Risk of not paying sales tax?
Risk of not paying sales tax?
Out of a pastime grew a tiny business for my wife in retirement. She makes inspired hand made necklaces out of semi precious stones (turquoise, lapis, amber, coral, silver) and sells them to friends. We registered her LLC with the state and the city so she could have a booth in local craft and gift shows. She has occasionally shown her work at these venues and in friends' boutiques and galleries. As she explored her feelings about her business, she realized she enjoys creating and sharing the pieces she makes more than making money with it, so she is not interested in an on-line business with a website and on-line catalog. The necklaces sell for an average of $75 and some years she sells $2000. She's sold 250 necklaces in the past 5 years. She's good at it and loves hunting for bead sources and learning techniques and seeing joy in her customers.
A friend will be hosting an in-home party in 2 weeks for my wife to show her necklaces. My wife uses the "Square" on her iPhone for credit card sales. (but most are cash/check). When she re-activated this device yesterday, she asked me how she should charge and pay the state and city sales tax for her sales. I called our state Dept of Revenue and they said that every sale in the state must pay tax and file a monthly form reporting total sales and file a tax return for that business. I asked if all the vendors in all the farmer's markets and street fairs in our state do this and was told they are supposed to, or they are breaking the law. That, at these markets and fairs, there is usually a state agent that circulates and explains the obligation to the vendors.
My wife is not planning to display in public shows anymore. She will create when she feels like it and sell by word of mouth or through boutiques/galleries that handle the tax on the sales. If she reports the sales from this month, she will have to file a report monthly going forward and a return, and keep track of her expenses, etc. She sells sporadically through the year, but usually sells more nearing the holidays. Some months, she doesn't create or sell anything.
She is willing to pay the taxes, but the process is so tedious, she has second thoughts. In prior venues, other vendors have counseled her variously to forget reporting or that if she only has a few sales, reporting isn't required.
1. Is it likely that this small enterprise is far enough under the radar that the risk is low for her if she chooses to not report?
2. Is it possible that by using the Square for a credit card charge (the amount goes instantly into her business checking account) the transaction could be reported to the Dept of Revenue somehow? She could simply ask for cash or check.
A friend will be hosting an in-home party in 2 weeks for my wife to show her necklaces. My wife uses the "Square" on her iPhone for credit card sales. (but most are cash/check). When she re-activated this device yesterday, she asked me how she should charge and pay the state and city sales tax for her sales. I called our state Dept of Revenue and they said that every sale in the state must pay tax and file a monthly form reporting total sales and file a tax return for that business. I asked if all the vendors in all the farmer's markets and street fairs in our state do this and was told they are supposed to, or they are breaking the law. That, at these markets and fairs, there is usually a state agent that circulates and explains the obligation to the vendors.
My wife is not planning to display in public shows anymore. She will create when she feels like it and sell by word of mouth or through boutiques/galleries that handle the tax on the sales. If she reports the sales from this month, she will have to file a report monthly going forward and a return, and keep track of her expenses, etc. She sells sporadically through the year, but usually sells more nearing the holidays. Some months, she doesn't create or sell anything.
She is willing to pay the taxes, but the process is so tedious, she has second thoughts. In prior venues, other vendors have counseled her variously to forget reporting or that if she only has a few sales, reporting isn't required.
1. Is it likely that this small enterprise is far enough under the radar that the risk is low for her if she chooses to not report?
2. Is it possible that by using the Square for a credit card charge (the amount goes instantly into her business checking account) the transaction could be reported to the Dept of Revenue somehow? She could simply ask for cash or check.
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Re: Risk of not paying sales tax?
Are you asking for advice on whether or not it is OK to break the law?
If your wife owes taxes, she should pay them. If it is too much hassle, then she should stop selling.
If your wife owes taxes, she should pay them. If it is too much hassle, then she should stop selling.
Re: Risk of not paying sales tax?
Pay your taxes. Yes it is pain. But it is the law. The states I am familiar with have online portals. It takes a couple hours to set up and then like 15 mins/month to file.
Re: Risk of not paying sales tax?
You say she organized her business as a LLC in order to be eligible to sell at crafts fairs, festivals, etc.
Don't those venues also require a current business license from the city/county/state?
Does she have the appropriate licensing to do what she does?
