Sales Tax Horror Stories

[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

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?