Scam Profits

It's no secret that I despise most taxes of all kinds, including sales taxes, because they are used by our rulers to confiscate wealth from the little people and use for their dastardly projects.

As low as I consider tax and spend politicians to be, you can only imagine the level of disgust I have for people who use the tax laws as a means of stealing from the people to line their own pockets. I am specifically alluding to a scheme I have seen on a number of occasions that came up in a question I answered earlier today on AskMe.com.

The person submitting the question had been shopping at a store where things were marked down. He bought something for a big discount off the normal retail price, $25 instead of $200. When he was checking out, he was charged sales tax on the full retail price, not the actual price he paid. The store manager told him that was required.

My response to this is that the store manger is either an ignoramus or a thief. My guess is the latter. When he fills in his monthly sales tax reports for the State, he reports the actual sales made during the month at the actual prices paid by the customers. He calculates the appropriate sales tax on the actual sales volume and sends it to the State tax collector. What happens to the additional taxes that were collected by the store manager based on the inflated retail prices? I doubt that it's going to charity.

While the original questioner had only been overcharged by about $10.50 ($12.00 instead of the actual tax of $1.50), you can only imagine how much the grand total would be for all of the store's customers.

This kinds of thing happens quite often in another way. I buy almost everything over the Internet or from mail order catalogs. If the company doesn't have a store or other physical facility inside this state, they are not supposed to be charging sales tax. Often times, they do add sales tax to their invoices when they aren't supposed to. The impression most customers have is that that money will be passed on to their state just as their local merchants do. The truth is that those out of state vendors don't do any such thing and just keep that money. It's another source of bonus money, just like the outrageous shipping & handling charges many vendors add to bills.

What to do about it? Depending on my mood at the time and the amount of money involved, I have notified several out of state vendors that they were improperly assessing me sales taxes. About 75% of them adjusted their invoices accordingly. I have no idea if they stopped charging other out of state customers for sales taxes, but my guess is that they weren't about to kill a cash cow just because one person caught on. With the other 25% of the vendors, who refused to remove the sales tax charges, I forwarded the info to our state tax agency. I haven't heard how all of the cases turned out; but in some of them, the vendors were nailed with some hefty charges for years of unremitted taxes and penalties.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 10/06/2002 06:37:00 PM Send this post: