218. "Sales and Use Taxes" with Holly Hoffman

Dawn Kennedy talks with Holly Hoffman (“the sales tax lady”), founder of Sales Tax Advisory Network, who serves businesses of any size and industry with sales and use tax training and guidance. Hoffman explains the difference between sales tax (seller’s liability) and use tax (purchaser’s liability) and notes audits often focus more on untaxed or undocumented purchases than on sales. They discuss state-by-state complexity, resale certificates and seller’s permits, manufacturing exemptions that vary by state, and the difficulty of determining whether services are taxable. Hoffman warns against relying on Google, AI, or non-official sites for tax rates, advising use of official Department of Revenue/Treasury lookups. They cover the Wayfair decision’s impact on interstate sales, the continued importance of physical presence nexus, increased post-COVID multistate audits and data sharing, and growing state focus on taxing digital goods. Hoffman shares she only provides audit defense in Wisconsin and can be reached at salestaxlady.com.

In this Episode....

Who is Holly Hoffman and whom does she serve? (00:52)

Fear and Safe Space (02:33)

Sales Tax vs Use Tax (04:49)

Resale and Permits (07:45)

Manufacturing Exemptions (09:24)

Service Business Taxability (11:07)

Retail Rates and Jurisdictions (14:38)

Wayfair and Nexus Basics (19:06)

Permits Across States (25:32)

Audits and Digital Goods (32:24)

How to Reach Holly (35:47)

Holly Hoffman’s Information:

Website: https://salestaxlady.com/

LinkedIn: https://www.linkedin.com/in/hollymhoffman/

YouTube: https://www.youtube.com/user/hrhoffman99/videos

Facebook: https://www.facebook.com/salesincometax

X: https://x.com/salesincometax?s=09

Transcript

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Dawn Kennedy: 0:03

Welcome to Business Mastery with Dawn Kennedy your quick under forty five minute dose of expert insights and strategies to make a positive impact on your business and life Let's get started. Hello and welcome to this episode of the Business Mastery Podcast. You are going to meet somebody that we can all get behind, When we first had a conversation around this, I was like, that is such an important topic, but normally nobody specializes in that area. I'm so grateful that I found goes along with sales and use. So thank you so much for joining

Holly Hoffman: 0:47

Thank you. I'm excited to be here.

Dawn Kennedy: 0:49

Amazing. All right. Can you tell everyone who you

Holly Hoffman: 0:53

So I am known as the sales tax No one usually knows my name. They call me. Oh, you're the sales lady. So you can just remember me by But my real name's Holly Hoffman, and I'm the founder and owner of Sales Tax Advisory Network. I serve all businesses any size. It can be small to very large And it doesn't matter what use tax does affect everyone. So that's a misnomer. Some people will tell me I don't sometimes they're right, But all our purchases can be affected by use tax and businesses can be audited for their purchases. So it does affect you. And, and how I serve businesses I shouldn't say a little unique. I'm like a unicorn. So I provide employee and sales tax training. And yeah, I get really excited And can I just tell you So I do I'm a geek. I listen to your podcasts and But you had another guest a while back and her name was Frankie Jean. And she's the founder of And she really get the issue with my customers and my potential customers. So what she, what her company does is deals with psychological safety in the workplace and the whole blockage for potential customers. Bringing me in is their And I guess what I always called it was no one wants to come in and have you look at their sales and use tax because it's akin to going through their underwear drawer. They're like, I'm probably not Or in France, he got into. Managers don't want their employees knowing that they made a mistake. Owners don't want to find out what they're doing wrong because do I have to report it to the state? Everyone just is so fearful, and especially when they hear that my background is in audit or that I worked for the government prior. It's well, who is she in a towel And once they get to know me or meet me or hear from other people that have worked with me, they're like, oh, it's a safe space. This is someone who's on our And it's not about being sides. It's just. No one does it. Perfect. You're never going to get to complete perfection with sales and use tax because it's so complicated and work all in the same space. And it's complex. It's difficult. But to avoid it and not talk about it or not train and develop is crazy because it's so impactful to your business and it affects so many people in your company. So everyone has brought me in, And that's why I get so excited feeling of satisfaction.

