Sales Tax Horror Stories

[Frank Petronio]

If only it was Halloween.

I'm particularly interested in hearing your sales tax horror stories from being a part-time or semi-professional photographer, extra points for New Yorkers.

[Black Lightning]

Well, I am an accountant With a practice in New York. I don't have any horror stories of my own. Clients of mine, that's a different story. Sales tax problems are why many of my clients came to me in the first place. I have kept a few of them from going to jail.

[BrianShaw]

Sales tax in CA needs to be paid in terms of sales per county (tax rate can vary by county) - a major book keeping PIA when I had a business because we couldn't afford an accountant to do that for us. Other than that it was quite straight forward.

[eddie]

ny is done quarterly. you better get em done before the end of Dec.

what sucks the most about NY is that if you sell to some one in a different area you must collect that tax (just like brian says above). so if rochester tax is not 8% like it is here in ulster county then you would collect 8% from me as i am in UC. that is the PITA of it all.

if you collect less than $3000 (so $40,000 in sales) in one year you do not have to file quarterly....BUT you must file quarterly for teh 1st year....then you can file once per year after that.

hope this helps.

have fun with the tax man.

eddie

[Richard Wasserman]

I had a wholesale business and one of my customers unbeknownst to us let his resale number lapse. We were audited by the state who found the problem. Between the penalties, interest, and the formula they used to assess how much we owed them (5 years worth) they hurt us significantly. They then of course went after my customer for nonpayment of taxes.

[Kirk Gittings]

Richard, I had a similar issue with a magazine publisher here and got nailed for thousands though in actuality it was completely his fault. I just got caught up in his audit.

[Jerry Bodine]

A few years ago I arranged to have some of my photos hung for a 90-day period in a local framing shop that had a classy setup. When discussing with the store manager about all the details of the arrangement, I asked how the sales taxes would be handled. She said I should get a tax number and report sales to the state (Washington) and city. In retrospect that was not a very bright thing to do. My interest as expressed in my application for the tax number was in sales of b&w landscape prints, but as soon as my information got into the state's hopper, I started getting phone calls from folks who found me on the internet and were looking for a photographer to do (a) portraits, (b) aerials, (c) weddings, etc. etc. etc. Then I discovered that Dunn & Bradstreet was putting false info about me on the internet that showed my "business" income to be $50K annually - an outright lie - along with other misinformation. Ever since that time I've been trying to get D&B to take that stuff down from the internet and it hasn't happened yet. Then WA state signed into an agreement with several other states to start charging sales tax according to where the product was DELIVERED in-state rather than where the product was SOLD (the intent being to level the playing field for in-state businesses who were being hurt by tax free online purchases). What a bookkeeping nightmare. And the state wonders why businesses are inclined to go elsewhere! Geez.

[BrianShaw]

... charging sales tax according to where the product was DELIVERED in-state rather than where the product was SOLD ...

That distinction, by the way, is how CA did sales tax when I was in business (within the mailorder era, but before the internet sales era). When I wrote "sold" in my previous post I meant sold-and-delivered. (I never had an experience where something was sold but not delivered, or sold to someone in one county and delivered to another county... but it certainly could have happened.)

[Pat Kearns]

Frank, here is my horror story. I used to operate as a part time photographer shooting weddings, portraits and babies from 1975-2000. Got the business licenses, filed sales taxes and income taxes as a legit operation. Quit operations around 1995 but kept my business licenses current annually. That meant having to file zero tax returns monthly. After a couple of years of zero returns I started sending them in quarterly. Well that didn't sit well with one of the revenue departments and I got a computer generated form letter saying they were going to penalize me 100% of the monthly sales tax amount I was paying for late payment of taxes. I called them and tried to explain that I wasn't doing any photography business anymore and sales taxes were zero. The clerk wasn't in a good mood and read me the riot act. I told him I kept my business licenses current annually even though the business was defunct which was in essence giving them free money for annual business licenses. Filing monthly zero sales tax returns didn't make sense when they should be quarterly or occasional filings at best. The clerk became more hostile. I said it would be easier and cheaper for me to not renew my licenses when they became due again. He said to go ahead and do that. So I did what he said and quit giving them free money.

