Lisa Hannum of Beehive PR, Inc., describes herself as “one pissed-off small business owner.” And she should be.
Hannum’s rapidly growing St. Paul firm recently emerged from a Minnesota Department of Revenue (DOR) audit. She received a notice from the state in April that she would be audited for compliance with Minnesota’s sales and use tax law. The law requires minute adjustments for goods purchased in one tax district and delivered to a client in another.
Here’s how it’s supposed to work: Say Hannum’s firm buys graphic design services in Minneapolis, where the designer charges 7.275 percent sales tax. The service is for a client in St. Paul, and Hannum bills her client for a “reimbursable expense.” However, the sales tax in St. Paul is 7.625 percent. Under state law, Beehive is required to collect an additional 0.35 percent in sales tax from the St. Paul client. If Hannum doesn’t pass the tax charge onto her client, Beehive is still liable to the state for the