Is she filing Schedule C and reporting the years she has a net profit of $400 or more?
If I am understanding you correctly, you are using the wrong terms when you say she is willing to "pay" the sales taxes.
She isn't going to be paying them, she is going to be collecting them.
(The reporting forms are no big deal, a child can complete them when you get down to it )
btw, those 250 necklaces sold in the past 5 years add up to nearly $19,000 by your figures. That's not profit, of course, she has deductible expenses as a self-employed person. But, the state doesn't care about that when it comes to collecting and remitting sales tax based on the purchase price.
Don't those venues also require a current business license from the city/county/state?
Does she have the appropriate licensing to do what she does?
Is she filing Schedule C and reporting the years she has a net profit of $400 or more?
If I am understanding you correctly, you are using the wrong terms when you say she is willing to "pay" the sales taxes.
She isn't going to be paying them, she is going to be collecting them.
(The reporting forms are no big deal, a child can complete them when you get down to it )
btw, those 250 necklaces sold in the past 5 years add up to nearly $19,000 by your figures. That's not profit, of course, she has deductible expenses as a self-employed person. But, the state doesn't care about that when it comes to collecting and remitting sales tax based on the purchase price.
- saltycaper
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Re: Risk of not paying sales tax?
Sounds like you got your answer. Either pay the taxes or close the business. If you still want to know the risk of not paying sales tax, call up the Dept of Rev again and ask them what the consequences would be if you were caught not paying.praxis wrote:
I called our state Dept of Revenue and they said that every sale in the state must pay tax and file a monthly form reporting total sales and file a tax return for that business.
Quod vitae sectabor iter?
Re: Risk of not paying sales tax?
Our city does not require licenses for temporary businesses like an open air craft fair or farmer's market.drawpoker wrote:You say she organized her business as a LLC in order to be eligible to sell at crafts fairs, festivals, etc.
Don't those venues also require a current business license from the city/county/state?
Does she have the appropriate licensing to do what she does?
Is she filing Schedule C and reporting the years she has a net profit of $400 or more?
She has not reached $400 net profit in any one year. I made a mistake in my estimate of 250 necklaces in the past 5 years.
I just asked her and she told me that her sales are closer to 15 sales/year and her profit varies with materials used and time spent, but she normally marks up her pieces 30-40%. Net profit would then fall around $400 or less/year.
Last edited by praxis on Tue Nov 08, 2016 1:15 pm, edited 1 time in total.
Re: Risk of not paying sales tax?
On a related note, I might share that our state tax agency makes the IRS collections folks look like a bunch of pussycats. They have teeth and they do use them.
Semper Augustus
Re: Risk of not paying sales tax?
What are the consequences for continuing to refer to this as paying the tax. The seller is collecting the sales tax, not paying. The purchaser is paying.
Frankly, I'm rather surprised that none of the approx. 250 people who purchased these necklaces never questioned why they were not charged sales tax.
Did they think they were buying from a non-profit or charity
Frankly, I'm rather surprised that none of the approx. 250 people who purchased these necklaces never questioned why they were not charged sales tax.
Did they think they were buying from a non-profit or charity
Re: Risk of not paying sales tax?
No, you misunderstood. I was asking doesn't either the city or county require that your wife obtain a business license to sell her jewelry.praxis wrote:
Our city does not require licenses for temporary businesses like an open air craft fair or farmer's market.
(Many states do not impose sales tax on food so the farmers market angle is not real relevant)
Re: Risk of not paying sales tax?
It's pretty common at these kinds of markets for sales tax to be included in a nice round price and then the merchant (presumably) adjust the price to make the sales tax work out to the total that was actually paid.drawpoker wrote:Frankly, I'm rather surprised that none of the approx. 250 people who purchased these necklaces never questioned why they were not charged sales tax.
Did they think they were buying from a non-profit or charity
Re: Risk of not paying sales tax?
I was wrong. She just told me she averages 15 necklaces/year @ $75 average. Her markup is 30%-40% Net profit under $400.
Besides her state company registration and name registration with the city, she may need a license to sell in this city. We will check. Thanks.
Of course, looking at this black/white, the answer is pay or quit. I thought there might be a minimum amount of sales that weren't worth the paperwork and was looking for other points of view.