Dawn Kennedy: 4:42

All right. That is fantastic. We're going to take the scary So let's start with two points. One is sales and use tax are So the sales and use taxes in Wyoming and the sales and use taxes in. I know. Pick another state of Alabama. They're going to be at a state So each state. So that's one of the reasons it The second thing just for all of What do you mean when you say Because people are like, we supposed to do and we give it to Some of us report monthly. Some of us report quarterly. Depends on what some of us have Could we do different counties. We do our sales tax. What else could what else is

Holly Hoffman: 5:32

Sales and use tax is the same And most often I say sales tax. And people are like, whoa. So you don't do use tax. Yeah. To shorten it. I just usually say sales tax. Sales tax is what a seller good use tax is what a purchaser properly charged on sales tax. So it's the same transaction. It's just whether a seller is liability of the seller. Or if the seller didn't properly charge, or maybe they weren't required to charge right then the use tax on that same transaction is the purchasers liability to remit use tax on a taxable purchase. So that's where so individuals like you and I personally, when we're not in our business, when we're purchasing states usually aren't going to go after an individual because that's just not really viable to audit individuals. The purchases aren't going to will get audited for use tax. And in fact, most audits aren't Tax isn't the big chunk of the It's your purchases that you're So whether it's not having proper documentation or that you didn't pay tax properly on purchases, that's where the big chunk of your eye it's going to come from purchasing from out of state and you didn't remit use tax if you're in a taxable state. So use tax is just a counterpart Every state that has a sales tax or gross receipts tax has a use tax. So that's the explanation of it

Dawn Kennedy: 7:43

So between the purchaser side where you probably see this a something at wholesale and when submit a document that says, purchase for whatever. And that is so that the It's going to be the retailer's When they go to the end percentage or that is probably Is that pretty accurate, right?

Holly Hoffman: 8:15

Yeah. It resales the common And some states you can like Wisconsin, you can be a wholesaler and not hold a seller's permit and seller's permit. Just so folks know, a sellers permit doesn't allow you to sell things. It allows you to collect tax and remit that tax to the state. That's that. And if you have no taxable hold a seller's permit. However, there's a couple states, for instance, Illinois, Florida that you can't claim resale without holding a seller's permit. So there's little weird, right? Weird rules. I got to be careful with that. Right. And those rules. So let's talk.

Dawn Kennedy: 9:20

About some of the places like So you're bringing in raw goods What happens in there? Where do people get in trouble? So there's number one, you're actually making the end thing to sell. And you have raw material,

Holly Hoffman: 9:34

So manufacturing they issue think as a manufacturer then, manufacture, that must be exact. But manufacturing exemptions are Okay, so I get OSHA requires it or some other requirement, or you get required for the manufacturing process. But the sales and use tax they differ state to state. So if you are a manufacturer several states, just know that the electricity exemption, those So the scope of manufacturing or the consumables or anything like that's going to differ state to state. So don't assume that it's the And then also some people something else beyond that. They don't sell for wholesale. Sometimes they manufacture and then install their manufactured product. That can change. What exemptions apply to their they qualify for manufacturing. So you got to be careful.

Dawn Kennedy: 11:03

Okay. So let's take another business like a service business. In some states there's taxes on on some other services. So if you want to start maybe a an accountant, or if you wanted there's no physical product, How do we know? Where do we find that

Holly Hoffman: 11:31

So services are extremely And you have to be careful and you don't see something you're looking under. So. That one is tough. And I recommend that you consult whatever service you're Because sometimes it can be services to tangible personal property. And you're not searching for And you're like, oh, I didn't And that was under something that you're not expecting it to be, or you couldn't find your service and you still must be taxable. But things that aren't taxable So services to humans aren't listed in Wisconsin, but anything that's a service to humans, if it's not listed, it's not taxable.

Dawn Kennedy: 12:34

So just to clarify services that might be taxable because tangible goods could be like Hvac repair. So it's a tangible good. So if they fix your AC that But if they just if they're not property, it may not be taxable. That's what you're saying. So there really is a case depending on the business to make sure. And especially if you're in like cross state lines, that changes This is why in the beginning you caveated it and said, this is a safe space and nobody gets it perfect.

Holly Hoffman: 13:10

Yeah. It really, and sometimes there's like multiple areas in the tax code that caveat very specific things. And though it says one thing a request for this salon story And so sometimes I request the something, even though I know for something else. And the initial answer I got And they cited administrative And I'm like, okay, that yes, forgetting this other code. And then someone higher up was that it's wrong. The answer was wrong. And that was just a vague And we'll get back to you with some more more clarity on that answer. And I'm like, yeah, okay. But so you just have to be very careful because you can come up with a statute or a code that answers your question, but you might be missing another one that is more specific and overrides it.

