GENERAL SALES/USE TAX RECOUPMENT OR REIMBURSEMENT/NEXUS
Laws Differ By State
Paparazzi has Consultants throughout the United States and its Territories. Sales/use tax laws are complex and vary by state and locality. Paparazzi Consultants are independent contractors responsible for their business practices and tax issues. Further, every Consultant is required to comply with all city, state, and federal laws (see Section 6.6 Laws and Ordinances). Consultants should consult a tax advisor regarding all tax matters.
Calculation of Sales/Use Taxes
According to Section 8.3 Sales Tax of Paparazzi Policies and Procedures, Paparazzi collects and remits sales tax and consumer use tax (referred to herein as “sales/use tax”) from Consultants when they purchase Paparazzi Accessories at wholesale. The amount of sales tax collected and remitted is calculated based on the state or locality to which the product is being shipped and is based on the following formula:
The retail sales price of Paparazzi Accessories multiplied by the state and local sales tax rate for the location to which the Paparazzi products are shipped.
Sales Tax Exemption
Paparazzi will not collect sales/use tax from a Consultant if documentation of a valid exemption (such as a resale permit) is provided to Paparazzi on or before the time of their purchase. Tax exemption eligibility varies by state. For more information, contact support@paparazziaccessories.com.
Recoupment/Reimbursement
If a Consultant wishes to recoup the sales tax paid to Paparazzi at the point of sale to a customer, it should be designated on invoices as a “recoupment” or “reimbursement” rather than as “sales tax” or “use tax.”
This method is currently established within Paparazzi Premiere. Using Paparazzi Premiere, the app will automatically apply the recoupment or reimbursement on the invoice. The Consultant can choose to toggle off any recoupment or reimbursement on Paparazzi Premiere.
If Consultants are collecting anything labeled as “sales tax” or “use tax” from their customers, they are responsible for complying with the requirements of their taxing authorities. This would include filing any sales/use tax reporting forms to their tax authority and documenting what sales/use taxes they have collected from customers as well as what has already been submitted on behalf of the Consultant by Paparazzi. The Consultant may receive a credit on sales/use taxes owed or may be required to remit all such designated “sales tax” and “use tax” to the taxing authority.
Section 8.3 is not intended to provide legal advice about Consultants’ rights and responsibilities for collecting and remitting sales tax. Paparazzi is not suggesting or recommending that Consultants should collect sales tax without remitting it to their states. Instead, Section 8.3 highlights for Consultants’ consideration (and subject to discussions with a tax advisor) that certain states provide opportunities for Consultants to offset sales tax already remitted to their states by Paparazzi.
Nexus Between Consultants and Other States
For sales a Consultant makes outside of the Consultant’s home state, sales tax liability is governed by an economic nexus requirement for sales tax (also known as "sales tax nexus") that determines a Consultant’s sales tax responsibilities in a state other than the Consultant’s home state.
A nexus is typically triggered when a Consultant’s sales activities in a state reach a specific dollar amount and/or number of transactions. If a Consultant does not meet the threshold and/or transaction amount, no tax is due to the non-home state. However, if/when a Consultant meets the threshold set by each state, the Consultant must pay and collect the required sales tax. Keep in mind that the requirements vary by state, so depending on your sales transaction levels or dollar amounts, you should discuss this with your tax advisor.
Potential Sales Tax Liability
Paparazzi does not collect sales tax on free accessories that are given to Consultants, including, but not limited to, Hostess Rewards, free Life of the Party Exclusives, and accessories given away at Paparazzi-sponsored events. This would also include selling $5 items for $8. If Consultants choose to sell these accessories, they should contact a tax professional concerning potential sales tax liability and sales/use tax laws in their state.
Summary
Please note that even though Paparazzi collects and remits sales tax paid by Consultants when ordering from Paparazzi, it is the Consultant’s responsibility to comply with any and all requirements regarding sales tax, use tax, and sales tax nexus. This may include filing any reports or forms that may be required by your state or other states.
Paparazzi does not provide tax or legal advice to Consultants. If you have any questions about sales tax, nexus, or what states require, you should contact a tax advisor.