Why Is Sales Tax So Difficult?

[KristineS]

Like many businesses we collect sales tax from our customers as required by law. We also state clearly on our policies page and on our blog how to avoid being charged sales tax and even make the relevant forms available for download.

We make it as simple as possible and yet we still have people who don't grasp the procedure or who won't fill out the forms and then complain that they get charged the necessary tax.

Do people just not understand how this works? Does anyone else have this issue when it comes to sales tax?

[vangogh]

I can't speak for everyone, but not every state charges sales tax (I think sales tax is state only isn't it?) so they may not be as used to dealing with it. Also since we're talking about things on a state level the rules change depending on where you live. We're living in an age of the Internet where people expect less and less to be charged sales tax for anything.

But what's might be the biggest thing is no one wants to pay the sales tax in the first place. They could just be avoiding and complaining in the hopes of saving some money.

[dynocat]

I feel for you Kristine.

We're one of only 5 or 6 states with no sales tax. I don't envy any business that has to collect not only state but county and city sales taxes. It must be a nightmare. Some even vary by zip code.

[KristineS]

It is kind of annoying dynocat, but the more annoying part is the people who won't follow the simple steps that would allow them to legally not pay the tax. We argue with people all the time about it. In the time they spend arguing with us they could just fill out the blasted forms and then there wouldn't be any more arguing.

[bizjunkie]

Sales tax is only a state thing right now but there is talk about a VAT. While a VAT would be just added into the price - making the business account 100% for it - it will still be a cumulative sales tax.

While I agree that people don't like paying sales tax - I think KristineS's problem might have to do more with the laziness of people. They are use to just having someone else do it all for them and they expect (demand) that this continues. You are asking them to fill out forms - thus, they have to take the time to do it and think about it - when all they want to do is pay and move on.

While I don't think it should be your responsibility to do this for them, it seems to be costing you time and effort - thus, can you think about ways to make it even easier for them to get through the process?

[vangogh]

You could be right about the laziness. It might also be a little more than just laziness. Maybe some of it is the confusion around sales tax with all the different rules. Makes it easier to be lazy when you're not quite sure how to go about doing something.

[KristineS]

I think some of it is confusion, some of it is just not wanting to deal with yet more paperwork, and some of it is sheer stubbornness.

I have tried to think of ways to make it easier, but we provide links to the forms and the information as to why we charge sales tax. About the only way to make it easier would be to complete the forms for them, and I'd guess that's illegal.

[vangogh]

Are there parts of the form you could complete that wouldn't be illegal? How about showing an example form on the site with explanations for what might be confusing fields?

[Evan]

Sales tax causes a lot of issues for clients, who often miscalculate it, or don't know what exactly is taxable and non-taxable. The laws vary considerably from state-to-state. But I think restaurants or convenience stores have it the worst.

The complexity also varies by items. For example, candy is generally taxable in Rhode Island, except if it includes flour. So you can purchase a Milky Way (no flour), or Twizzlers, and it is non-taxable. Buy a Snicker's instead -- and now you're taxable.

If you go to the deli, and they have some hot lasagna they just made -- it's subject to sales tax. You go the next day and the same lasagna is there, except it's cold -- it's non-taxable. You return on day three for another slice of the lasagna, except it is already heated, it's now taxable again.

For breakfast, if you go to a bagel shop and get an uncut bagel and it's not toasted -- assuming there aren't any utensils available, it's not taxable in RI. But if they give you utensils, or if they're readily available, it's taxable in RI.

Very confusing stuff, never mind reporting it. Sales tax audits are also messy, mainly because it is a "Sales and Use Tax". Now if I purchased items in Massachusetts for 6%, and didn't pay use tax for 1% (to make 7% in RI), OR if I bought stuff online and paid NO tax, they will wonder why I paid no "Use Tax". They will add all of this stuff up, and subject you to interest and penalties.

[KristineS]

Good Lord, Evan, I didn't know it was that confusing! That is some weird stuff. Who really sat down and figured out that the temperature of the lasagna would make a difference in whether or not something was taxed.

I know it is confusing for our customers and I do understand their frustration. I'm just out of ideas as to what to do other than what we're already doing. I suppose we could go into more detail about why we charge sales tax in the states where we charge it, but most people don't read the explanation we have now, so I doubt they'd read additional information.