Am I obliged to be the "Re-Sale Police"?

[Meghan MacMillan]

Do others of you have clients who offer their daughter's, sister's, neighbor's resale numbers simply to avoid paying sales tax? Do I point out that this is an inappropriate use? What happens if hte company I work for is audited? I have a signed form with a valid number.

If I tell this particular client I won't accept it because I suspect the items are not for resale she will likely cancel her $1200 order.

Is this in fact an ethical dilemma, or is my boyfriend correct when he says, "Man, you just look for stuff to worry about, don't you?"?

[fttom]

Meghan, I don't know about NY, but in GA, this is illegal, and both of you could be fined, and do jail time. Think on that. :(

[Meghan MacMillan]

Yikes. I'll be awake all night! I was raised to be law abiding and have done pretty well on that front so far.

[Framerguy]

Meghan,

In Illinois, we are required to have on file a copy of the resale certificate of all customers that are buying framing for resale before we can legally sell to them without charging sales tax. If we don't, then WE pay the sales tax for them!

In addition, we must have a copy of all exemption certificates that are used by churches and non-profit organizations for tax purposes.

If you required a copy of this certificate be filed with your company, that might minimize the "double dipping" on the numbers.

Framerguy

[Bob Carter]

Meghan-Sleep easy tonight. If you have fulfilled the paper work, at worst, you are liable for the tax.

This is a lot like the scare tactics of framers getting sued for the slightest of improper framing. Possible? Maybe. Probable? Highly doubtful

Keep a properly filled out exemption form on record to cover your backside. Or if the ethics Nazis get the best of you, decline the sale.

As for me, I would accept the exemption form on face value and let the taxing authorities sort it out in case of fraud. Just look them straight in the eye and ask "This is for re-sale, correct?"

[Meghan MacMillan]

I'm gonna end up with an ulcer over this. THroughout my career there have always been "designers" who were just women who had paid the $25 fee to obtain a resale number so they could not pay the tax. My employers have always said essentially that it is only our responsibility to keep the proper records showing why we didn't collect the tax, not to follow them home and see what happens to the art.

This particular sale today was a similar case it just rubbed me the wrong way and prompted me to post.

I can't imagine it would be good for business if I rat her out.

One, and only one of the companies I worked for, required 3 trade references to give the designer discount and not pay tax.

[fttom]

Meghan, your last post is pretty much the way we handle it here, but we also have to have a copy of the certificate like Bob said. Each state is different. Here, all you have to do to get a number is fill out a form, and mail it in. Presto Chango back comes your certificate in the mail, and your form to fill out every quarter. As long as they get that check from you every quarter, they don't care where you collect the tax from! If it is a good customer, forget it. If it is a sometimes customer, or a PIA customer, ask for a copy of her certificate. Tell her that you have to have one on file in case you're audited. That way, you're rear is covered in case you are. And get a good night's sleep. There are too many other things to keep us up. (I've got to recut that danged multi-opening mat in the morning. I made one of the openings too big. :( tongue.gif )

[Ron Eggers]

Yes, you are obliged to be the resale-police.

At least in Wisconsin, even the legitimate holder of a seller's permit can only avoid sales tax on items which are actually for resale and for which they will be collecting, reporting and paying the sales tax. The process is so arduous that some artists who would certainly be entitled to hold a seller's permit don't bother. They'd rather just pay the tax on their materials.

I don't believe I've ever had someone try to use someone else's tax number.

[Rick Bergeron - CPF]

Megan,

Listen to Bob and sleep well tonight. We had a similar issue here in Idaho. The state tax officials told us that Idaho considers a copy of the state form claiming tax exempt status signed by the purchaser a legal affidavit and the person signing was the one who would be in trouble for making false statements regarding the exemption. ie: We are specifically not the re-sale tax police. AND we specifically cannot ask for a copy of the resale certificate, only the signed affidavit.

You could probably clear things up with a quick call to your state tax commission.

[Meghan MacMillan]

Veering shamelessly off topic

Originally posted by fttom:
(I've got to recut that danged multi-opening mat in the morning. I made one of the openings too big. :( tongue.gif )Just cut a tiny second mat for that one opening and tell the client that photo was so special you thought it should be emphasized. . .no extra charge. ;) ;)

Back to my tax cheat - thanks for the replies. I guess people can justify anything to themselves. It would be one thing if she were absolutely sure she never used even one of the serviced paid for by state sales tax, but how is that possible?

Anyway, I expect I'll sleep okay tonight. The paperwork is in order.

[fttom]

Thanks for the suggestion, Meghan, but I also had to put captions under the openings, and managed to mess them up, as well, so I've got to redo the whole thing in the morning. I knew better than to do it this afternoon, when I was tired. I hate to do multi-openings, and just put it off, until I couldn't justify putting it off any longer. Now, I've got to do it over. I've been doing this long enough, that I know better, so I have no one to blame but myself. :(

[David N Waldmann]

I agree with Rick - talk to the NYS tax commision, or look at the booklet they no doubt included with the resale certificate.

In Vermont our law specifically says "You will only be held liable for the tax if you fail to obtain a completed exemption certificate from your customer or if you have reason to know that the information contained on the certificate is false or misleading."

Knowing how much these kind of laws vary I would only be comfortable after I found out exactly what the ones governing me were.

[Marc Lizer]

Having been audited by the Franschise Tax Board (TWICE!!!) I have some kernels too add.

But I'm gonna hang back a bit an watch the entertainment first.

[ERIC]

Okay, it’s certainly the case that the laws are different in every state , so lets get specific to the question raised – New York State. (oh, and Meghan, it’s good news for you! so get some sleep smile.gif )

New York State Dept. of Tax & Finance, “Resale Certificate” form ST-120 reads : “ I, the purchaser, understand that: I may not use this certificate to purchase items or services that are not for resale. . . . . I will incur tax liabilities, in addition to penalty and interest, for any misuse of this certificate.” They then sign below that statement.

Publication 750 “Guide to Sales Tax . .” pg 18 reads : Any person who issues a false or fraudulent resale or other exemption document with the intent to evade tax is subject to a penalty of 100% of the tax evaded, plus a penalty of $50 for each false or fraudulent document issued.” In the book I found nothing that sounded like what Vermont law has where you had to 'know' the intent of the purchaser.

Are you having the customer sign a form ST-120 in front of you? I made up copies with my part filled out and just tell them to read and sign it.

You are obligated to collect tax on taxable transactions. They get permission to not pay the tax. It’s between the purchaser and the State. The exception to that would be if you were involved (benefited financially?) in the fraudulant activity. And I would think that in an audit situation, that would be part of what they are looking for patterns of. ( Marc - twice? Ouch, it must be that entertainment crowd that you have for a client base. tongue.gif )

For more authoritative info try here too NYS Tax Dept (http://www.tax.state.ny.us)

[rosetl]

Sales tax audits are pretty common out here in sunny CA and I've heard that Every account is reviewed once every three years....and some get audited that much. And, as in any audit, it depends on how much a PIA the auditor wants to be and also, like any other government audit, they prefer to find something wrong.