Dawn Kennedy: 14:34

Okay, so what about somebody They're taking goods from They don't actually make anything, and they're just doing retail in a boutique or even online. There's additional or different

Holly Hoffman: 14:53

Yeah. So there you have to be careful about what jurisdiction you're in and what product you're selling. So you have to look at, and this So especially in urban areas, additional taxes on top of it. So it could be expo or transient is, you have to be very careful. And can I just caveat here a couple clients. You cannot Google tax rates and

Dawn Kennedy: 15:43

And again, louder in the back. Don't Google your tax rates. So generally you said Department state named the same thing. Department of revenue. So if somebody in any state where to look or are there a couple of other maybe popular names that you could see in different states of somebody is listening in now and going, oh, I might need to have a look at that. Is it Department of Revenue,

Holly Hoffman: 16:11

Revenue, Department of Treasury usually if you look for the state and taxes, but just make sure it's the official state website. So sometimes if you Google it will bring up in a children's sight or some other service pipe. Don't go to that. You want to go to the actual In every state has a tax rate So that's where you want to go. If you want to find the tax rate

Dawn Kennedy: 16:55

Okay. Department of Treasury or You don't always need a seller's So make sure that you do because it doesn't actually mean you're consumer facing. It could actually mean something Depending on the business that multiple places you would have or come out of pocket. Is that accurate?

Holly Hoffman: 17:15

Yeah.

Dawn Kennedy: 17:16

All right. So now I'm gonna crack my knuckles here because if you're listening in, what are the states that make you the most relevant when you have to look at them? because I know there's going to where if you're in this state, complex than maybe if you're in

Holly Hoffman: 17:38

All of them know that there's It really depends. It really depends on what you're So my first thing is not what It's what is the business and And are you physically engaged in business in that state or are you simply making sales into the state? Then I go to what are you So I guess I look at it not what is the state, it's what is my business doing? So I guess I don't get hung up on who is the state as much as what is my client doing so that I don't get overwhelmed with what. I guess I would go nuts if I was trying to know everything about every state. So the states that are the most deal with New York as often. A few times I have had to deal with New York has been okay, but I hear New York is rarely with tax treatment. But knock on wood, any issues There's certain states that are I feel like all the states are Wayfair went into effect in happened and the states laid low going to start auditing right like a couple years after we

Dawn Kennedy: 19:20

Tell everybody what Wayfair is

Holly Hoffman: 19:23

So Wayfarer was a South Dakota decision court decision that allowed interstate sellers to collect tax from the consumers if they made sales into other states over a certain dollar threshold or transaction threshold. And that started October of

Dawn Kennedy: 19:54

So online sales were no longer general interwebs rule. Up to that point. You could order something, and state, you didn't have to customer in the state where now want to buy anything, it says

Holly Hoffman: 20:15

So states wanted this because they were not getting the tax from the purchasers, the individual purchasers, they wanted to be able to collect from the seller and make the seller collect the tax from the purchasers. So they got it passed by um because the small sellers this type of huge berg. So they had an exclusion for thousand dollars threshold sales Since then, states are dropping the the number of transactions, the threshold number of transaction is number of invoices. So that doesn't hold up well in hundred teachings, which is a And that could cause you to have could be pennies. So the number of transactions is Anyways, so now that Wayfair has over and now states are going interstate sellers who only have share data among other states, So most states go back three If you aren't registered, they Technically they can go back

Dawn Kennedy: 22:08

Wow.

Holly Hoffman: 22:09

Wisconsin if you're unregistered, they go back six years. But they're going back all the

Dawn Kennedy: 22:18

I'm seeing that's nine years. Yeah, that's longer than the seven for an audit. And you can file, I think it's three or four years back taxes without pay, the penalties and stuff. But I don't think they consider that punitive or whatever until you've missed three or four tax years. I think you can do the last But IRS goes back seven, I Yeah. But this is.

Holly Hoffman: 22:50

Wisconsin is all about being consistent and treating all taxpayers equally. This is not consistent.

Dawn Kennedy: 22:58

Right? Yeah. When I heard you start saying when you're selling in another jurisdiction and is it just a sale or are you doing stuff there? I flashed back to the horrible from law school where it was Where's your headquarters? Where's your this all of the So really, has every state now call that Wayfair decision? Or there's still some states that do not tax those internet transactions.

