 Sales
tax records for deduction purposes
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 Dear
Tax Talk,
I understand that the IRS is now allowing a tax
deduction for sales tax paid by the taxpayer. I believe this can
be either your actual sales tax paid (if you keep all your receipts)
or the amounts from the IRS tables. What if I have not kept all
my receipts this year, but want to claim my actual sales tax paid?
I use a debit card for literally all purchases and
download my transactions into Microsoft Money. I have a complete
record of every purchase for the year and the location (and therefore
the sales tax rate that would have been applicable). Can I not use
this record from the bank to calculate my sales taxes paid during
the year and claim this on my tax return (in lieu of state income
tax)? It would seem that the electronic file would serve as proof
of sales tax paid just as well as paper receipts. Would this be
acceptable?
Thanks for your help.
-- Lisa
 Dear
Lisa,
The last year for claiming a deduction for sales tax paid, in lieu
of state and local income taxes, is 2005. The IRS published tables,
see Publication
600, that allow you to claim an automatic deduction based on
adjusted gross income and family size.
However, the tables seem a little sparse on the deduction.
For example, in Florida a family of three earning more than $200,000
can claim a deduction of $1,792. At the general sales tax rate of
6 percent, that translates into $30,000 in taxable purchases, or
around $2,500 a month. Depending on your household habits and your
net worth, which is not considered, this might not be representative,
as you believe in your case.
You can certainly look at your card statements (or in the case
of the debit card, your bank statements) as a guide to see how much
you spend monthly on taxable purchases. If you think you can work
out a reasonable basis for using your statements to arrive at the
deduction, I don't see why this wouldn't stand ground upon examination.
It certainly wouldn't hurt to have gathered a month's worth of actual
receipts to compare to your statements as representative of your
purchasing habits.
In determining the amount of sales tax you can deduct
on actual purchases, you only count those items that are taxed at
the general sales tax rate for your area (including any local sales
tax). For example, many states impose a sales tax at a higher rate
on communications such as mobile phones. This is not a general sales
tax, as it does not apply to a broad range of products at a similar
rate.
However, if the sales tax is imposed at a higher rate than the
general rate on a motor vehicle, you can deduct the tax up to the
amount of the general rate. For example, if your sales tax rate
is 7 percent on most purchases, but a car is taxed at 8 percent,
you can claim a deduction equal to 7 percent. Conversely, if cellular
services are taxed at 9 percent, it is not considered a general
sales tax and no deduction is allowed for the tax paid on your cellular
service, unless it's a business deduction.
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