Our state taxes food. Our farmer's markets contain non-food items too, soap, plants, duck calls, keyrings, kittens. One neighbor sells cakes from her home and another sold his lawnmower last week. I wondered if my wife's hobby made it inside anyone else's gray area. It made it inside mine. But I don't think of myself as a criminal.
Besides her state company registration and name registration with the city, she may need a license to sell in this city. We will check. Thanks.
Of course, looking at this black/white, the answer is pay or quit. I thought there might be a minimum amount of sales that weren't worth the paperwork and was looking for other points of view.
Our state taxes food. Our farmer's markets contain non-food items too, soap, plants, duck calls, keyrings, kittens. One neighbor sells cakes from her home and another sold his lawnmower last week. I wondered if my wife's hobby made it inside anyone else's gray area. It made it inside mine. But I don't think of myself as a criminal.
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Re: Risk of not paying sales tax?
If you don't care too much about the money, you can probably work around it. Or find an easier way to pay the sales tax. BTW, sales tax is on the gross amount, not net profit so it's on the $2k in gross, not the $400 profit.
1. Give away the necklaces in exchange for them donating to the charity of your choice. Collect the check from them and mail it so you make sure it's In the mail. They would still get a tax donation to the charity.
2. You might be able to find a payment system that makes this simple to add up the gross, say how much is total and then just send in.
3. Alternatively, there might be a threshold for your county/state that you only need to submit the sales tax once a year or quarter instead of monthly.
1. Give away the necklaces in exchange for them donating to the charity of your choice. Collect the check from them and mail it so you make sure it's In the mail. They would still get a tax donation to the charity.
2. You might be able to find a payment system that makes this simple to add up the gross, say how much is total and then just send in.
3. Alternatively, there might be a threshold for your county/state that you only need to submit the sales tax once a year or quarter instead of monthly.
Re: Risk of not paying sales tax?
Well, actually, if you want to really delve into this, do a thorough analysis here of What's What :
Your wife should apply for a tax-exempt certificate for herself. Why?
She should be exempt from paying sales tax on the materials, raw goods, she buys that are used to create The Jewelry.
The law allows this exemption status, since the final product that is created, the necklaces, will be subject to sales tax when it is sold. Um, er, at least, should be subject to sales tax.
Did she not know that?
Of course, she will need to furnish her business license number to apply for the exemption (unless she is a registered charity)
Your wife should apply for a tax-exempt certificate for herself. Why?
She should be exempt from paying sales tax on the materials, raw goods, she buys that are used to create The Jewelry.
The law allows this exemption status, since the final product that is created, the necklaces, will be subject to sales tax when it is sold. Um, er, at least, should be subject to sales tax.
Did she not know that?
Of course, she will need to furnish her business license number to apply for the exemption (unless she is a registered charity)
Re: Risk of not paying sales tax?
I've never been "charged" tax on a sale (above the stated price) at any open craft fair or farmer's market or outdoor art show. Like terran, I believe custom is to sell at a round number. I'm trying to understand whether there's wiggle room in the profile of the vendor that renders unto Caesar from that transaction. In other words, is there a small enough sale to get a pass on processing the tax and sending it in. The state will not give a pass. I already asked them.drawpoker wrote:
Frankly, I'm rather surprised that none of the approx. 250 people who purchased these necklaces never questioned why they were not charged sales tax.
Did they think they were buying from a non-profit or charity
Re: Risk of not paying sales tax?
If you buy a pack of gum at the store for 20 cents, do you get charged tax?
Or does the store say, oh, forget it, that sale is too small to bother with.
That's the answer to your question.
Really, the Necklace Maker should stop stressing and just go ahead and file to collect and remit the sales tax. As others have pointed out, the reporting forms are very easy to D.I.Y. Keeping a record of her sales shouldn't be that difficult.
Only mega business or Walmart needs to hire and pay accountants to do it.
If you want to give her a little extra push, do a little Googling and search for what the fines and penalties are in your state if she is caught selling stuff without collecting sales tax and sending it in to the state.
Or does the store say, oh, forget it, that sale is too small to bother with.
That's the answer to your question.
Really, the Necklace Maker should stop stressing and just go ahead and file to collect and remit the sales tax. As others have pointed out, the reporting forms are very easy to D.I.Y. Keeping a record of her sales shouldn't be that difficult.
Only mega business or Walmart needs to hire and pay accountants to do it.
