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Archive for Tuesday, September 5, 2006

Wedding photographer’s self-audit results in ‘very unreasonable’ $2,000 bill

September 5, 2006

Lawrence photographer Monte Mace received an unpleasant notice when he returned from vacation this summer.

It was from the Kansas Department of Revenue, demanding that he conduct a self-audit of business purchases over the past three years.

The purpose of the audit was to figure out how much tax Mace owed for equipment he bought from out-of-state companies.

The final amount came to approximately $2,000, though there is some disagreement on that number.

Mace said he is steamed about the whole situation.

"I think it's very unreasonable," Mace said. "We already pay thousands in sales tax on items that are sold to my clients such as photography, wedding albums, etc."

Mace's experience is one of many that has caused a national debate over collecting taxes on items purchased out of state now that Internet shopping has become more routine.

But while the modern computer age has increased out-of-state purchasing, the tax Mace owes is governed by a law dating back to the Great Depression when the state sales tax was established, according to Kansas Secretary of Revenue Joan Wagnon.

Photo by Mike Yoder

Wedding photographer Monte Mace reviews some of his work at his home studio. Mace received a notice from the Kansas Department of Revenue ordering him to pay sales tax for purchases he has made over the Internet. Mace said he orders photo albums and most of his photo gear on the Internet.

"The use tax was enacted in the late 1930s," Wagnon said. "It was put there to protect Kansas businesses. You don't want to set up a situation where it is cheaper to buy out of state."

Mace said he buys much of his specialized equipment from a company in New York because it isn't available anywhere else. The company doesn't charge sales tax.

But under Kansas law, those kinds of purchases must be taxed, Wagnon said.

Mace also said he thought the letter demanding a self-audit was somewhat threatening, and he hoped that the revenue agency was treating all industry groups consistently.

He said there is no way he can contest the tax bill because he is too busy running his business.

"It seems to me they want an additional pound of flesh," he said.

But Wagnon said having businesses audit themselves is less confrontational than if the agency did the audit.

"They have been incredibly useful," she said of the self-audits. "It educates people on the law, and it allows them to do it without harassing them."

Wagnon said the self-audits have been going on for three years and have generated $3 million in tax revenues. She said the agency sends out self-audit notices from industry group to industry group.

And while she didn't know anything specifically about Mace's case, she said the agency is always willing to work with taxpayers on payment plans.

Wagnon said collection of the use tax may someday be unnecessary if states band together to remit sales taxes.

Kansas is part of a 22-state group that signed the streamlined sales tax pact, which collects taxes from other states and, using tax statements, sends the cash back to the states where the sales were made. New York is not a member of the group.

Discussion

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5 September 2006
at 6:11 a.m.

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KS (Anonymous) says…

When will enough be enough for the State of Kansas?
5 September 2006
at 7:54 a.m.

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blessed3x (Anonymous) says…

When they get 100% of your paycheck and redistribute the money, giving you your “portion”.
5 September 2006
at 8:11 a.m.

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Sigmund (Anonymous) says…

Between income taxes and personal property taxes (auto tags) the citizens of Kansas are amoung the highest taxed of all United States citizens. Live in Lawrence with our real property taxes and soon to be highest sales tax in the State, and Lawrence citizens are amoung the highest taxed in all of Kansas!

If you buy an item for resell or if you buy an item in KCMO (for instance), you pay no Kansas sales tax. But if you buy the same item from a company in KCMO online you have to pay Kansas sales tax? Makes no sense and it is just plain greedy of the state of Kansas. Keep track of you purchases online. The amount in taxes is likely to be a lot less than the Kansas default amount of $2000. I wonder if we only have to pay the State part of sales taxes or if we have to pay the City part of the sales as well? If the latter, does the State of Kansas cut a check to City of Lawrence?

Complain about taxes and get called rich and greedy. It is slowly dawning on citizens of Lawrence that virtually everyone else in the country pays less in taxes than they do, they are begining to scrutinize both Local and State governments use of their tax dollars.
5 September 2006
at 8:12 a.m.

