Factoring is a mathematical process that extracts the tax from the seller’s taxable receipts, when a tax amount was not separately identified to the purchaser. This method of tax computation is usually employed when the seller wishes to charge the purchaser a flat amount. While the prime contractor has the option of separately charging the tax, it is often more convenient to charge a flat price and factor the tax later. Any prime contractor may opt to factor transaction privilege tax and county excise tax.
Factoring is a mathematical process that calculates the tax from the seller’s receipts, when a tax amount was not separately identified. This method of tax computation is commonly employed when the seller wants the total charge to the purchaser to be a flat amount. Examples of common factoring situations include a vendor at a sporting event that charges a dollar for a soft drink, and an artisan that charges ten dollars for a handcrafted item at an Arts and Crafts Festival. While both sellers have the option of separately charging the tax, it is a convenience to both the seller and the purchaser in such situations to charge a flat amount.