[Ari]

How about living in Canada and paying 15% on almost everything you buy, then paying further Customs and Duty fees once your purchase crosses the border?
Bone-chilling enough for you?
The worst part is that this is supposed to give us a top-drawer medical/health system and better roads and schools, but I only see a large decline in all services.

[keeds]

You've got to worry. We pay 20% on everything and have to pay $ to £ even though the exchange rate is $1.5 -> £1

[Greg Blank]

In the US - Imop- There should be or lets say needs to be a National sales tax- with no exceptions to the mega online resellers, that would level the play field for all businesses at least on one front. All tax would be charged at the point of sale to the user. Folks like me that have paid their sales tax to their states for years would finally move the stagnant US economy in the correct direction- it says in fine print.

[Greg Blank]

From the stand point of what the governments provide taxes are a necessary evil. Sweden I beleive has you beat. They tax income at 40-50%. However they as I also beleive have one of the most prosperous economies going and also have heavily invested in clean energy technologies. I think if a government utilizes a fair income tax system sales tax is not required. Maybe the answer is to make sure no one gets away without paying? We could brand everyone so they can be kept track of. Everyone wanting to be branded raise your middle finger for the process :D


How about living in Canada and paying 15% on almost everything you buy, then paying further Customs and Duty fees once your purchase crosses the border?
Bone-chilling enough for you?
The worst part is that this is supposed to give us a top-drawer medical/health system and better roads and schools, but I only see a large decline in all services.

[photobymike]

How about living in Canada and paying 15% on almost everything you buy, then paying further Customs and Duty fees once your purchase crosses the border?
Bone-chilling enough for you?
The worst part is that this is supposed to give us a top-drawer medical/health system and better roads and schools, but I only see a large decline in all services.

LOL i live in Florida - no state tax, No city tax, no county tax. But i am required to collect tax from in state sales. It seems there might be a constitutional issue when the state requires me to collect tax for them.....in essence working for free for the state collecting said tax. With that being said ..... i am going to start a Darkroom Supplies Website that will require me to register with the state to collect the tax for them. But it is only for in state sales.

I know in the state of Florida, when i comes to collecting tax, Due process goes out the window. The tax collectors do not need a warrant to audit your books. They can seize property to collect on said taxes that they think you owe, and it is all up the the tax collectors discretion on how much and what to seize. I am considering not selling to anybody in the state of Florida for the reasons described. I think the law requires me to sign up, and fill out monthly reports on sales. Collecting sales tax on only in state sales. That will mean at there discretion they can enter my house audit my books and inventory my belongings all without a warrant or probable cause.

[Greg Blank]

Keep in mind anything as a business that you purchased in your home state is subject to sales tax. That is, even if you resold it. That is considered use. The way it works in Maryland is I have to pay sales tax regardless of having a state resale cert. No tax, hah- its merely deferred, so anything I bought in state - tax gets paid on. I pay tax wether it went on to another user or wether I converted to property used by my business. Stuff I bought out of state or or outside the country is a whole nother matter subject to income tax. Keep good records and assume eventually you will get audited, then it won't be so traumatic. A good accountant as was stated above, will help you deal with the auditors.

[Black Lightning]

ny is done quarterly. you better get em done before the end of Dec...

Actually, New York sales tax returns for the third quarter were due yesterday.

[Corran]

In my "real" business I file as a sole proprietor. I collect no taxes but am charged income tax or whatever from what I bring in (I can't charge taxes anyway on services I believe, which is 99% of what I do). Luckily I have plenty of write-offs every year that keep most of the taxes away. I usually get a small refund.

I don't have the money for an accountant, nor do I think I need one. I hope that's true anyway :D

Interestingly I have no problem filing LF camera gear as a business expense, compared to digital stuff, because apparently modern cameras are classified as hobbyist stuff, not professional work gear, or some such thing. They only give you so much room for the description so not like they can decipher "Chamonix4x5ViewCam" anyway!