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jayhawks71 (Anonymous) says…

A USE tax. USE. USE, people, USE. You USE something, you pay a tax on it…. to USE it.

Again with the government “protecting” us and businesses (which of course by virtue of incorporation, it already does… yet, they forget about huge benefit for many businesses that get to skirt taxes because they are “corporations”… isn't that protection enough???).

“It was put there to protect Kansas businesses. You don't want to set up a situation where it is cheaper to buy out of state.”

Yeah, you don't want to encourage competition!

I can proudly say it took a year and a half, but I finally convinced the KDR that I didn't owe them the taxes they claim. If you don't owe them, fight them. Get names, times, dates, send letters with demands (keep copies and certify) that IF the materials you are sending them do not satisfy them that it is on them to contact you and inform you of this (BTW, they won't; you will keep getting bills with interest and penalties, but when they try to garnish your IRS refund or you go to court, you have the repeatedly ignored requests.).

Also, don't expect to get anything done by talking to people at KDR. I was told that a zero-balance letter would be sent to me (I requested this); After 2.5 weeks I had not received it so I called them and was told a request was never made (I received one less than a week later.).
5 September 2006
at 8:15 a.m.

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jayhawks71 (Anonymous) says…

“But under Kansas law, those kinds of purchases must be taxed, Wagnon said.”

Oh Joan Wagnon, get a life; MUST be taxed? Why MUST they be taxed? Will they dissolve if they aren't taxed? Will they turn into pumpkins at midnight if they aren't taxed? Get a life!

And if you buy brick and mortar in KC, they will say that you paid sales tax on it already. However, I wouldn't be surprised that they try to get you twice, afterall, you have to protect Kansas businesses.

Don't they already make you pay sales tax on a vehicle where you live as well? You can buy a car on e-bay in the Bay Area and then pay kansas/douglas county/lawrence sales tax on it.
5 September 2006
at 8:19 a.m.

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jayhawks71 (Anonymous) says…

Sigmund, I don't think the use tax actually amounts to sales tax rate that you would pay in a local brick and mortar, so no they aren't cutting a check to Lawrence or the county. The state is collecting “their portion” (hah, think about that THEIR portion…. as if they did something for it other than demand payment… sounds like the thief on the street… your money or your life…. isn't that the deal the state offers?).

PS. Joan Wagnon, get a life. Those purchases must be taxed!
5 September 2006
at 8:41 a.m.

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Informed (Anonymous) says…

Cold, dead hands, baby. Cold, dead hands. Oh, wait. That's my guns.

About the tax: audit this…

5 September 2006
at 9:16 a.m.

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common_cents (Anonymous) says…

I don't like the tax either, but the law is pretty clear on this subject:

http://www.ksrevenue.org/bustaxtypesr…

There is also a line on one of the many Kansas Corporate Tax Forms (I can't remember which one) which specifically asks for the amount of goods used, which were purchased tax free. I believe it stats “Goods used by you purchased tax free.” or something like that.

Granted, it's a crappy deal, but it's pretty clear.
5 September 2006
at 9:18 a.m.

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common_cents (Anonymous) says…

Found it…

Line 2

http://www.ksrevenue.org/pdf/forms/st…

Granted the example isn't very clear, but it does extend to goods purchased by you which are purchased without sales tax.
5 September 2006
at 9:21 a.m.

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white_mountain (Anonymous) says…

This just goes to show, you shouldn't try to hide your money from the government. If you owe them money you need to pay up. We get so many services for free from the government, so please don't short change them on your taxes.
5 September 2006
at 9:40 a.m.

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murderama (Rob Gillaspie) says…

Oooh… I got one of those envelopes, and immediately deposited it in the circular file. The faster they send 'em to me, the faster I'll throw 'em away. I mean, the whole thing HAS to be a joke, right?
5 September 2006
at 9:50 a.m.

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Sigmund (Anonymous) says…

Shouldn't try and hide your money? Did you read the article? Nobody was trying to hide their money. Go to the store and buy something, they calculate the tax, collect it, and then send it to the State. Work at a job, your employer pays their part of your Social Security Worker Compensation taxes, then withhold a part of your remaining wages to cover taxes, and report this to the State. You settle up at the end of the year, if they over withheld the return your money otherwise you pay.

