What should I be doing about buyers who ignore my email about including sales tax if they are in my state? In my email I give the total, plus the amount they owe for the tax. Lately folks just ignore the tax part and send enough for the total with shipping.
Am I supposed to pay the state the correct amount anyway, even if I didn't collect it from the customer? In which case do I write it off as a business expense?
I'm not inclined to refuse to ship over 20 cents or whatever, but I am not sure if I owe the tax to the state even if uncollected.
posted on April 25, 2001 05:58:51 PM
Your state revenue department likely has a web site with that information. It might vary from state-to-state, but I know in my state, if my customer doesn't pay up, I have to.
posted on April 25, 2001 06:00:57 PM
We had a big hoorah about this several months ago when someone started a thread where a seller was coming back & asking them about paying tax which they hadn't collected.
posted on April 25, 2001 06:05:11 PM
Perhaps I'm wrong and somebody please correct me if so. But I thought you didn't have to remit sales tax on in-state purchases if you're selling used items or if you pay the sales tax yourself on new items. After all, if I'm selling a used book, the original purchaser already paid the sales tax on it, right? http://bjgrolle.freehomepage.com
posted on April 25, 2001 06:36:46 PM
You owe sales tax on any purchase sold by a sales tax license holder. The seller can absorb the cost though, but if you forget to charge the wrong person you WILL get audited.
"In pioneer days they used oxenfor heavy pulling, and when one ox couldn't budge a log, they didn't try to grow a larger ox. We shouldn't be trying for bigger computers, but for more systems of computers." - Grace Hopper
posted on April 25, 2001 09:35:27 PM
I have a CA reseller's permit (sales tax certificate/ID is another name for it.) I am required to remit sales tax for ALL sales I make within the state of California, whether it's on used merchandise or new. I also have to remit the tax whether or not I charged the customer tax. Last year, for example, I did not charge sales tax to my customers (too many hassles for a relatively small amount) but I knew that when sales tax time (Jan 31) rolled around, I'd be writing a check to the Board of Equalization. And sure enough, I owed a total of about $20 in sales tax (most of my california sales are small and they make up a relatively small total of my sales, is the reason for the small number.) So I didn't charge the customers, but I paid the tax myself. The BOE has told me in the past that I will not be penalized for not collecting from the customer as long as I pay the tax myself at the end of the fiscal year.
If you buy in order to sell for resale, you really must have a reseller's permit to be legal in CA, from what research I have done. they are incredibly easy to get and free for small businesses (larger ones may need to put up an amount of $ equal to the first year's taxes, in some cases).
The majority of wholesalers I have worked with have required me to show a copy of my permit.
Note that a permit for sales has nothing whatsoever to do with a business license. Business licensing in Cali is handled through each individual city whereas sales permits are handled through the state.
posted on April 25, 2001 10:21:57 PM
(My thoughts coming from Washington State)
"But I thought you didn't have to remit sales tax on in-state purchases if you're selling used items" If that were the case, we'd all be furnishing with antiques! Food is not taxable in WA state (used or otherwise ) but everything else is.
"...or if you pay the sales tax yourself on new items. In WA, you always charge sales tax (unless selling to another dealer who has a resale certificate). If you happened to have paid sales tax on the item yourself (e.g., bought it at Goodwill) and there was "no intervening personal use" you can deduct that tax when remitting the collected sales tax back to the state.
The penalties in WA are very severe for someone who does not collect sales tax on retail sales. If I don't get a signed resale form with my WA bidder's payment, the item doesn't get shipped, period. The only exception would be if I had made such a huge profit that I felt like giving them an 8.2% discount by paying the tax out of my own pocket. Fat Chance!
posted on April 25, 2001 11:27:09 PM
When your buyer stiffs you on the sales tax, you can either hold shipment until he pays it, or let him off the hook for it....but you STILL have to turn in the applicable tax to your state, whether it comes out of the buyer's pocket or YOURS. Many state taxing authorities are worse than the IRS about getting their money.
You have to turn in tax on all used merchandise you sell to in-state non-exemption holders, regardless how much tax was collected in previous sale(s) of the item. If you've ever bought a used car (for use, not resale), you had to pay sales tax on your purchase price, though the seller may have paid sales tax when HE bought it new (or used) a couple years earlier, and other previous owners may have paid sales tax on it. It's one of the rip-offs of our tax system.