[Allen in Montreal]

From the stand point of what the governments provide taxes are a necessary evil. Sweden I beleive has you beat. They tax income at 40-50%. However they as I also beleive have one of the most prosperous economies going and also have heavily invested in clean energy technologies. I think if a government utilizes a fair income tax system sales tax is not required. Maybe the answer is to make sure no one gets away without paying? We could brand everyone so they can be kept track of. Everyone wanting to be branded raise your middle finger for the process :D

We are not far behind Sweden:
Income tax can hit 49 percent (combine federal and state, 24% fed and 25% QC)
Federal sales tax is 5 percent (GST)
Provincial sales tax on top, is 9.5 starting in Jan.
The 9.5 is calculated on the item amount PLUS the 5% GST. :mad:
There is supplemental tax on fuel, license plates and in my city, a $45.00 per car head tax.
There is a luxury tax on some items.
All cars and trucks with 5 liter engines face an extra tax.
There is a Tire tax
An engine oil disposal tax
There is a special tax on blank DVD and CDs
There is a mandatory public transit contribution tax
I can go on all night if you like, the list is long, but you get the idea and at the very end of the day,

There is an estate tax when go and leave what is left to your kids too! :mad: :mad:


That said, we pay far too much tax, but it sure sounds like you don't pay enough in the US.
The GST sales tax system is reasonably fair. 9.5 % provincial on top (9.97) is a bit much.
Now if only they would stop squandering and deliver some of the services they promise us in exchange those taxes.

[Allen in Montreal]

If only it was Halloween.

I'm particularly interested in hearing your sales tax horror stories from being a part-time or semi-professional photographer, extra points for New Yorkers.

Here in QC photogs have been labeled "suspect" and we are often subject to mini snap tax audits. You get a letter and 15 days to answer X questions and provide the paperwork. If you don't get it right, full audit.
I have had 2 mini audits and not had to pay, my books are clean and very tight.
Last time they sent me a note demanding 257 dollars because I had not filed a paper they requested. I am appealing because they never asked for that paper and I have their letters to prove my argument.

My accountant will charge far more than the $257 on this dispute and the Gov will end up with no extra dollars.

But they try.....every few fiscal quarters!!

[Greg Blank]

We are not far behind Sweden:

... but it sure sounds like you don't pay enough in the US.

....Now if only they would stop squandering and deliver some of the services they promise us in exchange those taxes.

That might be good enough reason to re-aim our nukes- north :D

At the heart of it all thats it.... about how the money is spent. I read an article this week that stated the US has slipped two notches in terms of the Democratic freedoms of its overall society. Sweden again was at the top of the list. Canada from what I remember was pretty far down the list maybe a few positions above the US (Not sure).

[Bryan Lemasters]

In my "real" business I file as a sole proprietor. I collect no taxes but am charged income tax or whatever from what I bring in (I can't charge taxes anyway on services I believe, which is 99% of what I do). Luckily I have plenty of write-offs every year that keep most of the taxes away. I usually get a small refund.

I don't have the money for an accountant, nor do I think I need one. I hope that's true anyway :D

Interestingly I have no problem filing LF camera gear as a business expense, compared to digital stuff, because apparently modern cameras are classified as hobbyist stuff, not professional work gear, or some such thing. They only give you so much room for the description so not like they can decipher "Chamonix4x5ViewCam" anyway!

What services are or are not subject to sales tax, and what that tax rate is, varies from state to state. Here is a good starting point:
http://www.taxadmin.org/fta/pub/services/services.html

[Corran]

Great link, thanks! I had a look and not surprisingly my business or even something similar isn't even listed (recording engineer, as well as freelance musician). Some categories that might have been very vaguely associated were exempt luckily so I'm almost sure I'm safe. Probably best to consult a tax expert, blah blah blah but I guess I take my chances...

[jnantz]

i always wondered if there were USE TAX horror stories.

[Brian Ellis]

LOL i live in Florida - no state tax, No city tax, no county tax. But i am required to collect tax from in state sales. It seems there might be a constitutional issue when the state requires me to collect tax for them.....in essence working for free for the state collecting said tax. With that being said ..... i am going to start a Darkroom Supplies Website that will require me to register with the state to collect the tax for them. But it is only for in state sales.

I know in the state of Florida, when i comes to collecting tax, Due process goes out the window. The tax collectors do not need a warrant to audit your books. They can seize property to collect on said taxes that they think you owe, and it is all up the the tax collectors discretion on how much and what to seize. I am considering not selling to anybody in the state of Florida for the reasons described. I think the law requires me to sign up, and fill out monthly reports on sales. Collecting sales tax on only in state sales. That will mean at there discretion they can enter my house audit my books and inventory my belongings all without a warrant or probable cause.

