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Purchase and Sale Furniture

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					                            CITY OF COLORADO SPRINGS TAX GUIDE

                               SALE AND PURCHASE OF A BUSINESS

Colorado Springs sales or use tax is due on the purchase price paid for tangible personal property, such as
furniture, fixtures, equipment, vehicles and supplies (other than inventory held for resale), which is
included in the purchase or sale of a business. The tax is based on the amount paid or on the fair market
value of the tangible personal property at the time of the sale. Evidence of the taxable purchase price
includes a bill of sale, amounts allocated in the sale or purchase agreement, and amounts shown in the
accounting records of the purchaser. When no determination of value of the personal property has been
made by the purchaser, the current valuation of the property by the Assessor and independent appraisals
may also be considered in determining the taxable amount.

The acquisition of property by foreclosure or repossession is not a transaction subject to sales or use tax.

When a business is bought or acquired, the new owner takes the business subject to any delinquent taxes
owed by the former owner.

The sales or use tax due on the purchase of manufacturing machinery and equipment acquired in the
purchase of a manufacturing business may be deferred for two years and then may be abated by the City
if certain conditions as specified in section 2-7-447 have been met. In any event, the sales or use tax on
all assets except manufacturing equipment and machinery is due by the 20th of the month following the
month of purchase.

EXAMPLES

1.      ABC Company buys the assets of XYZ Company for $150,000. The sale and purchase agreement
        show the following allocations: Resale inventory $50,000; goodwill $10,000; accounts receivable
        $35,000; furniture and fixtures $15,000; machinery and equipment $40,000. The taxable base is
        $55,000 and includes the furniture, fixtures, machinery, and equipment.

2.      DEF Company purchases the assets of UVW Company for $150,000, and no allocation for
        equipment is shown in the purchase agreement. An appraisal determines the value of the
        furniture and fixtures is $25,000 and the machinery and equipment is $50,000. These amounts
        are entered in the fixed asset ledger. The taxable base is $75,000.

3.      GHI Company buys the assets of TUV Manufacturing Inc. for $250,000. The assets are booked
        in the following manner: Furniture and fixtures $20,000, intangibles $10,000, inventory $20,000,
        manufacturing equipment $200,000. The tax base for GHI is $220,000. Sales or use tax is due
        on the $20,000 of furniture and fixtures. The tax on $200,000 of manufacturing equipment may
        be deferred for two years. After two years, the tax will be abated if GHI has met all the
        conditions specified in the ordinance.

CS Code Section 2-7-104: WORDS & PHRASES DEFINED: BUSINESS
CS Code Section 2-7-104: WORDS & PHRASES DEFINED: PURCHASE OR SALE
CS Code Section 2-7-201: IMPOSITION OF TAX
CS Code Section 2-7-447: PURCHASE OF MACHINERY OR EQUIPMENT LOCATED DIRECTLY
                         AND EXCLUSIVELY IN THE CITY
CS Code Section 2-7-605: NEW BUSINESS PURCHASE; SELLERS AND CONSUMERS


THE ABOVE INFORMATION IS A SUMMARY IN LAYMAN'S TERMS OF THE RELEVANT
COLORADO SPRINGS TAX CODE FOR THIS INDUSTRY OR BUSINESS SEGMENT. IT IS NOT
INTENDED FOR LEGAL PURPOSES TO BE SUBSTITUTED FOR THE FULL TEXT OF THE CITY
OF COLORADO SPRINGS SALES AND USE TAX ORDINANCE.

Revised 5/16/00

				
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