Published for the
Clients and Friends of Zegarelli Associates Professional
Zegarelli Associates is pleased to announce that the
firm will expand its office at 1100 Allegheny Building, in
Pittsburgh, PA. The buildout has already begun and should be
completed in early October. The new space will allow for
additional attorneys and staff to serve your needs.
Like most of our entrepreneurial clients, each day, we develop
our business plan, we assess the business risks and we implement
Like you, we represent the entrepreneurial spirit.
JACKIE HUI XU
Joins the Firm!
Jackie Hui Xu (pronounced
"sue") has become an Associate of the firm. Jackie has
an undergraduate degree in Computer Science from Molloy College,
Long Island, New York. She is a graduate of Golden Gate
University School of Law in San Francisco, California, where she
graduated in the top 15% range of her class. She recently
relocated to Pittsburgh, with her husband, who is a Professor of
Computer Science at Carnegie-Mellon University.
Prior to joining the firm, Jackie received detailed litigation
training in Federal and state courts through her clerkships with
the California State Superior Court and the United States
Bankruptcy Court for the Northern District of California.
Jackie practices in all transactional areas of law, with a
concentration in commercial litigation, computer and
international law, and the law of corporate and business
As a native of Beijing, China, Jackie is especially familiar with
the customs and culture of China, and she is fluent in Mandarin
Chinese. As a result, Jackie is also primarily responsible for
client transactions in the Pacific Rim. Jackie can be reached
directly at 412-765-0530.
SALES AND USE TAXES
AKA, Either Way,
If youre like most people, you pay sales tax. But if
youre like most people, you dont really understand
when to pay or why you pay. Perhaps you noticed a mail order
advertisement that indicated to pay the tax if you lived in PA, and another that
indicated to pay the tax if you lived in AZ, FL, MA or WA. Why
the difference? The following summary explanation should assist
you. It is noted that the summary is conceptual, rather than
1. Think of the tax as a "consumption" tax. The
first step in understanding sales and use taxes is to acknowledge
that the state can tax the consumption of products and services
within its state jurisdiction. Sales and use taxes are really
the same tax, but, they are separated because they must be
enforced differently, as explained below. Its generally
more confusing to think of "sales" and "use"
issues, just think "consumption."
The state doesnt have the heart to tax you on consuming
everything, just some things. For example,
"necessities" like toilet paper are not taxable, nor is
unprepared food like steak. You didnt really need that
prepared pizza, so the state taxes consumption of prepared
2. Local consumption only. Should Pennsylvania, for
example, be permitted to tax Illinois residents on their
consumption in Illinois? Certainly not in our American federalism
of independent state jurisdictions. Pennsylvania has no
jurisdiction over Illinois residents. Pennsylvania would
create the tax, if it could, but the U.S. Constitution prevents
itas it also prevents Illinois from taxing Pennsylvania
consumption. So far, so good.
3. The General Rule. The general rule is that, if you
consume in a state that requires you to pay a tax to consume,
then you must pay. It doesnt matter where you purchased
the item, only that you consume it in the state with jurisdiction
to tax you.
Okay, easily stated. But, if you were a state, you couldnt
sleep knowing that relatively few persons would, at the end of
the year, provide an accurate accounting of all taxable (and
generally untraceable) consumption. Enforcement would be a
nightmare. And, it still is in some cases, but the state got
clever. Real clever.
4. Make business do the work. Because the state knew that
many consumers would not voluntarily admit making taxable
consumptions, the state forces local businesses to track
all taxable items sold, and to collect the tax from the consumers
as the states agent, at the point of sale. Yes, the state
forces, under penalty of law, business to be the tax collector.
(If you have collected the tax, you know that the state allows
you to keep a de minimis portion of the collected funds as a
When a local business collects the tax for sales made and
delivered by it within the state jurisdiction, well call it
a "sales tax" because the tax is collected at the point
of sale. But, the state still has a problem: it cant
regulate businesses outside of its own jurisdiction. The U.S.