Not sure where you get the idea that in Florida there are no State, county, and city taxes. Would that it were so, I'd never have left. : - ) However, there is a State income tax on corporations which of course gets passed on to consumers. There's also a 6% State sales tax to which most counties have added their own sales taxes on top of the State sales tax. Then there's the State tangible personal property tax, the intangibles tax, the documentary stamp tax, motor vehicle taxes, utility taxes, cigarette taxes, parimutuel wagering taxes, the list goes on and on. That's all at the State level. Cities and counties impose real property taxes and collect more real property taxes on behalf of school boards, special taxing districts, redevelopment agencies, etc., that list too goes on and on.

What Florida doesn't have that most other States do is an income tax on individuals.

Also not sure why you think the State should need a warrant or probable cause to audit you. First, they're trying to collect money, not send you to jail. Warrants and probable cause relate to crimes, not to civil payments. And if in the course of an audit they discover something they think is criminal you'll get all the warrants and warnings you can stand and then some.

Second, if they couldn't audit without first finding probable cause, how could they ever audit anyone? They find probable cause (i.e. a belief that money is owed) by auditing. The State would be in a classic Catch 22 situation if they couldn't audit without first having probable cause to conduct the audit - no probable cause, no audit; no audit, no probable cause.

[photobymike]

I came from Michigan and they have all the taxes that the other states have but they have forms to fill out for personal income tax for the state, city and the counties can charge different sales tax. In florida ... there is no city personal income tax no state personal income tax. There did i state that right....... As for the sales tax, my next door neighbor was a prosecutor in Tampa. He said probable cause is at the collectors discretion... then he asked me if i had a problem... LOL

[Pat Kearns]

i always wondered if there were USE TAX horror stories. USE TAX can be more devastating to a company than people realize. Buying tangible personal property thru mail order, internet, or telephone out of state can be subject to the same sales tax rates if the vendor/dealer didn't charge sales tax. I would recommend everyone to visit their individual state website and "TRY" to read the sales & use tax laws, rules, & regulations. I will guarantee you will come away with a headache and more confused than ever. You may ask how I can guarantee this? Simple, I do this five days a week for a company with operations in 10 different states. Every state's sales & use tax regulations are different and very complicated. So, I pray I can retire before the Horror Story kills me. :(

It's been interesting reading the various comments but very early in the thread someone said consult a good accountant. No wiser advice can be given.

[John Bowen]

My favorite sales tax story......

Back in the early 80's I was with KPMG in NYC. One of our clients (a US Subsidiary of a Japanese electronics firm) sold a few millions of $$ of calculators (you know, 10 keys with the rolls of paper attached) to Kmart. The client had not obtained a resale certificate from Kmart. The Sales Tax Agents wanted to assess sales tax on the transaction. The client objected and the Sales Tax Agents inquired....can you prove Kmart didn't use them in their business? They assessed the tax.

I'm pretty sure this wound up in court, but I don't know the ultimate outcome.

[Frank Petronio]

I just got a job as an investigator, check your mail.

Thanks, these cautionary tales should be repeated occasionally.

[Joseph O'Neil]

In the "count your blessings" category, you guys could end up like we are here in Canada with the HST (aka VAT as known in the EU or, as we sometimes call it - Hated Sales Tax :) ).

You would think a single, "harmonized" sales tax as it is called would simplify things, but often, it does not. For example, 5 donuts are fast food, and taxed, but 6 donuts - even from the same store - are "groceries" and not taxed. It goes on and on.

Bottom line is, regardless of the country or tax in question, the amount of paperwork needed for any tax is surely becomming very combersome, and from a strickly, practicle point of view, I sure do like the idea of single, flat rate tax anymore.

[Frank Petronio]

It has to be to keep legislators, accountants, enforcers, and lawyers employed. If we had simplified taxes then they would all be worthless, right?

