Monday, January 12, 2009

Charging Taxes Instead of Raising Prices

Here's a new scam that, frankly, makes sense - if you're a felon.

There was a case recently where a seller charged tax on a non-taxable service. He didn't call it "sales tax" - he just called it "tax." But he put it on the invoice where you'd typically see sales tax. And his employees used a sales tax rate card in the presence of the customer to calculate the "tax." He knew the service wasn't taxable, he was just trying to make more money. He wanted to raise his price but he couldn't because he had competition. So he decided to just start charging "tax."

The problem is that the state asked him where the money was. If you're going to charge your customers tax, even if incorrectly, then you're expected to pay the money to the state. Which, of course, kind of defeats the purpose.

The article I read did not indicate the penalties assessed by the state. I hope they were high. I wonder though, if the state took any action to get the customers, who had been illegally charged tax, their money back.

Probably not.

The moral of the story is that you need to be aware of the taxability of what you're buying. And if the seller is charging tax on something you don't think is taxable, then yell. And threaten to call the revenuers.

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