Monday, December 14, 2009

Are Your Vendors Stealing Sales Taxes?

This article from is long on fluff, but has a good core point to make. Are your vendors, who you're paying sales tax and/or use tax, actually remitting that money to the state?

Remember, if they're not paying over those taxes, they're ripping you off, as well as the state. You may be off the hook for the taxes (maybe not, it depends on the state*), but why should you pay that extra 8 percent or so just to line the vendor's pocket. It would be nice if that money actually went to the state, where it kinda sorta actually benefits you.

So what can you do?

The article notes that if the seller doesn't ring up the sale or give you a receipt, it's a red flag that they're not reporting the sale, or the tax. If you want to make someone miserable, and you're assertive, raise the issue right there and ask for a receipt. This would require them to ring it up, and the tax will probably get reported. Unless of course, their "cash register doesn't work right now." This really won't solve the problem unless everybody does it...which they won't. What to do? The state relies on tips from consumers - if you catch my drift.

And as I've recommended in my seminars for a long time, it's not a bad idea to ask the vendor for a copy of the permit or license they received from the state when they registered to collect sales and use taxes. It's not a guarantee they're report the income, but at least you know they're on the state's list. This is particularly important for vendors from outside the state that are charging you tax on shipments into your state. And you might want to make sure you do it for in-state vendors who you use a lot, and are kind of small or new operations.

In some states, the vendor is actually required to post their permit by the cash register. Next time you shop, try freaking out the poor clerk by actually carefully inspecting it.

But the best course, and the one your state would probably prefer, in the spirit of the season, is to tell the sheriff 'bout those law-breakin' varmints.

Sales Tax Guy

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*In some states, the buyer's liability for paying either sales tax or use tax isn't extinguished until the seller actually pays the tax to the state. Didn't know that did ya? In other states, the buyer only needs a receipt showing tax to be off the hook. But you need to check.

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