This is different, you're suppose to keep track of how much you spend online and then pay tax on money you have already been taxed on? There is no hiding of money here you idiot!
5 September 2006
at 9:51 a.m.

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blue73harley (Anonymous) says…

Hey everybody! Keep working and paying those taxes so white_mountain can continue to get his/her “free” services!
5 September 2006
at 10:12 a.m.

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HMcMellon (Anonymous) says…

Sales tax is a pain in the neck for businesses in the first place. Trying to collect on internet sales complicates an already over-complicated system. If business people were paid for their time in collecting sales taxes, keeping records, sending in forms to the States, etc., many businesses would find the amount collected would not even pay the time of an employee to keep those records.

As a nation, we really need to move away from any kind of sales tax and start taxing churches. We also need to eliminate the tax exemption for contributions to churches.

This simple change would generate enough money at both the Federal and State levels to cover what is now received from sales tax and might even help pay down the National Debt. It would also make the tax system much less complicated.

The tax exemption for church contributions was well intended, but many churches have become nothing but Political Action Committees. This is not fair to the voters. Someone can contribute to some right wing political group that calls itself a “church” and deduct it, but those who contribute to a PAC cannot deduct it.

The solution to this problem is to not allow any deduction for any church contribution. The taxpayers could make up this increase in taxes by a equal reduction or elimination of sales tax, which is a regressive and stupid tax in the first place.
5 September 2006
at 10:43 a.m.

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Sigmund (Anonymous) says…

BTW, if you think this just applies to business, you are completely wrong. It applies to everyone who purchases anything online if the seller doesn't collet tax. IIRC, it even applies to new and used items purchased on eBay, and when you get the bill from the State of Kansas it is for $2000, unless you can prove otherwise. I hope you keep very good records.

5 September 2006
at 10:49 a.m.

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Kontum1972 (Anonymous) says…

sex toys too?
5 September 2006
at 11:15 a.m.

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KS (Anonymous) says…

I love sales taxes. You buy, you pay. Everyone pays at the same rate. You don't want to pay, don't buy. Exempt food, clothing and shelter. The three basic esentials to life.
5 September 2006
at 11:44 a.m.

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Sigmund (Anonymous) says…

KS, as a replacement for income tax I would tend to agree. Those that have more to spend end up paying more in taxes. The UK VAT tax would be my ideal. I might include medical care and medicine in your list
5 September 2006
at 12:57 p.m.

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compmd (Anonymous) says…

I still find it appalling that the state of kansas can impose sales tax on a cash transaction between myself and another private person in another state (used car sale). The property tax calculatons the state uses when you renew your plates every year is a joke too.

in conclusion: use tax on internet purchases? bah. in soviet kansas, tax uses YOU!
5 September 2006
at 1:29 p.m.

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blue73harley (Anonymous) says…

A couple times a year, I sell used car and motorcycle parts at swap meets. This is just a hobby and is no great source of revenue. This year, I received a tax reporting form along with my registration for the swap meet at the Woodlands. I would have gladly filled it out if I would have sold anything ;-)

How many of you report garage sale earnings? I thought not!
5 September 2006
at 2:04 p.m.

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KS (Anonymous) says…

Sigmund - Using my theory, the sales tax would replace the income tax. The VAT tax “could” make things a little pricey, but I am in favor of doing away with income and property tax. I don't think we currently pay a sales tax on medical care, maybe on prescriptions, but I could be wrong there. Exempt them too.
5 September 2006
at 2:16 p.m.

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Sigmund (Anonymous) says…

Of course if I buy something in KCMO I pay taxes. I thought my point was pretty obvious to people of reasonable intelligence, but for of those at the back of the class my point is why does Kansas think they have a right to tax that same purchase over the Internet from a merchant in KCMO? No other State I know forces their citizens to keep track of their internet purchases in KS and forces their citizens to pay taxes on those sales.

