Sales Tax

[Tinker]

I am somewhat concerned about a subject that comes up, in my mind, all too often.  Following is a quote of a letter I sent off to Bob today.  In reply, he assured me that he does have to add sales tax to any billing for items sold within his own state.  I had already known that to be fact.  My concern is for so many members stating on the FOG that certain dealers do NOT charge sales tax. Such a statement is assurance that they do NOT pay sales tax. How many of those who state they do NOT pay sales tax understand that they are legally LIABLE for that tax?

it is not likely to ever become exposed that such payments are due.  However, I do know of such inconveniences as audits which can come at any time.  this indicates to me, certain repercussons.  not every audit can turn out as well as the 6 audits from IRS that I had within the first 15 years of being in business.  Every time they audited me, they ended up owing me.  each time, they found they owed me more. ;D  Not everybody is that lucky.

I, as a small business man whose business must pay sales tax based on sales within my state, must also keep track of, and pay sales tax on items bought outside of Connecticut.  If I am reporting a tool as a business expense, that expense must show that the tax was paid.  Others are in the same situation, I am sure.

Following is a copy of the letter I sent to Bob:

"Hi Bob,
I am writing this note personally to you as I have certain concerns as stated below:

There have been several discussions within the FOG where it has been noted that you do not charge sales tax for your sales.  This service is/has been greatly appreciated from many sides, as well it should be.

My concern is:  Being in business myself, I am aware of the fact that should the seller not charge sales tax (Connecticut law), the buyer becomes fully responsible for recording and paying such tax.  That is a law I am sure many who comment are not aware of.  If I make a sale (again, Connecticut law and I am sure it is the same in other states), I am responsible to report such sale, even if i did not charge the tax.  If i did not charge the tax, i am required to get a tax number from the recipient.  I have several such tax certificates in my own records that I must keep available for auditing, should such become necessary, and i must update those records periodically.

I have deliberately not made comment on the above during any conversations where the subject has come up, as I do not wish to attract undo attention to you, or other dealers.  Such public comment could possibly cause more harm than good and i am sure that inyour case, the rules are somewhat different than in my case where ALL of my business is conducted within the State of Connecticut.

As for me, it makes not a bit of difference whether you charge sales tax, or do not.  I have my reasons for dealing with people due to the attitude of the dealer concerned.  You fit that situation.  I have made such comments within several discussions.  I am concerned that so many are reporting (publically) that you do not charge sales tax, but am not sure how to approach the subject, or if I should.

Wayne"

I know Bob is well covered in this, i hope all others understand.
Tinker

 

[Mirko]

Oh oh, looks to me, we're about to open a "can of worms"

Mirko

 

[semenza]

Hi,

      I am not about ot get into comenting on the various sales tax situations or laws - in state, out state, business, non business, seller, buyer, etc.  Many people have varying understandings, beliefs and niss beliefs.

      But HOW did you manage to beat the IRS six times!!!!!!

Seth

 

[Dave Ronyak]

Purchaser's residing in Ohio who purchase items from out of state from a dealer who does not collect Ohio sales tax are required under Ohio law to report and pay the tax themselves when they file their Ohio state income tax.  The law of other states may vary, I have no knowledge.  Of dealers located outside of Ohio, only those meeting certain criteria are required to collect the tax for Ohio (commonly based on whether they solicit/advertise for business in Ohio).  The rise of internet based commerce has made it much more complicated (compared to brick and mortar stores and advertising in regional newspapers) to determine if a dealer located outside of Ohio is "soliciting" or "doing business" in Ohio.  Today, compliance for individuals (not businesses like Tinker's) is largely an honor syste.  But eventually there may become enough computational power available to states to enable them to match up sales transactions from without a state to residents within a state.  When/If that happens, then the states will be able to collect sales taxes on such out-of-state purchases. 

Dave R.