When I pay tax on things I buy for resale (from stores that won't honor exemption certificates), I find it easiest to just include the tax in my cost.
posted on April 26, 2001 04:15:06 AM
"What should I be doing about buyers who ignore my email about including sales tax if they are in my state?"
I deposit the payment. When they email asking why they have not received their item, I tell them there is a balance due for the sales tax that was noted in the auction description and included in the winning email notice.
I assume you are noting the sales tax in the auction description. If not, then the buyer would have a legitimate reason for ignoring the sales tax in your winning email notice.
posted on April 26, 2001 06:04:51 AM
I'm going to have to check into this a bit further.
I started out selling used books from my personal collection a year ago. I then started buying books for resale, primarily from garage sales and library book sales. It honestly never occurred to me that I would need to charge in-state customers sales tax on used books that I'd bought at these types of sales. Also, when I've sold new merchandise, I've bought the stuff at the deeply-discounted retail level, not from wholesalers. So again, I didn't need a reseller's license to buy the stuff and I, as the customer, was paying the sales tax.
I've shipped out over 700 packages in the last year and probably no more than 10, maybe fewer were within my state, Ohio. And once the transaction is a done deal, I delete all the emails and other relevant info from my computer just to keep it easier to find the info I need for my more recent sales. All financial info. is put into my financial software for tax time in April. And, of course, that info. is backed up by my bank deposits.
Seems to me that collecting and remitting sales tax on in-state purchases has to be somewhat on the honor system. Since eBay doesn't keep the info in their database, doesn't the state have to take you at your word regarding in-state sales?
Well, I'm off to see what I can find out from the state of Ohio website.
posted on April 26, 2001 06:55:47 AM
You have to collect even on books,the items I sell range from 200 to 2000 years old and we have to collect on all in State sales.
Its a major pain as you have to find out what county they are in and remit based on the county.
Though we charge 6% sales tax for Florida some counties are as low as say 5% and others as high as 7%.
Its about a 50/50 ratio that pay,those that do not eat it first time around but not the next.
We submit quarterly and last quarter we sent 70.00 so over the course of a year we send a few hundred dollars.
posted on April 26, 2001 07:08:16 AM
Well, I just got off the phone with a really nice lady from the State of Ohio Dept. of Taxation. She said that if you're selling online, you have to collect sales tax regardless of if the item was purchased used or new, or if it was purchased specifically for resale or if it's something you don't need anymore and are trying to get rid of.
I said, "You mean even when I sell the clothes my kids have outgrown, I have to collect sales tax?" The answer was yes.
Well, I've printed out the form for a delivery vendor's license and will be mailing it in promptly.
The good news is that I have so few in-state sales, I'll qualify to only file semi-annually. And I'll get to stop paying sales tax when I purchase new items for resale. (She said no retailer or wholesaler can refuse to honor them.) And I'll be able to buy from wholesaler who require a resale number.
This might turn out to be a very good thing.
How do you document what sales are in-state? I figure I'll just create a separate category in Money for when I need to file. If I print out the relevant emails or keep the relevant snail mail, is that sufficient to document my Ohio sales should I need to provide proof? (I'm talking just the in-state mail, not the mail for every sale.)
posted on April 26, 2001 08:10:37 AM
BjGrolle: I went through much the same process as you a few years ago, and it was a surprise, yes, but as you're finding out, state sales tax is really no big deal in terms of the footwork. Even the paperwork is, in my experience, much simpler than a income tax return. (Note to imabrit: don't you have to only pay the variances in county tax when you have a presence in those counties? My understanding of the california reg's is that i only pay the county by county taxes in the zone I, as a home business, actually have a presence in (that is, my home county). just something to talk over with your tax advisor, because I am wondering now if I have been doing it wrong or if FL is once again just darn wacky.)