Holly Hoffman: 23:29

Pretty much every state has It's varying threshold. Trying to think, though, is

Dawn Kennedy: 23:39

The last holdout?

Holly Hoffman: 23:40

I can't remember, but yeah, But my problem is that all of my clients, everyone that I run across, has Wayfair stuck in their head and they've completely forgotten physical presence. So if you have a truck, if you Covid, everyone started working having an employee in another So they've just forgotten this And so people have physical And they're like, oh, but I And you don't have a threshold. You have physical presence, you're engaged in business in that state. People need to remember that

Dawn Kennedy: 24:32

Prior for a while.

Holly Hoffman: 24:34

Yes, yes. And you're not going to have an So yeah. So that is a big warning to Just keep in mind. And then some states have really Click through Nexus. If you have a button on right to your ordering, to your sale, that gives you physical to sales people who aren't your creates physical nexus. There's just a lot. So just be very wary of what you're doing in other states right now.

Dawn Kennedy: 25:19

Let me ask this broad question. If let's say you are doing business in two or three states, maybe you're a regional company, you would have to hold the permit in each of those states individually. So not just I have mine where my primary plant is located because it would again, this is where I think it starts to get complicated is not only is it maybe different in each state or what's required as in each state, you also have to keep up licensure in each state or permit. I know some of them are So after so many years, if you they just look at you and anything and they let it lapse. What are some of the other kind think we're being super being super compliant.

Holly Hoffman: 26:09

If you don't have any taxable But if you do have taxable sales then you better have a permit. And then also if you have So if you have a physical purchases where you aren't So if you aren't paying tax on all your purchases in that state, say you have a plant or something, maybe you aren't making sales there that are taxable. Okay, you don't need a seller's Or maybe you're a contractor and I would not get a seller's Okay, so get a seller's permit. But there's usually a thing called a consumers use tax permit. Okay. I would get that if you have taxable purchases on a regular basis. But if you don't have a reason get registered for a seller's the time because that creates Sorry, but if you do have registered if you have physical It does.

Dawn Kennedy: 27:32

So what? This is even a regional company states and you sell to consumers And in the third state, you're just manufacturing or that's where your delivery hub is or whatever that state, even if it's not consumer facing maybe taxable sales, you still need to check and see if you need a use permit or a tax permit for the non consumer facing uses that you might have to remit taxes for. Is that accurate?

Holly Hoffman: 28:04

Correct. Yeah.

Dawn Kennedy: 28:06

Okay, this does get very Obviously, you can work across So that was going to be my other Typically, if it's a state specific thing, the states like to have somebody either register to represent people in front of them or something like that, or like for the IRS, you have to have an enrolled agent sort of thing. Are you required? Is your company required to be Can you represent in all fifty And can you maybe do audit defense or something in all fifty states? Or is there a process or looking for if they're looking

Holly Hoffman: 28:43

Okay, so I only do audit defense I don't do defense in the other states, but I will prepare you to avoid audit in the other states, and I can help them with that. Okay, perfect. And I do have connections with and things like that. The big thing is to avoid audit and to make sure you're doing everything to make sure you're on top and to educate your employees, which a lot of those like avalara in the big companies don't provide tax treatment answers. And that's what I do. So yeah, I can do that. And sales tax isn't income tax. The CPA doesn't doesn't register sales tax ability. So there is no registration for Okay.

Dawn Kennedy: 29:40

So the CPA doesn't talk about sales tax, which I'm probably because they're like, it's just multiplication. Just multiply it by zero point

Holly Hoffman: 29:50

It's a local tax. And so your college education doesn't educate you on sales and use tax. And the CPA exam doesn't as So I like me to cover like I but right now it doesn't.

Dawn Kennedy: 30:09

That is so interesting. That is so interesting because I stuff to our accountant, we have sales taxes, right? If we have taxable sales. So that's very interesting that more heavily pushed because it you're taxable or not. You have to have an awareness. And for some people listening in time that they are aware that considerations beyond just we sales in general.

Holly Hoffman: 30:43

So this property tax, it's like there's a lot of taxes that are covered. And I think it's interesting going away from income tax. And even if you have income tax primary revenue generate. That's why I love my job and I'm I'm like, hey, I have to pay This is huge.