If you want to give her a little extra push, do a little Googling and search for what the fines and penalties are in your state if she is caught selling stuff without collecting sales tax and sending it in to the state.
Last edited by drawpoker on Tue Nov 08, 2016 2:52 pm, edited 1 time in total.
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Re: Risk of not paying sales tax?
I would say that the vast majority of us just don't care. I buy from our weekly farmer's market all of the time. The salsa is $5.00, the berry pie is $6.00. Do you really think that I would ask the vendor if they are collecting the proper sales tax?drawpoker wrote:What are the consequences for continuing to refer to this as paying the tax. The seller is collecting the sales tax, not paying. The purchaser is paying.
Frankly, I'm rather surprised that none of the approx. 250 people who purchased these necklaces never questioned why they were not charged sales tax.
Did they think they were buying from a non-profit or charity
Re: Risk of not paying sales tax?
I guess everyone thinks differently depending on perspective.
Retailers always post signs giving the price of an item. Most adults know enough that the advertised price does not include sales tax.
I have an idea. Can the Necklace Lady move her business over to Delaware? I just noticed on my last trip to Walmart last week they took down the Entering DE signs that always said "Welcome to Delaware - Home of Tax Free Shopping". Now they just say Welcome to the First State.
Did the DelDot people decide they were tacky ?
Retailers always post signs giving the price of an item. Most adults know enough that the advertised price does not include sales tax.
I have an idea. Can the Necklace Lady move her business over to Delaware? I just noticed on my last trip to Walmart last week they took down the Entering DE signs that always said "Welcome to Delaware - Home of Tax Free Shopping". Now they just say Welcome to the First State.
Did the DelDot people decide they were tacky ?
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Re: Risk of not paying sales tax?
Are you SURE the process in your state is tedious? Every state is different, but here in Michigan you can do the necessary registration online and get your sales tax permit in about a week. The sales tax return itself is also real simple, and Michigan would only require an annual filing for that level of sales anyway, also possible online.
As in your case, there is no "minimum" sales level here where the requirement to collect starts. On the other hand, you would not be doing hard time for such a trivial amount. On the other, other hand, I worked with a state sales tax auditor for 2 weeks once when I (briefly) worked as a controller for a small business undergoing a sales tax audit. While I would find multiple root canals preferable, their net from us was under $100 for both unpaid tax and penalty - far less than my bar bill to celebrate that auditor's departure. So I would be willing to spend an hour or so in filings to prevent that experience again.
Not sure what your tax rate is, but are you sure a MONTHLY filing is required, when the annual bill is under, say, $70 (15 x $75 x 6%)?
In any case, review the two-step process first. It's probably not as bad as you think. Either way, if your wife enjoys it, I wouldn't stop doing that business.
As in your case, there is no "minimum" sales level here where the requirement to collect starts. On the other hand, you would not be doing hard time for such a trivial amount. On the other, other hand, I worked with a state sales tax auditor for 2 weeks once when I (briefly) worked as a controller for a small business undergoing a sales tax audit. While I would find multiple root canals preferable, their net from us was under $100 for both unpaid tax and penalty - far less than my bar bill to celebrate that auditor's departure. So I would be willing to spend an hour or so in filings to prevent that experience again.
Not sure what your tax rate is, but are you sure a MONTHLY filing is required, when the annual bill is under, say, $70 (15 x $75 x 6%)?
In any case, review the two-step process first. It's probably not as bad as you think. Either way, if your wife enjoys it, I wouldn't stop doing that business.
Re: Risk of not paying sales tax?
Depending where you live, the city/county appraisal district may also mail you a request to file a property tax rendition for tools, equipment and inventory. I was sent one because I have a sales tax license. Since I sell very few items within the state and do not charge tax on out of state sales, I only need to file once a year with the state. Only takes a few minutes to do it.
My rendition was so small, I haven't heard back from the county appraisal district, at least not yet. It also helps to let your inventory dwindle at the end of the year.
Samtex
My rendition was so small, I haven't heard back from the county appraisal district, at least not yet. It also helps to let your inventory dwindle at the end of the year.
Samtex
Re: Risk of not paying sales tax?
I don't know anything, but I'll throw out two ideas in the hope that someone knowledgeable responds.
