What to Know about Purchase Deposit Sales Tax

Navigating Sales Tax Changes video

Below are the upcoming changes to Auction Invoices as well as example invoices and formulas relating to the Purchase Deposit Sales Tax. 

Upcoming Changes to Auction Invoices: Implementation of Purchase Deposit Sales Tax (PD Tax)

Starting February 3, 2025, StorageTreasures will introduce a new line item on auction invoices called the Purchase Deposit Sales Tax (PD Tax). This tax will be applied to the Purchase Deposit amount and will be calculated based on the state where the storage facility is located. Our tax software will automatically calculate the applicable rate.

Buyers will need to pay the Purchase Deposit along with the PD Tax to StorageTreasures. This amount will then be deducted from the total the buyer owes at the facility.

Definition of the Purchase Deposit:

1. Paid by the Buyer: The Purchase Deposit is a fee paid by the winning buyer in lieu of StorageTreasures being paid directly from the facility for auction services rendered.
2. Taxable Service: The Purchase Deposit (Seller Premium) is taxed because the services provided to the facility are considered taxable.
3. Deduction at Facility: The Purchase Deposit and the taxes paid by the buyer on the facility's behalf will be deducted from the total amount due at the facility.

Key Changes (Call-Outs):

• New Line Item: A Purchase Deposit Sales Tax (PD Tax) will appear on auction invoices.
• Tax Calculation: The PD Tax will be determined based on the state of the storage facility and automatically calculated by a tax compliance service.
• Buyer Payment: The buyer will pay the Purchase Deposit plus PD Tax to StorageTreasures after the auction concludes.
• Deduction at Facility: The Purchase Deposit and PD Tax will be deducted from the total amount the buyer owes at the facility.
• Texas: If the facility is located in Texas, only 80% of Buyer Premium and Purchase Deposit is taxable.
• Applicable States: At this time, 17 states require sales tax on the Purchase Deposit. If your facility is in a state where no sales tax applies, the invoice will reflect no tax due. This may change at any time, without notice.

Why This is Important:

• The amount you collect at the facility may depend on calculations within your systems.
• Reconciliation Risk: If you do not account for the change in sales tax, your reconciliation may be incorrect, leading to discrepancies in the amounts collected.

Action Required:

• Update Internal Processes: You may need to adjust your internal processes or Property Management Software (PMS) settings to accommodate the PD Tax deduction.
• Consult Professionals: Discuss these changes with your accounting or tax professional to ensure a smooth transition.
• Alternative Solutions: If you prefer to avoid updating your processes, contact StorageTreasures for potential solutions, including moving to a monthly subscription model.

Purchase Deposit Sales Tax Examples
The examples below show the Payment Details of invoices with and without the Purchase Deposit Sales Tax.  The ‘With Purchase Deposit Sales Tax’ example shows how the Purchase Deposit Sales Tax will appear on paid invoices as of February 3, 2025:

Invoice Formulas
Below are the formulas for the invoice Payment Details, which include the Purchase Deposit Sales Tax.  We recommend providing this to your accounting or tax professional:

Note:  You may not need to make any changes to your processes.  If you think of paying for groceries or other taxable items or services, you input the amount paid, including the tax, in your records.  The only difference with how we are collecting the tax is that the buyer is paying the tax on your behalf.

If you have questions, feel free to reach out to your StorageTreasures Account Manager or Business Development Manager.