I know a lot of people feel that the term 'business' doesn't apply to them, but state sales tax board don't have the same types of determination policies that the IRS does. In California, if you're selling something, new, used, antique, one-time, many times, mail order, in person or internet, you are supposed to remit your sales taxes. Many people do not know this but not knowing will not protect you.
and to whoever asked, yes it is mainly the honor system but have you ever been in trouble with the BOE? I haven't but from the stories i have heard I do not ever want to be. they move a lot faster than the IRS.
posted on April 26, 2001 09:08:29 AM
It's not just a Florida thing.
I'm looking at the delivery vendor form I have to fill out and it states:
Delivery vendors will be required to collect tax based on the rate in effect in the county the goods or services are delivered to the consumer.
So it's an Ohio thing, too.
Since I do so few Ohio sales, my paperwork will be minor at best and the extra recordkeeping won't be too much hassle.
I'm still wondering how the state will nail those who don't comply. A person can simply say, hey, I haven't had any in-state sales and how is their state government to prove otherwise?
Anyway, I'm going to go by the book on this one and mail the darn thing in with my application fee tomorrow.
posted on April 26, 2001 11:45:13 AM
In order to minimize the sales tax bite (since i have no desire to deal with customers over it) I have my auctions end at times that are most appealing to East coast bidders. By doing this, I end too early for most bidders from Calif. and this keeps my tax burden low. although if they do win, I certainly treat them exactly the same. Buy It Now has increased my number of Calif. buyers, though---I will probably have to pay more sales tax this year due to it.
I will check out the county by county thing---does anyone else who lives in CA have any comments on that? What a pain in the butt that will be, considering how many counties we have. I sincerely hope it's just my home county not everywhere I send packages. It's not the money, it's the aggravation!!
posted on April 26, 2001 01:07:13 PM
Just to fill in the blanks of my original post, I do note in every auction the sales tax rate for Virginia buyers, so it's not a "surprise!" when they get my winner's email. I expect some people just overlook it. I get maybe 1-5 in-state buyers a month, and file monthly. I suspected I have to pay it irregardless of whether *I* am paid, but wondered how the rest of you deal with it. thanks!
posted on April 26, 2001 01:20:15 PM
I wind up "eating" the 6% sales tax when the relatively few in-state buyers I have conveniently "forget" to pay the tax or send me an exempt certificate. Yeah, the sales tax people move fast. They recently closed and boarded up a few businesses around here, and slapped a big sign on the front door that the business owners had failed to remit sales tax. I don't mess with those folks for the $20 to $40 dollars per quarter I have to remit.
posted on April 26, 2001 01:43:35 PM
I've found most buyers quite esasy to deal with on this subject. If sales tax is forgotton, 9 times out of 10 it was just an oversight. It was not intentionally withheld.
If a payment arrives to us without sales tax, I ship the goods and send a polite request asking the buyer to forward the sales tax that was owed on the purchase and not included in the original payment. Most say "sorry" and forward the funds immediately. For the handful of others, I simply cover the cost of the tax myself.
posted on April 26, 2001 04:05:05 PM
My state caught an acquaintance of mine for sales tax. On his state income tax returns he had taken home office deductions. The state then audited him and figured out that he was not collecting sales tax on in-state sales.
His fine was much bigger than the small payment he would have needed to make.
posted on April 26, 2001 05:08:55 PM
There are many savvy buyers who know that if they don't send sales tax, many amateur sellers won't notice or won't bother.
We don't ship the item plus charge a $1 fee to collect the sales tax seperately.
posted on April 26, 2001 11:12:06 PM
brighid868:
"I will check out the county by county thing---does anyone else who lives in CA have any comments on that?"
I have been told to pay only what is due in my CA county so it doesn't matter where my customer lives in CA! That makes it nice and simple.
posted on April 26, 2001 11:34:40 PM
gaylene: well, we may have earthquakes, riots, draughts and electricity problems, but that's ONE thing this California girl can be thankful for. thanks for the info. I'll double check it next year with my tax guy, but I think you're correct.
posted on April 27, 2001 12:43:21 AM
In Texas you're supposed to turn in sales tax itemized for each county you sell to. My brother, who does remodeling in several counties and turns in A LOT of tax quarterly, has to break it down by city/county/state/special levy--like .05% transportation or stadium funding. I collect so little sales tax from in-state internet sales, I just turn in the 8.25% charged locally, on an annual basis, and don't break it down.
