We self-assess use tax. For services, do we use the jurisdiction where services are performed or jurisdiction where the services will be used?
Full Question: We self-assess use tax. My question pertains specifically to services. What jurisdiction should be assigned to a purchase order for engineering services, repair services, or support services? Is it the jurisdiction where the services are actually being performed or is it the jurisdiction where the the services will ultimately be used? For examples, we have projects that are going on in both AR and SC and are exempt in both states, but the engineering work is being performed in Canada. Currently the purchase orders for these services are being assigned to a Canadian jurisdiction, causing the project to be assessed with 13% tax for these engineering services. The same thing is also occurring within the states - for example, if an item from AL is sent in for repair in LA, then which state should be assessed the tax (of course depending on if repair labor is taxable in that state)? Thanks.
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The ORIGINAL/COMPLETE question was as follows:
Unfortunately the answer to your question is not an easy one or a general one that can be answered here. Most states follow a "benefit received" concept for determining the sourcing of services. However, that assumes that the "product" of the service or "benefit" of the service will be "delivered" or "received" in a state. In some cases, the result of the service may not be received elsewhere. This is something that will need to be researched on a state by state basis and specific to the service. Professional services such as engineering may follow one rule but the repair of an item sent out of state to a repair facility to be returned to another state could follow a different rule. If you need assistance with this project, we do provide consulting services and would be happy to talk to you about our services.