[Tom Monego]

My last equipment lease turned into a sales tax nightmare. The price in the lease documents included the state sales tax, that was fine with the original leasing company, but they were bought out by Citibank and I noticed a raise in the monthly payments, it was because they were charging sales tax on the monthly payments. told them that the original lease included sales tax, they told me they always charge for sales tax for monthly payments because they could, asked my accountant, he said yes they could do this then charged me $200 for reading the contract. That was fine until we moved our studio, this town charged a use fee for all equipment, where other towns and states allow you to depreciate use fees on equipment, this town charged full price for as long the lease was in effect. So I was paying $700 a year on a $10000 lease while the guy I worked with maxed out his credit card for his $10000 equipment purchase ended up paying under $100 per year. My accountant told me this was just a bad town to have a lease in. To make this all worse CitiBank called me a year after closing the lease to get more tax $ for the last year, I didn't have the lease. They said the town I had been in was asking them for it. I had closed the business and taken a paying job in another state. Business had become too complex for me in a sole proprietorship.

Tom

[Bob Salomon]

I'll give you another one:
We have one place of business in northern NJ. We have no other offices nor do we have any employees living in any state other then NJ.
A state in the Pacific NW sent us a questionair wanting to know the following:
Do we own property in that state - NO
Do we have an employee in that state - NO
Do we ever go into that state to train employees of our dealers in that state - YES
Do we have an independant sales representative who lives in that state- YES

The state then notified us that we were subject to their Occupational and Business tax of 0.0034% of all shipments to that state, even though these shipments were to retail stores in that state who collected sales tax on the sale of our merchadise made by them.
They also said that we were liable for penalty and interest on all shipments to that state for the previous 5 years.

So, rather then fighting it, which would have cost around $50,000.00 we decided to pay this quarterly tax, which our sales rep also has to pay.
A few months ago this state sent us a letter that they have decided that they will no longer accept company checks for the payment of the tax and all payments have to be made electronically, unless they would grant an exception for special conditions. As we do not make any electronic payments at all we appealed the letter on those grounds, of course they refused the appeal. So we notified them that we would no longer pay their tax. It should be noted that most suppliers of photographic merchandise to retailers in that state were not notified by that state that they were subject to this tax. Even though they also had no property in the state and also did not have employees in that state and they did to training in the state. We often work next to each other doing trade shows in that state.

[Black Lightning]

Bob, Read the following pdf. Public Law 86-272 seems applicable in your situation.

http://www.steptoe.com/assets/attachments/1571.pdf

[Bob Salomon]

Bob, Read the following pdf. Public Law 86-272 seems applicable in your situation.

http://www.steptoe.com/assets/attachments/1571.pdf

Thanks, I think that is why they call it a Business and Occupation tax rather then an Income Tax. The state claims that they can collect this tax because they do not have an Income Tax in that state. We have had an accountant and a major law firm look at it and they both stated that the costs for fighting it were well above the tax we were charged.

[John Koehrer]

It has to be to keep legislators, accountants, enforcers, and lawyers employed. If we had simplified taxes then they would all be worthless, right?

How much more worthless is possible?

[Greg Blank]

I am not going to say one profession does not have value to make mine easier for me.
My 17 plus year business experience leads me to say: There really needs to be a National sales tax-and NO State intervention- or additional imposed taxes. There really needs to be better enforcement of © Laws, and strict punishment of all violations. If done correctly there is better buisness for all and more easily to navigate and do business.

[Ari]

It has to be to keep legislators, accountants, enforcers, and lawyers employed. If we had simplified taxes then they would all be worthless, right?

In this case, worthless is a relative term.

[Brian Ellis]

I used to do a lot of sales tax work as a worthless lawyer in Florida. Without intending to demean anyone posting here, there's a massive amount of incorrect information, misunderstandings, omitted information, and so many other misconceptions, mistakes, and erroneous assumptions in most of the tales related here that it's impossible for someone who knows something about taxes to figure out what really happened to anyone and why it happened.

[Larry Gebhardt]

My worst sales tax horror is that I traveled out of New Hampshire and bought something. They had the nerve to charge me a tax to buy the product.

[Tom Monego]

My worst sales tax horror is that I traveled out of New Hampshire and bought something. They had the nerve to charge me a tax to buy the product.

Larry,
How did that happen? I live on the NH, Vermont border and buy a lot of stuff in NH, unfortunately not photo equipment as our last area photo shop closed last year. We recently bought some furniture in NH and they wouldn't have charged us sales tax if we had picked it up for our selves. Generally if you take something yourself no sales tax, even items you have shipped, if it is a direct delivery then sales tax will be charged.

Tom

[Jason_1622]

I am about to figure up and pay my state sales tax.