 

[rjhidaho]

Purchaser's residing in Ohio who purchase items from out of state from a dealer who does not collect Ohio sales tax are required under Ohio law to report and pay the tax themselves when they file their Ohio state income tax.  The law of other states may vary, I have no knowledge.  Of dealers located outside of Ohio, only those meeting certain criteria are required to collect the tax for Ohio (commonly based on whether they solicit/advertise for business in Ohio).  The rise of internet based commerce has made it much more complicated (compared to brick and mortar stores and advertising in regional newspapers) to determine if a dealer located outside of Ohio is "soliciting" or "doing business" in Ohio.  Today, compliance for individuals (not businesses like Tinker's) is largely an honor syste.  But eventually there may become enough computational power available to states to enable them to match up sales transactions from without a state to residents within a state.  When/If that happens, then the states will be able to collect sales taxes on such out-of-state purchases. 

Dave R.

It is the same in Idaho.  You are supposed to declare your out of state purchases when filing income tax.  I think most people ignore it, but it is the law here.

Rob H.

 

[Dan Clermont]

Part of this sales tax thing is great and part of it is flawed. Depending on how you want to look at it.

If I buy a tool from Bill in Seattle I'd have to pay WST. If I buy from Bob or Timmy I don't even though I am still having it shipped to Washington.

It alienates locals from using there local dealers.... on the other hand you save some cash.

I have to pay Provincial Sales Tax and Goods and Services tax when I bring the stuff back to Canada so I already get dinged 12%.

Dan Clermont

 

[robtonya]

I work hard for my money. If I can save a dime here and there, I will. Bottomline. The government could collect its out of state purchase tax if it wanted to enforce it. I pay dearly for child support, I do my part and take care of my kids, no complaints there, but she gets all that money and doesn't have to claim a cent as income, but I do.  :'(  I think someone that is collecting enough money that they do not have to work should pay tax on that, and give the paying parent a credit. That would be a bill I would support. But back to sales tax, I try to get the most of my money, so if I can save a hundred dollars on not paying sales tax for my Festool purchases, I'm a hundred dollars richer, sorry.

 

[Tinker]

Hi,

      I am not about ot get into comenting on the various sales tax situations or laws - in state, out state, business, non business, seller, buyer, etc.  Many people have varying understandings, beliefs and niss beliefs.

      But HOW did you manage to beat the IRS six times!!!!!!

Seth

Seth, It's a loonnnngggg story, but I'll give you a sample of the first time i was audited.  this is a true story.  I was audited five more times.  Each time I came out with refunds or money in my account.

I had been in the masonry business for 3 years. Each spring, i did my own taxes to the best of my knowledge and abilities.  The 3rd year, i ended up owing the IRS a considerable sum which was more money than i had in the bank. 

I thought I would have to borrow money. money I did not think would be available to me as I was still struggling to get my business off the ground, i had recently lost time to an operation on my knee (I still feel effects of that as one side of the knee will sometimes itch and to relieve the itching, i must scratch the oposite side), I was periodically in pain to my back for more lost time.  In short, i was finding it difficult to rteally put everythng together in a way that bankers interpret as "good risk".  During this time, i had met a guy at the local diner who, as it turned out, was a CPA.  We had become quite friendly and i took a chance that he would not be too busy to give me some help.

He walked into my kitchen at around 8am on a Saturday morning.  By the time he finished his coffee, the IRS owed my $450.  That was the best coffee i ever served.

sometime later, i got a letter from IRS wanting to set up a meeting.  Of course, being the friendly guy I was (still am : ) I accepted.

As the IRS guy was going ver my records, he went back to the beginning.  He came across a number and asked me how i had arrived at the figure.

"I don't know."

"you did the calculations, didn't you?"

"Yes."  To make a long story short, this same set of questions and answers repeated several times.  Each time, i gave, essentially the same answer.  each time, the inspector seemed more and more irritated.  Finally, he indicated enough irritation i decided it was time to straighten him out a little.  "Look, Mister so-and-so, I'ma justa dumma stona mase.  I'm a know how ta breaka da rocks.  I'ma don' know how ta breaka da numbers.  You figure it out.  When you are done, either I owe you and I'ma pay you, or you owa me ana you you pay me. Itsa very simple.

He ended up taking my records (more on that alittle later) for further study.  A week or so later, i got my records back with an explanation of the calc.  A week or so later, a check for $X00 along with 7-1/2% interrest on the money the IRS had owed.  I ended up with a reasonably good feeling over the whole thing  ;D until i told my CPA friend about what had happened.  He told me in no uncertain terms to NEVER let the IRS into my house unless they have search warrant.  AND DO NOT EVER EVER EVER allow them to take my records.

