taxability questions about software or robots, Sales Tax Defense is here to help! Please note that we accept both, humans and androids as clients.

Sales Tax Refund

Another Refund Success!

A client received several notices from the New York State Tax Department showing amounts due from unfiled sales and use tax returns as well as filed returns with no payment. They came to Sales Tax Defense to resolve these issues.

After reviewing its sales and its methodology for sales tax reporting, we discovered the company was correctly not charging customers sales tax on capital improvement jobs, but was incorrectly including those capital improvement jobs as taxable sales on the sales tax returns that were filed. The company was paying over tax that was never collected.

We amended the sales tax returns to the correct number. We filed the missing returns. This resulted in a refund to the company!