Anonymous Poster
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- Sep 27, 2005
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Do you mean that because I'm primarily a Florida resident, I should be able to escape sales tax in NC for the things I buy there, take possession of there, and use there, and never bring back to Florida? Don't think so.
Also, as far as business exemptions are concerned, that is only for things which are legitimately for resale, and for which you will collect the sales tax when you sell it. Anything you buy for your own use, whether personally or for the business, you must pay the tax when you buy it, or you must pay the tax when you remove it from your inventory for use.
Example - I was/am in the bbq grill business (the confusion is because I'm temporarily retired; have to wait until my property is developed to see whether retirement will "stick" or whether I will get bored and start using my expertise again). I buy a pallet load of lump charcoal for resale. I use my exemption and pay no sales tax when I buy it. Each time I sell a bag, I collect the sales tax and remit it to the state. However, I withdraw a bag from inventory and use it for a cooking demonstration. What I have to do is "sell" it to myself, and pay the tax. I can sell it to myself for my cost, and pay just the tax on that, because the state has no say in the price I charge. But, I have to pay something, and the legitimate amount is on the price I paid for the product.
And, in my day to day business, I did just that, for several reasons. First, turning it into a "sale" to myself removed the item from my inventory, decreased the dollar amount of my inventory, and increased the dollar amount of my advertising expense. My books are straight. Second, if (and most likely when) I am audited by the Dept. of Revenue, I don't have to account for the missing bag of charcoal - or whatever else I used. Without this accounting, the Dept of Revenue could accuse me of making a cash sale and pocketing the sales tax amount, in effect stealing from the state, and I wouldn't be able to prove that I didn't. They throw folks in jail for that.
Sure, in the example I gave above, I could probably get away with a little bit like occasional bags of charcoal. I could claim it got wet and I threw it out (but I accounted for things like that, also, in order to write off the loss); I could claim it was shoplifted; I could claim mysterious disappearance. But, if the amounts come to any sizeable total, I would be in trouble two ways - my books wouldn't be an accurate reflection of my business, and I could be in serious trouble with the "revenooers".
The one way to take stuff out of resale inventory and not pay tax on it is to give it away. Items thrown in as an incentive to purchase, items given to charity for door prizes, etc. But, we still ran them through the register as a no-charge in order to remove them from the inventory and apply the cost as an expense of the sale or as a donation.
Before anyone says I am/was too **** about this, I should tell you that one of my best employees was a former business owner who spent 8 months of a 2 year sentence in jail, 3 months on work release with me, and the rest of his life (he passed away last July, a broken - and broke - man) on probation until he finished the impossible task of making restitution for the sales tax "finagles" he had done improperly. Not a penny of this went into his pockets, all of it went to pay the costs of his business, which was not doing well, and he always intended to "catch up" some day. But, the Dept. of Revenue properly determined that they did not have the role of making business "investments". He ended up being my most scrupulous employee because he had truly "learned his lesson", and I was fortunate to learn vicariously from him.
Sooner or later the loopholes in interstate sales are going to be closed, and I will applaud the day they are, because internet sales have an automatic 10% to 20% (depending on the local tax rate) advantage over the traditional "bricks and mortar" retailer, who absorbs the cost of incoming freight and must charge the sales tax -- and that's not counting the overhead differences.
Until then, and because my Momma didn't raise any fools, if and when I get back into business it will be primarily through internet sales...little overhead, little to no inventory carrying costs, no sales tax, the buyer pays the freight, and no service after the sale. You put money in your pocket for selling a product you never see (drop shipped from the distributor) to a customer you never meet.
Sorry for wandering a bit off the topic, but one thing led to another...
Also, as far as business exemptions are concerned, that is only for things which are legitimately for resale, and for which you will collect the sales tax when you sell it. Anything you buy for your own use, whether personally or for the business, you must pay the tax when you buy it, or you must pay the tax when you remove it from your inventory for use.
Example - I was/am in the bbq grill business (the confusion is because I'm temporarily retired; have to wait until my property is developed to see whether retirement will "stick" or whether I will get bored and start using my expertise again). I buy a pallet load of lump charcoal for resale. I use my exemption and pay no sales tax when I buy it. Each time I sell a bag, I collect the sales tax and remit it to the state. However, I withdraw a bag from inventory and use it for a cooking demonstration. What I have to do is "sell" it to myself, and pay the tax. I can sell it to myself for my cost, and pay just the tax on that, because the state has no say in the price I charge. But, I have to pay something, and the legitimate amount is on the price I paid for the product.
And, in my day to day business, I did just that, for several reasons. First, turning it into a "sale" to myself removed the item from my inventory, decreased the dollar amount of my inventory, and increased the dollar amount of my advertising expense. My books are straight. Second, if (and most likely when) I am audited by the Dept. of Revenue, I don't have to account for the missing bag of charcoal - or whatever else I used. Without this accounting, the Dept of Revenue could accuse me of making a cash sale and pocketing the sales tax amount, in effect stealing from the state, and I wouldn't be able to prove that I didn't. They throw folks in jail for that.
Sure, in the example I gave above, I could probably get away with a little bit like occasional bags of charcoal. I could claim it got wet and I threw it out (but I accounted for things like that, also, in order to write off the loss); I could claim it was shoplifted; I could claim mysterious disappearance. But, if the amounts come to any sizeable total, I would be in trouble two ways - my books wouldn't be an accurate reflection of my business, and I could be in serious trouble with the "revenooers".
The one way to take stuff out of resale inventory and not pay tax on it is to give it away. Items thrown in as an incentive to purchase, items given to charity for door prizes, etc. But, we still ran them through the register as a no-charge in order to remove them from the inventory and apply the cost as an expense of the sale or as a donation.
Before anyone says I am/was too **** about this, I should tell you that one of my best employees was a former business owner who spent 8 months of a 2 year sentence in jail, 3 months on work release with me, and the rest of his life (he passed away last July, a broken - and broke - man) on probation until he finished the impossible task of making restitution for the sales tax "finagles" he had done improperly. Not a penny of this went into his pockets, all of it went to pay the costs of his business, which was not doing well, and he always intended to "catch up" some day. But, the Dept. of Revenue properly determined that they did not have the role of making business "investments". He ended up being my most scrupulous employee because he had truly "learned his lesson", and I was fortunate to learn vicariously from him.
Sooner or later the loopholes in interstate sales are going to be closed, and I will applaud the day they are, because internet sales have an automatic 10% to 20% (depending on the local tax rate) advantage over the traditional "bricks and mortar" retailer, who absorbs the cost of incoming freight and must charge the sales tax -- and that's not counting the overhead differences.
Until then, and because my Momma didn't raise any fools, if and when I get back into business it will be primarily through internet sales...little overhead, little to no inventory carrying costs, no sales tax, the buyer pays the freight, and no service after the sale. You put money in your pocket for selling a product you never see (drop shipped from the distributor) to a customer you never meet.
Sorry for wandering a bit off the topic, but one thing led to another...