As for taxing churches, I believe that the Constitution protection of freedom of religion and the glorious seperation of church and state has been interpretted by the Supremes as to forbid taxing churches.
5 September 2006
at 3:59 p.m.

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Kontum1972 (Anonymous) says…

soon there will be a tax for blogs

5 September 2006
at 4:05 p.m.

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Rationalanimal (Anonymous) says…

This is protectionism at its finest and stands in the way of evolving free trade. Protectionism always ends in the consumer paying a higher price for cheaper quality.
5 September 2006
at 5:06 p.m.

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classclown (Anonymous) says…

How is it that the state knows who is making what purchases online?
5 September 2006
at 6:05 p.m.

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jayhawks71 (Anonymous) says…

logic… I choose to opt out of your “societal contract” now what? I am fine not paying insurance to have the fire department come put out a fire. I am fine not funding a war of aggression rather than defense. I am fine not getting welfare or food stamps when I am unemployed. I am fine paying a toll for a road that I use as long as I am not paying 40 cents extra on every gallon of gas that I purchase. I am fine not paying the bureaucrats that shuffle papers nor receiving their services (e.g., licenses (I won't need them), tax forms (I won't need them)) I will be happy to forego police “protection” (which the Supreme Court has ruled that the police are not bound to provide) that ensures that I will: wear a seatbelt when I drive, wear a helmet when riding a motorcycle, ensure that I don't inhale a burning marijuana cigarette in my home. I am fine with providing for my own insurance so that “you” don't have to pay for my misdeeds when they harm ME.

Where do I sign up to opt out. Will 1-800-iopt-out work? Afterall, contracts require a “meeting of the minds” and I don't recall my mind meeting that of the mindless government. The social contract is therefore null and void.

And classclown…. take a guess how they know… maybe they don't… maybe the threat of force is enough to get some fools to comply.

And logic, their logic is that if you can buy online without sales tax, you will hurt the local “law abiding/tax collecting” business who would have to sell the product at 92% of the price of the online vendor to equate prices.
5 September 2006
at 6:55 p.m.

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white_mountain (Anonymous) says…

Tax on blogs.. that is crazy.. Tax on email, not so crazy.. could go a long way to get rid of spam, and help the USPS become more profitable. People try all kinds of ways to skirt their taxes.
5 September 2006
at 7:19 p.m.

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Wilbur_Nether (Anonymous) says…

jayhawk71 wondered about opting out of the social contract, but also wondered “now what?” Socrates wondered the same thing, in _Crito_, and imagined the Athenian authorities replying to him “You, Socrates, are breaking the covenants and agreements which you made with us at your leisure, not in any haste or under any compulsion or deception, but having had seventy years to think of them, during which time you were at liberty to leave the city, if we were not to your mind, or if our covenants appeared to you to be unfair. You had your choice, and might have gone either to Lacedaemon or Crete, which you often praise for their good government, or to some other Hellenic or foreign State. Whereas you, above all other Athenians, seemed to be so fond of the State, or, in other words, of us her laws (for who would like a State that has no laws?), that you never stirred out of her: the halt, the blind, the maimed, were not more stationary in her than you were. And now you run away and forsake your agreements. Not so, Socrates, if you will take our advice; do not make yourself ridiculous by escaping out of the city.”

Or, more simply, opting out has certain consequences. Deciding to opt out necessarily requires the moral person to also accept the consequences.
5 September 2006
at 8:35 p.m.

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GardenMomma (Anonymous) says…

They get you too even if you don't own a business. Ever seen the new line (it's been two years now) on your Kansas Income Tax Return called “Use Tax”? It's for those purchases you made out-of-state (including KCMO or even Wisconsin) and paid sales tax less than what the state sales tax rate is. You need to pay Kansas the difference.

For example, you bought something and paid 4.7% sales tax on it, but you bought it on vacation out-of-state. You would be required to pay the difference to the state of Kansas (up to 5.3%, which is state sales tax rate, I believe).

But, if remembering and calculating the difference in sales taxes for all your out-of-state purchases is too difficult, you can just use the handy-dandy formula supplied by the state, which is 5%, 10%, and 15% depending on your income, with a minimum of $5 added to your tax bill.
5 September 2006
at 8:45 p.m.