1. If your wife sells each necklace for $75, of which $60 is materials, do she need to collect sales tax on the $60? She (presumably) already paid sales tax when she herself purchased the materials. I could be wrong, but I have a recollection that one needn't pay sales tax if they're going to resell the item they're purchasing. I.e., distributors don't collect sales tax from retailers.
2. Could she possibly charge her buyers $60 for the materials (on which she herself has already paid sales tax) and then charge an additional $15 as a service fee for making the necklace, on which no sales tax needs to be collected?
1. If your wife sells each necklace for $75, of which $60 is materials, do she need to collect sales tax on the $60? She (presumably) already paid sales tax when she herself purchased the materials. I could be wrong, but I have a recollection that one needn't pay sales tax if they're going to resell the item they're purchasing. I.e., distributors don't collect sales tax from retailers.
2. Could she possibly charge her buyers $60 for the materials (on which she herself has already paid sales tax) and then charge an additional $15 as a service fee for making the necklace, on which no sales tax needs to be collected?
Re: Risk of not paying sales tax?
Same here in CT. The assessor will peruse the Super Market Bulletin board to see if any local residents are advertising services, etc for sale and if they've filed an assessment estimate for property taxes (assuming they have business equipment and/or inventory)samtex wrote:Depending where you live, the city/county appraisal district may also mail you a request to file a property tax rendition for tools, equipment and inventory. I was sent one because I have a sales tax license. Since I sell very few items within the state and do not charge tax on out of state sales, I only need to file once a year with the state. Only takes a few minutes to do it.
My rendition was so small, I haven't heard back from the county appraisal district, at least not yet. It also helps to let your inventory dwindle at the end of the year.
Samtex
Re: Risk of not paying sales tax?
CFM300 wrote:I don't know anything, but I'll throw out two ideas in the hope that someone knowledgeable responds.
1. If your wife sells each necklace for $75, of which $60 is materials, do she need to collect sales tax on the $60?
Sales tax is calculated on the final cost of the item sold by the seller. Only exceptions to this are automobiles and some other high ticket consumer goods where a cap (maximum amount) is set.
She (presumably) already paid sales tax when she herself purchased the materials. I could be wrong, but I have a recollection that one needn't pay sales tax if they're going to resell the item they're purchasing. I.e., distributors don't collect sales tax from retailers.
That aspect has already been addressed in the thread. Refer to my earlier post re: her need to apply for an exemption certificate. A merchant is not allowed to waive sales tax without recording the buyer's certificate number for the transaction.
2. Could she possibly charge her buyers $60 for the materials (on which she herself has already paid sales tax) and then charge an additional $15 as a service fee for making the necklace, on which no sales tax needs to be collected?
You can't be serious
- Epsilon Delta
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Re: Risk of not paying sales tax?
It's more complicated than that. It almost certainly varies by state / locality. I'll use California as an example since they put things on line, where I can find them.drawpoker wrote:What are the consequences for continuing to refer to this as paying the tax. The seller is collecting the sales tax, not paying. The purchaser is paying.
Paraphrasing, the seller owes (and pays) the sales tax on gross receipts and may then collect the amount of the tax from the customer (and for this purpose the reimbursement does not count as part of the gross receipts). Notice that the reimbursement is allowed but not required. This "loophole" is used by street vendors etc. that do not itemize the tax and the occasional "we pay the tax" sale event. If a business does not ask for reimbursement the customer cannot conclude that tax evasion is in progress.https://www.boe.ca.gov/pdf/pub452.pdf wrote:The seller is responsible for paying sales tax to
the BOE on their taxable transactions. A seller is
generally allowed to collect the sales tax from
you—the customer.
Business that do not ask the customer for reimbursement end up paying a slightly larger fraction of the transaction to the state.
Some other states use the rules I give here. There are almost certainly others that word it differently, some of the differences probably matter. I will add a disclaimer that some of the above may be wrong or outdated as far as CA is concerned. If you want the exact details you need to hire a lawyer or read learned articles in law or public policy publications
Re: Risk of not paying sales tax?
Oh, Jeeez, almighty. I give up.
Epsilon Delta, didn't it occur to you in plodding thru all the tedious text in the link to your BOE -
that the Land of Fruit & Nuts has again distinguished itself - duh
It all comes down to semantics.
