A tax is a mandatory payment that an individual, as well as an organization, has to pay to the administration. It is a financial charge that is levied by the government on the taxpayer. Just in the event, if any individual or an organization tries to evade tax, it has to face some serious dire consequences, as this activity is punishable by the law itself. Sales tax is a kind of tax that is calculated on the basis of sales made by an individual or an organization on specific goods and services. Just like a normal tax, this is also an obligatory payment.Read More
Talking from the perspective of the transportation companies, sales tax and transporting companies are closely related to each other. A lot of individuals do pay the optimum amount of tax. Apart from that, to saving tax, one can establish a transportation company. Here are some of the ways by which sales tax can be saved by establishing your own transportation company.
Handle The Transportation Company
The prime step towards saving the sales tax is to structure a transportation company. This is the very first step in saving sales tax. One must create and establish a transportation company to get the tax benefit.
The fundamental requirement is to establish a separate LLC. LLC stands for the Limited Liability Company. Therefore, the transportation company that an organization or an individual will be established must be a Limited Liability Company. In this situation, the operating company will be owning the majority of shares of the LLC. There is a regulation, in many of the states, that LLC cannot be a fully owned subsidiary of the company that operates it. Rather than this, the company has to be a separate entity that pays its own returns and taxes to the federal government.
Transfer To Transportation Company
The other prime requisite is to transfer all the qualified vehicles from the operating company to the transportation company. Either leased or owned, all the vehicles must be transferred to the transportation company. In the circumstances that if the vehicle is leased, then the lease agreement will be revised. A new agreement will be formed where the vehicle will be registered again. For this purpose, one can go to the trucking management software. As all the things are being allotted to the transportation company, the proper agreement between the parent and the transportation company must be made with clear terms and conditions.
“There is no situation like the open road, and seeing things completely afresh.” — James Salter
Services That Are Provided by the Transportation Company to the Parent Company
The major service that a transportation company will offer to the parent company is offering a transportation services agreement.
Services That Are Provided by the Parent Company to the Transportation Company
These are some of the services that a parent company will offer to the transportation company:
Employee Leasing Agreement
Management Services Agreement
Creation of own Set of Books
By performing all the above-mentioned activities, separate entities will be created. These entities will perform functions on their own. This, in turn, will make the tax filing return simplified. Therefore, in the long run, sales tax will be saved to a major extent.
Evaluating the Operations
It is obligatory to follow all the rules and regulations that have been laid down by the higher authorities. Therefore, it is mandatory to evaluate all your operations and activities from time to time. The organization must make sure that all the activities are being carried down as per the norms of the agreement.
For this purpose, the organization must make sure that all the trucks are being used for business and commercial activities only with the help of truck mapping software. Avoid any kind of personal use. In case, if a business is found violating the rules, then there are high chances that the business will be forfeited. Apart from that, the goodwill of the business will suffer to a major extent.
Use the Word Hire
Another task that will save your sales tax to a great extent is to use the word “to hire” on all of the trucks. This must be done for both of the companies, i.e, the parenting company as well as the operating company.
By doing so, it will be clearly understood that all the trucks are being used for commercial activities rather than personal use. In addition to this, the third-party benefits will also become a part of your business. Therefore, by doing so, the business profits will be enhanced and the risk will be reduced to a great extent.
Video Credit – Zmodal
In the nutshell, one can say that, by following the above-mentioned tips, one can surely save sales tax. Besides that, establishing a transportation company that operates on its own is a very good and profitable medium to save the sales tax. For undergoing this process, one must consult the accounting agencies so that each and everything can be done in an effective as well as efficient manner.