Constitution wont allow such taxes for the same reason that
a state cant tax consumption in other states.
So, for example, what if a person in Pennsylvania purchases from
a business in Illinois? Does the Illinois business collect the
tax at the Pennsylvania rate, the Illinois rate, or not at all?
If not at all, then how does Pennsylvania get the tax from its
5. Buying from other jurisdictions. Remember, its a consumption
tax. If you purchase from out of state, then you are still
responsible to pay the tax! In this case, lets call it a
"use tax" because its collected based upon use
only. Yes, you are required by law to complete a Use Tax Return
and to declare and to pay the tax related to your consumption of
all taxable items which were not collected at the point of sale.
The state doesnt care whether you purchase from in state or
out of state, you must pay the tax. But, as you might imagine,
the state still has nightmares about collection of use
tax, because it must rely upon consumers to
"voluntarily" report their consumption of items
purchased from other states.
6. Mail order confusion resolved. You now have all of
the rules to know why mail order ads are so different in the
collection of sales tax. Stop here to go back and figure it out.
In the introduction, the ad that indicated for PA residents to
add sales tax is presumably a Pennsylvania business which
is therefore required by Pennsylvania law to collect the
sales tax for consumption in Pennsylvania. Pennsylvania
has no power to tax consumption in other states, and the other
states do not have jurisdiction to force the Pennsylvania
business to collect their tax of their consumers purchasing from
Pennsylvania businesses. So, for example, if Illinois has a
sales/use consumption tax, and the Illinois consumer purchases
from the Pennsylvania business, the Illinois resident must pay
the tax to Illinois as a use tax, but Illinois has no
jurisdiction to force the Pennsylvania business to collect it.
Among other things, a larger company is regulated by every state
where it has an office or employees. In other words, some
businesses exist in more than one state; therefore, they are
within the jurisdiction of each of those states. In the
introduction, the other business presumably exists in Arizona,
Florida, Massachusetts and Washington. Therefore, that business
can be and is required by each of those states to collect the tax
for consumption which will occur in each of those states by the
respective residents. Companies like Microsoft might list 48
jurisdictions in mail order ads, because it exists in each of
those states, and each such state has jurisdiction to force
Microsoft to collect the sales tax from the local consumers. See
the table below for a
brief summary matrix.
Summers over! Dont worry, youve got an
optiona great option. Join the best health club in
Pittsburgh, and stay fit, trim and tan all year round:
Athletic Club and Fitness Center, Inc.
Ramada Hotel, One Bigelow Square
(Yes, its the facility next to USX Tower with the two
distinctive bubble domes.) Dan Griffin, the President, is
superbly experienced and knows the business inside and out. He is
so confident in his teams service, that he doesnt
have lock-in minimum terms like other facilities. Youve
really got to see what hes done with the facility. Call Dan
at 412-560-FITT (3488). Dan has agreed to waive the joining fee
for clients of the firm a limited time. This is the place
to be: great place, great people.
No doubt about it, the Downtown Athletic Club absolutely has
the entrepreneurial spirit!
As always, please call us
if you have any questions or if we can be of assistance to you in
Use Example Table:
consumer pays PA sales tax/PA business collects and
remits to PA
consumer pays IL use tax to IL via Use Tax Return/PA
business does not collect the tax
consumer pays PA use tax to PA via Use Tax Return/IL
business does not collect the tax
consumer pays IL sales tax/IL business collects and
remits to state IL
Contact us today! Our firm can assist
you with understanding and applying the law to your particular situation.
Represent the Entrepreneurial Spirit®.
If you would like to obtain our other firm publications, please go
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Articles and information are for general information only, and often address
issues, without expressly indicating, in generalizations. Laws vary between and
among jurisdictions. You should not rely upon any
information provided by or on the website, including articles, as applicable to your
particular situation. The
law, filing fees, etc., change often, so the information in this document may
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if you are interested in becoming our client--only then would this office be in
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