In the case of the Calif BOE people - when they say the seller (merchant) must "pay" the sales tax - duh - they really mean the seller must "pay" the sales tax receipts to the state of Calif. At least that is what I am getting from a close read of the text.
The copy writers in the Land of Fruit and Nuts who composed the drafts for the BOE merchants' guide evidently escaped any form of editorial proof - reading.
Obviously, they meant to say: sellers must remit, not pay, the sales tax receipts to the BOE to comply with the law.
Can folks really get it all confused that much in their heads? Thinking that somehow sending off the required sales tax amounts to the state on either a monthly or quarterly basis somehow equals that they are paying the state ......
Isn't anyone applying common sense anymore when researching these type of tax questions.......
Epsilon Delta, didn't it occur to you in plodding thru all the tedious text in the link to your BOE -
that the Land of Fruit & Nuts has again distinguished itself - duh
It all comes down to semantics.
In the case of the Calif BOE people - when they say the seller (merchant) must "pay" the sales tax - duh - they really mean the seller must "pay" the sales tax receipts to the state of Calif. At least that is what I am getting from a close read of the text.
The copy writers in the Land of Fruit and Nuts who composed the drafts for the BOE merchants' guide evidently escaped any form of editorial proof - reading.
Obviously, they meant to say: sellers must remit, not pay, the sales tax receipts to the BOE to comply with the law.
Can folks really get it all confused that much in their heads? Thinking that somehow sending off the required sales tax amounts to the state on either a monthly or quarterly basis somehow equals that they are paying the state ......
Isn't anyone applying common sense anymore when researching these type of tax questions.......
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Re: Risk of not paying sales tax?
Criminals never do. I don't think you're gonna get much sympathy from others here that follow the rules and pay taxes. Why do we have to pay taxes and you don't?praxis wrote:Our state taxes food. Our farmer's markets contain non-food items too, soap, plants, duck calls, keyrings, kittens. One neighbor sells cakes from her home and another sold his lawnmower last week. I wondered if my wife's hobby made it inside anyone else's gray area. It made it inside mine. But I don't think of myself as a criminal.
Re: Risk of not paying sales tax?
For the very, very last time - May I say I am at risk to go out of my freaking mind here - go berserk as they saytoofache32 wrote:....don't think you're gonna get much sympathy from others here that follow the rules and pay taxes. Why do we have to pay taxes and you don't?
If I hear one more person refer to this as paying - the sales tax
instead of using correct terminology of remitting
the prevailing sales tax
to the appropriate entity (the state that set the existing state sales tax rate)
Would the OP kindly consider re-naming his thread. To more accurately reflect the actual question being posed -
To wit - 'Risk of not collecting and failing to remit [/b]sales tax to the state "
Thank You.
Re: Risk of not paying sales tax?
The rules and enforcement levels and the "risks" involved in not following the rules will vary significantly depending on where you live.
My wife used to have a small craft business (sounds very similar to your wife) which eventually morphed into a $40-60k per year online retail operation. I'm not an accountant or attorney, but I am familiar with what she has to follow.
Technically, yes, if you live in an area with sales tax, it must be collected. Some states do offer an exemption for "occasional sales".
For my wife, obtaining the required ID number was fairly simple. And early on, she was only required to submit her taxes once per year. As her sales increased, she had to remit more frequently throughout the year.
Keeping track of sales and taxes collected (i.e. accounting) is by far the biggest hassle.
Beyond sales tax, she, and you, BTW, are also likely liable for paying income taxes (federal, state, and local) on any profits she makes. And note that if she does file for a state tax number, you are now on the state and/or locality radar for potential profits.
And to calculate profits, costs must be established and tracked. So if you and she want to follow the letter of the law, she must bite the bullet and start some kind of formal accounting/booking.
That being said, I know many folks who sell at arts and crafts shows, farmers markets, roadside stands, flea markets, etc. Most are cash only, but some do accept credit cards. I know of only one person who was ever audited and forced to pay back taxes on such sales.
It's not too different from "cash only" handymen, pet sitters, dog walkers, hairstylists, landscapers, undocumented alien workers, etc. They are all probably breaking the law. But in some localities enforcement is lax, so many folks feel it's worth the risk to skip the taxes and accounting headaches.
I do not condone such behavior, but it is a fact of life.