I learned a few lessons and eventually, since my friend would never allow me to pay him (another long story with some funny overtones that we will not get into here), I finally hired another accountand, later, another and so on for the next several years until i finally found one about ten years ago who certifies his work and for whatever reason, the IRS seems not too interrested in checking his work.  Oh yeah, I also wonder in the $K's of money they have had to return to me as a result of their many followup audits over which they owde me each time.  I kid my present CPA that I hope he is honest and that the IRS might find his work as interresting as with my previous accountants.  8)

With al of that, i still feel a natural shudder and cringe every time i get a letter of any kind from either IRS, or as in the past 30 or so years, from the State of connecticut. tax dept.   The last time i was audited, i had had, on paper, a very bad year.  I had bought a whole lot of new equipment over that year and the year before.  The IRS decided i was too poor to survive and sent me papers to apply for poverty payment and also application for food stamps.  I laughed and threw the applications into the fire, never to see them again.  Afew weks later, i got a poverty check in the mail.  i called my accountant who asked if i had requested the money.  I told him the whole story and he laughed and told me to spend it.  After another few months, i guess IRS decided they had made a mistook and wanted to see me.  I took all of my records to my CPA and he went before "the board".  He got back to me and wanted ALL of my records for the previous couple of years.  By the time all had been checked, The IRS sent my accountant back hme and sent me another check.  They have not bothered me since. Of course, with what I pay my present CPA every quarter, i would hope there would be no more errors in either direction.

Tinker

 

[Daviddubya]

Arizona has sales tax and use tax.  If a person buys from out-of-state, like off the Internet, they are supposed to declare those purchases and pay the use tax.  Folks do not pay attention to the use tax, and it mostly goes unpaid.  Saying there is no tax on Internet purchases is incorrect in many states.  There is a tax, but it does not get paid, and the state has no way to track it.

 

[Ned Young]

I think all taxation is extortion, perpetrated by various gangs who simply declare that they have a monopoly on violence within a geographical area.  These gangs are called "governments".

If you are stupid enough to disagree with me, try not paying a tax and see what happens, and then explain to me how what happened differs from being shaken down by criminals.

At this point, one of you liberals will point out all the "services" that government provides.  These services fall into three classes:  unwanted, incompetently delivered, or more expensive than they have to be.  Every useful service can be more effectively delivered by free market, for-profit enterprises or local voluntary cooperatives.

Of course, I am not advocating that anyone break any law.

Ned

 

[LaserGecko]

Businesses do not charge sales tax; they collect it on behalf of the state.

One Festool dealer from eBay charges sales tax no matter what since "there is a Festool presence in every state". I don't get it because there's no way they can know what the tax rate for every county in the country and there's not enough margin on Festools to remit that to each state. That's unfair and I'm sure it's cost them a lot of business.

 

[greg mann]

Ned said;

government services are

"incompetently delivered, or more expensive than they have to be."

Ned, those labels clearly apply to government services, but I can live with that.
I'm curious though what you think about the guv'ment paved road near your house
when the smoke blows your way?  

Or the guv'ment paid firefighters?

 

[Ned Young]

what you think about the guv'ment paved road near your house
when the smoke blows your way? 

Liberal nonsense, which I have come to expect on this forum with its liberal agenda.

The paved road would have been privately built and privately manintained.  We have some around here, and they're better.

Funny you should mention that.  We've just had maybe 18 inches of snow here.  (It's fairly unusual to get that much at once here, but TahoeTwoBears won't be the least bit impressed.)  The county ran a grader through creating 3-foot icy piles in front of everyone's driveway.  Even if I'd been out there at 3am when they did it, ordinary residential power equipment wouldn't have been able to cope with the mess they'd made.

This happened because the property owners aren't the customers.  The customer is the one paying for something, and who can decide not to buy it.  Government works hard to create layers of insulation between decision makers and the real world, so that they need no longer be responsive to those paying.  If snow clearing and other road maintenance were supported by voluntary subscription, I guarantee those icy piles would not exist.