Dawn Kennedy: 31:10

And now this makes completely cutting down like auditing more sales and use tax. If they're using that to fill reducing or eliminating like whole big bunch of sense. Because if they say, okay, we won't collect as much on, on this side, we still have to have schools and roads and all the things. So if they've shifted that, I'm community, other than the fact responsible for accuracy, right? So the consumer is not The consumer is going to pay the register or online or, or But it really is on the business itself to be compliant, to know about it, but then also to remit it. And this makes sense why they they're like, okay, we shifted property taxes, but now we want Yep. So as you said, the trend is up for them doing audits and things like that. What have you seen since the You said over the last couple of a business community?

Holly Hoffman: 32:25

A lot of states are doing out of is doing out of state audits. And they're they're sharing that And the other thing that they're doing, and this is totally legal. So this isn't it isn't like this This is legal. When they audit a company out of state, they will cut that company a deal and say, okay, we're gonna just assess a percentage of your sales into our state, and then that allows them to keep the customer list, and then they audit all the businesses that were sold to, and they can pick up the tax, the use tax from those businesses.

Dawn Kennedy: 33:15

Okay.

Holly Hoffman: 33:16

So they, I consider it a double technically because they didn't tax from the state itself. And it is.

Dawn Kennedy: 33:26

It if it was owed and there was awareness or whatever, is it they getting what they were And the business owner didn't There's an argument for that as

Holly Hoffman: 33:38

And the other big thing that states are focusing on is digital goods.

Dawn Kennedy: 33:45

Digital. So downloaded courses. And during the pandemic, you without running into a free

Holly Hoffman: 33:55

With.

Dawn Kennedy: 33:55

Okay.

Holly Hoffman: 33:56

With everything moving electronically, technology services provided online databases online. Everyone wants information and resources, and with AI you can get numbers and data on everything and everyone's selling data and information or everything, collecting data, providing data. And that's data and information. And it's huge. The numbers are astronomical, billions, hundreds of billions that this industry has grown and states are finding ways to tax that. And you'll see that there's a and how they're trying to pick or not it's constitutional cases, court cases going through So that's a huge thing. And the reason is because it's

Dawn Kennedy: 35:01

Yeah. They want their cut and we Or we could just be those aware okay, this is part of what we And some people will collect the time of sale. Some people roll the tax into the price and then they submit their portion. There's a million different ways to do it legally, ethically, morally correctly. But yeah, after this conversation is, boy, this is a lot more complicated than probably the average business owner knows. I know it's a big eye opening And you know, we okay, how can How can they reach out? Let's just put that out there as So they can't go into the white pages and go the sales tax lady, although that would be really cool. So where can they find you and

Holly Hoffman: 35:50

And we can almost go to the You can go online sales tax lady

Dawn Kennedy: 35:57

Fantastic.

Holly Hoffman: 35:57

And that's how you get connected Holly at sales Tax lady dot com sales tax lady dot com. So I truly embrace I am the sales tax lady, so why not just embrace it?

Dawn Kennedy: 36:11

I love that it is so clear. I think sales tax lady though really did not until this conversation make me think about all of the other nuances that go with it. So that's this has been very eye If you're driving and listening and you have any questions or you're regional, you're in multiple states or you didn't know, then I would encourage you to reach out and don't use AI, right? So don't Google, don't use AI, proper state information. And just to recap, it was Department of Revenue or Department of Treasury for most states. Yes. And you reach out to the sales tax lady Holly to get that clarity. Make sure you're in compliance anybody wants is to find out doing the right thing. And I bet that's the majority of They just didn't know.

Holly Hoffman: 37:04

And everyone is trying to do the Like everyone. Even when I was in on it, there was a few people who were fraudsters. But everyone is trying to do the right thing and we're all in the same spot. And when you work with me, you understand that it's not always clear and it's okay and no one expects anyone to be rocket scientist said. Sales and use tax. So it's totally okay. You find out that you're in a Everyone understands.

Dawn Kennedy: 37:34

I love that. Yeah. So again, psychological If you want to reach out to Holly and get her eyes on whatever you may need support with. So thank you so much for joining We've never covered this. I didn't realize how important and it was like, wow, there's You are the very first in this tax area. So thank you for coming on and generously sharing everything with us.

Holly Hoffman: 38:05

Awesome. Thank you.

Dawn Kennedy: 38:07

All right. We'll talk to you all next time Business Mastery Podcast. Take care. Thank you so much for listening to this episode of the Business Mastery Podcast. If you want to learn more about dot com and you can now check us course, any of your favorite Take care.