My wife used to have a small craft business (sounds very similar to your wife) which eventually morphed into a $40-60k per year online retail operation. I'm not an accountant or attorney, but I am familiar with what she has to follow.
Technically, yes, if you live in an area with sales tax, it must be collected. Some states do offer an exemption for "occasional sales".
For my wife, obtaining the required ID number was fairly simple. And early on, she was only required to submit her taxes once per year. As her sales increased, she had to remit more frequently throughout the year.
Keeping track of sales and taxes collected (i.e. accounting) is by far the biggest hassle.
Beyond sales tax, she, and you, BTW, are also likely liable for paying income taxes (federal, state, and local) on any profits she makes. And note that if she does file for a state tax number, you are now on the state and/or locality radar for potential profits.
And to calculate profits, costs must be established and tracked. So if you and she want to follow the letter of the law, she must bite the bullet and start some kind of formal accounting/booking.
That being said, I know many folks who sell at arts and crafts shows, farmers markets, roadside stands, flea markets, etc. Most are cash only, but some do accept credit cards. I know of only one person who was ever audited and forced to pay back taxes on such sales.
It's not too different from "cash only" handymen, pet sitters, dog walkers, hairstylists, landscapers, undocumented alien workers, etc. They are all probably breaking the law. But in some localities enforcement is lax, so many folks feel it's worth the risk to skip the taxes and accounting headaches.
I do not condone such behavior, but it is a fact of life.
Time is what we want most, but what we use worst. William Penn
- Epsilon Delta
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Re: Risk of not paying sales tax?
Unlike you the BOE has read the law and said what they mean and mean what they say.drawpoker wrote:Oh, Jeeez, almighty. I give up.
Epsilon Delta, didn't it occur to you in plodding thru all the tedious text in the link to your BOE -
that the Land of Fruit & Nuts has again distinguished itself - duh
It all comes down to semantics.
In the case of the Calif BOE people - when they say the seller (merchant) must "pay" the sales tax - duh - they really mean the seller must "pay" the sales tax receipts to the state of Calif. At least that is what I am getting from a close read of the text.
The copy writers in the Land of Fruit and Nuts who composed the drafts for the BOE merchants' guide evidently escaped any form of editorial proof - reading.
Obviously, they meant to say: sellers must remit, not pay, the sales tax receipts to the BOE to comply with the law.
Can folks really get it all confused that much in their heads? Thinking that somehow sending off the required sales tax amounts to the state on either a monthly or quarterly basis somehow equals that they are paying the state ......
Isn't anyone applying common sense anymore when researching these type of tax questions.......
That's the text of the law, don't see how it could be much clearer. Retailer pays the tax.https://www.boe.ca.gov/lawguides/business/archive/2010/vol1/sutl/6051.html wrote: 6051. Imposition and rate of sales tax.
For the privilege of selling tangible personal property at retail a tax is hereby imposed upon all retailers at the rate of .... [ delete list of rates and dates]
Heres some discussion of the various different tax regimes.
http://www.bizfilings.com/toolkit/sbg/ ... tions.aspx
Re: Risk of not paying sales tax?
By all means pay your sales tax, or risk the Kings jail. I don't look for ways to go to jail, and you shouldn't either.
Even educators need education. And some can be hard headed to the point of needing time out.
Re: Risk of not paying sales tax?
Since you want to split hairs, I would say that the BOE "Fruits and Nuts" as you so elegantly put it are more technically right and you are wrong. "Pay" is a more general term; as you use the term "remit" it implies you first collect it. Fact is, you don't have to collect the tax but you do have to pay it whether or not you collected it. The wording makes it clear that the seller is "allowed" to collect it from the buyer yet can opt to pay it without so doing. Otherwise, using your hair-splitting terminology, a defense might be "I didn't collect it, so there's nothing to remit". You can't say "I didn't collect it, so there's nothing to pay".drawpoker wrote:Oh, Jeeez, almighty. I give up.
Epsilon Delta, didn't it occur to you in plodding thru all the tedious text in the link to your BOE -
that the Land of Fruit & Nuts has again distinguished itself - duh
It all comes down to semantics.
In the case of the Calif BOE people - when they say the seller (merchant) must "pay" the sales tax - duh - they really mean the seller must "pay" the sales tax receipts to the state of Calif. At least that is what I am getting from a close read of the text.