We have three private water companies up here, and they're working fine.  These are cooperatives and the management, our neighbors, watch their costs closely.  They meet all health standards.  If we need extra money for an emergency, we know exactly where it's going.  A water "tax" won't go for a "community center".  Oh, we have one of those too, privately built.

Before you conclude that the village is some kind of limousines-in-the-woods place, let me tell you that we have a saying in this settlement of 900 full-timers:  "There are two kinds of people who live here.  Those who can afford to live here, and those who can't afford to live anywhere else."  It's a very diverse population.

As for the smoke, the threat of major forest fire has been increased many-fold by "forest management" policies that suppressed the natural cycles of the forest.  I've mentioned the limits of human understanding before, and humans are no better at ecology than they are at social engineering.

Fortunately, it's within human limits to build excellent power tools like Festool.  [Festool content.  Check.]

Ned

 

[Daviddubya]

Hmmm.  This thread seems to have taken on a predictably "political" flavor.  I prefer talking about tools!

 

[Corwin]

I am not one who falls for the political promises of lower taxes and increased services.  No way.  Not now or never.

Tinker

Yep, imagine what your CPA would charge to explain that...  I think it is a "fuzzy math" type of thing.  Should follow this with a little smiley face, but then, it is rather sad.

 

[semenza]

Hi,

  I admit that I posted a reply on this thread :-X    But is it time for this to go private?  Tinkers (good story too) starter post did apply to our Festool buying but......    I am inclined to think that this sort of thing will be a put off to new comers looking for Festool info.  JMO.

Seth

 

[GAKnothead]

"Taxpayer - someone who works for the government but doesn't have to take the civil service exam."
  - Ronald Reagan   

 

[Bob Marino]

  Leaving politics aside, it is my understanding that all sales are subject to sales tax. Selling to a buyer who resides in the same state as your business, the seller is obligated to charge, collect and remit that sales tax to the state. In out of state sales, the buyer is responsible to claim these sales and pay the appropriate tax. I say supposed to, because most folks are not even aware, so it is very rarely adhered to and the goverment hasn't jumped on this yet.

Bob

 

[Tinker]

  Leaving politics aside, it is my understanding that all sales are subject to sales tax. Selling to a buyer who resides in the same state as your business, the seller is obligated to charge, collect and remit that sales tax to the state. In out of state sales, the buyer is responsible to claim these sales and pay the appropriate tax. I say supposed to, because most folks are not even aware, so it is very rarely adhered to and the goverment hasn't jumped on this yet.

Bob

Bob's post illustrates my reason for starting this thread.  I had hoped that others, less aware of Sales Tax laws would atleast become a little more familiar with what is real.  i knew it could take a more political turn, for which i do take a certain amount of blame.  I had hoped it would not go in that direction.

The fact is, the laws are out there.  Bob and I (and others I have not not named) have the extreme good fortune to be required to fill out forms and sent with accompanying check to the local state government every month.  some must do it weekly, and for some, anytime sales reach a certain plateau.  Should it be discovered that a person has not done his/her own record keeping along with the required tax payments, and should that person not be reachable, such responsibility goes back to the agent, in this case, the dealer. 

Hence, my reason for making the statement i made.  In this day and age, there are so many ways to be checked on and i do not think it is right for so many of us to be broadcasting that such and such a sales person does not charge sales tax.  I also wonder about the free shipping statements being made.  i have no first hand knowledge there, but i do wonder if there is a potential for backfire there also. 

If any of the sales people want to advertise such practices, that is their business.  I do not feel it is right for the rest of us to make such claims for them.  personally, i do not care if they want to charge tax or shipping, or not.  It is their sweet disposition that attracts me  : : :

Tinker

 

[Daviddubya]

...Should it be discovered that a person has not done his/her own record keeping along with the required tax payments, and should that person not be reachable, such responsibility goes back to the agent, in this case, the dealer...

...I also wonder about the free shipping statements being made.  i have no first hand knowledge there, but i do wonder if there is a potential for backfire there also....
Tinker

Whether or not the "responsibility goes back to the agent" would vary from state to state, just as the rules for sales and use taxes vary from state to state.  Broad statements on this topic don't apply.

Why on earth might there be a "potential for backfire" regarding shipping charges?  It is the seller's decision whether or not to pass on shipping charges to the buyer.  The shipper is still getting paid.