You're also supposed to get a temporary tax certificate to have a garage or yard sale here, though no one does. At the first garage sale I ever had (in 1976), the first people to show up were two men from the state comptroller's office, asking to see my sales tax permit.
I know of a restaurant that was pocketing some of the sales tax they collected. The comptroller's office sent spies in to eat there and estimate the restaurant's daily receipts. When it was determined the restaurant was pocketing sales tax, it was closed down for a year and paid VERY high fines. The owner was threatened with prosecution and jail time.
You're right that it's basically an "honor system", but you don't want to mess with tax people---that's why you NEVER claim deductions for a home office (even if your WHOLE HOUSE is overrun with your business), and you turn in sales tax for everything you should.
posted on April 28, 2001 08:52:08 AMTexas sales tax is collected at the rate of the county you have a location in. We just moved out of the state, but sold via internet and at antique shows in Texas prior to the move.
When we sold something via internet, we had to collect the sales tax for our county on those sales. It didn't matter what county we were shipping the package to.
When we would GO to a show in a different county, for example Canton's 1st Monday Trade Days, we had to collect the sales tax for that county because we were physically there for the sale.
This is the info we received from the state when we first received our sales tax permit and verified since starting internet sales.
We lived in Ohio a number of years ago before internet sales days. Again, we would GO to shows in different counties and were required to collect tax at the rate for that county. We did sell a bit through trade newspapers, but I believe we were only required to collect tax at our county's rate not the ship to county. Also, we had a sales tax permit, not a delivery vendor license/permit. You may want to verify the info you were given. Things may be different now, but I would think you'd still need just a sales tax license. The Ohio license cost us $100, but I don't remember the renewal fee.
We had an acquaintance in Texas get audited for sales tax. They said it was worse than an IRS audit. Keep good records and ALWAYS get a COMPLETED exemption form from other vendors when you sell to them for resale. The folks who were audited said they were responsible for the tax even if they had the form, but the purchasers sales tax permit was for plumbing supplies not antiques for resale. Sometimes folks use their normal business permit to get out of the tax for items outside their business. I still don't understand how a seller can be responsible for a buyers dishonest assertions on a resale form. Maybe I misunderstood what was told to me.
As far as records go - we keep a hard copy of the EOA email we send, buyers address email and postal receipt showing where the package was mailed to. All is stapled together and kept for a few years. If you ship via ups or fedex, I would imagine a copy of the shipping log would suffice as proof as long as you have the back-up info for each shipment.
Hope this helps.
Rebecca
By the way, we always included a note in the actual auction listing stating Texas residents were required to add sales tax or supply a completed resale form. We would include the rate for our county and put the note in its own paragraph so it would stand out from the rest of the listing info. Our EOA email would also list total charges and then total charges with sales tax if applicable. We found it best to put the amounts due in table form:
auction price $
shipping/ins $
total due $
Texas tax $ if applicable
Total due w/tax $
=========
The info seems to get lost in the paragraph if it isn't set apart. Good luck!
[ edited by rbowen on Apr 28, 2001 09:00 AM ]
posted on April 28, 2001 07:25:17 PMWe lived in Ohio a number of years ago before internet sales days. Again, we would GO to shows in different counties and were required to collect tax at the rate for that county. We did sell a bit through trade newspapers, but I believe we were only required to collect tax at our county's rate not the ship to county. Also, we had a sales tax permit, not a delivery vendor license/permit. You may want to verify the info you were given. Things may be different now, but I would think you'd still need just a sales tax license. The Ohio license cost us $100, but I don't remember the renewal fee.
I don't know what the sales tax permit is that you're talking about. But they told me that the delivery vendor license is applicable when you're selling online. When you sell in different locations, like shows as you mentioned, that's a transient vendor's license. So it would seem that they've changed things since you lived in Ohio.
Thanks for the tips on the recordkeeping. I forgot about my postal receipts showing the city and state the shipment went to. That should be sufficient and I can keep the relevant hard copies for Ohio sales as well. I don't want to print out and/or keep hard copies for each sale though. It would create quite a storage problem for me.
Food is not taxable in WA state (used or otherwise 