The copy writers in the Land of Fruit and Nuts who composed the drafts for the BOE merchants' guide evidently escaped any form of editorial proof - reading.
Obviously, they meant to say: sellers must remit, not pay, the sales tax receipts to the BOE to comply with the law.
Can folks really get it all confused that much in their heads? Thinking that somehow sending off the required sales tax amounts to the state on either a monthly or quarterly basis somehow equals that they are paying the state ......
Isn't anyone applying common sense anymore when researching these type of tax questions.......
Re: Risk of not paying sales tax?
Where I live, the vendor is responsible for paying sales tax. Most of them pass it through, that is collect it from the buyer, but the vendor is responsible. It doesn't make any difference if they collect it from the buyer or not, they are still liable for the tax.drawpoker wrote: If I am understanding you correctly, you are using the wrong terms when you say she is willing to "pay" the sales taxes.
She isn't going to be paying them, she is going to be collecting them.
Slow and steady wins the race.
Re: Risk of not paying sales tax?
You can't be serious.drawpoker wrote:Obviously, they meant to say: sellers must remit, not pay, the sales tax receipts to the BOE to comply with the law.
Re: Risk of not paying sales tax?
LOL! Merchant must pay the tax to the state. S/he may collect the tax from the customer, or include it in the total charged to the customer. Either way, a remittance is made to the State. Who collects from the seller. I'm not serious eitherCFM300 wrote:You can't be serious.drawpoker wrote:Obviously, they meant to say: sellers must remit, not pay, the sales tax receipts to the BOE to comply with the law.
Re: Risk of not paying sales tax?
This is state and local jurisdiction specific. If the business qualifies, you should start filing at least $0 sales, $0 sales tax collected from a certain period just to start the statute of limitations or they could go back unlimited years and attempt to collect the tax. Same goes for business license requirements. They really don't go after little guys but just cover your bases.
Re: Risk of not paying sales tax?
The paperwork for sales tax is probably annoying and complicated enough that for the volume she does, she just needs to give the items away. Or, she can find a retailer to sell through that will take away that hassle (and half or more of the revenue.) Then you'd just have other business income/expense reporting requirements, and really those may not be as bad, depending on your jurisdiction's requirements (I'm guessing no license is required, but I'm not sure.)
- Don Christy
- Posts: 391
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Re: Risk of not paying sales tax?
Had a thought, probably not feasible, but will throw it out there
Most places don't tax services. Could your wife be reimbursed for the cost of materials, which she could buy retail having paid sales tax on those materials, and charge for her services to make a handmade necklace?
Wouldn't this be the same as when hiring a carpenter or painter?
The state would get sales tax on your wife's purchase of materials. She would be reimbursed for this expense and sell her time as a service.
Just a thought...
Most places don't tax services. Could your wife be reimbursed for the cost of materials, which she could buy retail having paid sales tax on those materials, and charge for her services to make a handmade necklace?
Wouldn't this be the same as when hiring a carpenter or painter?
The state would get sales tax on your wife's purchase of materials. She would be reimbursed for this expense and sell her time as a service.
Just a thought...
“Speak only if it improves upon the silence." Mahatma Gandhi
Re: Risk of not paying sales tax?
Don't ask me how I know, but it's easy to not be aware of which goods and/or services require sales tax. One may wonder if starting now will trigger an audit of the past years when sales tax wasn't collected. There is a wonderful mechanism that is used by many states called a Voluntary Disclosure Agreement. If your wife discovers she should have been collecting and remitting sales tax in the past and she tells the state she wants to make things right, she is likely to be offered a VDA from the state taxing authority. A good portion of the late sales tax due may be forgiven. The state gets better compliance if they encourage cooperation rather than penalizing someone for lack of knowledge of the law. https://en.wikipedia.org/wiki/Voluntary ... _agreement
Getting right with your state sales taxing authority can be a liberating experience. Once you are right with this agency, they are just a phone call away and (in my case) willing to answer ongoing questions. They are the most appropriate place to ask questions. There are many good answers in this thread, but to have the most confidence going forward, make peace with your state agency.
Getting right with your state sales taxing authority can be a liberating experience. Once you are right with this agency, they are just a phone call away and (in my case) willing to answer ongoing questions. They are the most appropriate place to ask questions. There are many good answers in this thread, but to have the most confidence going forward, make peace with your state agency.