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KS (Anonymous) says…

logicsound04 - Please tell us you did not go to KU? I could not stand to know that my tax dollars went for that kind of education.
5 September 2006
at 11:29 p.m.

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jayhawks71 (Anonymous) says…

I have no duty to leave because I opt out of the social contract. Society has no right to use force against me if I opt out of the social contract. The problem is, the social contract is a myth. A contract requires a meeting of the minds. Society has no mind and therefore no meeting of the minds can exist on those grounds. Second, even if society had a “mind”, my mind had no meeting with this so-called mind and therefore there is no contract. A contract for which I did not enter is a contract that is unenforceable on me.

If I obtain property from another individual, that property is mine in the absence of society or in the absence of failure to enter a societal contract. As I stated earlier, I would accept the consequences (mostly beneficial) of opting out of a contract that I never entered into. By opting out, I maintain (and gain) the benefits of free trade, of not being oppressed by a tyrannical majority, a freedom to move about, and the freedom to not be subjugated to a rule by force provided I do not use force against another.

One of the perceived benefits of society, protection, is really unnecessary. Most of the aggressors are governments or groups that have organized against governments. They have little issue with individuals and what issue they have with individuals (e.g., terrorists killing indfividuals) is because individuals are seen as mirrors of their government's practices. Think about how back in the 70s and 80s the “russians” were seen as such a threat, now, not so much. The people were stuck bearing the burden of the government that subjugated them.

5 September 2006
at 11:45 p.m.

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bige1030 (Anonymous) says…

We should do away with the sales tax, use tax, and property taxes and replace them with a progressive income tax. That way, the poor and the middle class aren't unfairly burdened, while the rich bear a greater burden than they do already. Besides, the rich can afford it.
6 September 2006
at midnight

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Marion (Marion Lynn) says…

Heh, heh.

I am 100% Internet and 100% offshore.

I own nothing but my building lot in Lawrence and am paid only consultation fees by evil offshore corporations.

I do not even own the car that I drive and I am 100% legal.

Now you know why.

Thanks.

Marion.
6 September 2006
at 12:08 a.m.

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dizzy_from_your_spin (Anonymous) says…

On the Kansas individual form, for internet purchases, you are taxed based on a percentage of your income, NOT according to the amount you actually purchase.

In other words, if 2 people bought $500 worth of stuff online, the person earning $20,000 per year pays less tax on the same amount than the person earning $60,000 per year. In the same vein, the $60k earner would pay more for $50 in purchases than would the $20k earner making $500 in purchases.

People don't pay any more or less sales tax at Target or Walmart based on “ability to pay”.
6 September 2006
at 12:58 a.m.

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Marion (Marion Lynn) says…

Yeah, you got it.

Thanks.

Marion.
7 September 2006
at 8:56 a.m.

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gr (Anonymous) says…

“You don't want to set up a situation where it is cheaper to buy out of state.”

Why? Because Kansas is a hostile place for businesses? New York should be collecting the tax AND keeping it. A reward for being friendly to businesses. Just like any Kansas businesses should be collecting taxes on out of state purchases AND keeping it. How much is Kansas losing in taxes each year from taxes being sent out of state? Probably not being “sent”, but still not being collected. Keep Kansas taxes in Kansas, and New York taxes in New York!

“, sends the cash back to the states where the sales were made. ”

Moving money back and forth makes so much sense? I'm sure some falls out along the way.

Where does this “use tax” go? Does it go to the city the person is in, or just goes to Kansas in general? That doesn't help local competition very much.

Question. Did Mace not submit the extra line item internet tax based on income? If he did, then there wouldn't be anything owed. I suppose businesses are treated differently.

Self audit. How much did you buy out of state? One dollar.

––––––––––––––––––––––

“Yes, because you pay Missouri sales tax when you buy something in Missouri. It is not as if the consumer is being forced to pay double tax—he is only paying what every other consumer must pay when they buy a good.”

“People, if you want to be a part of a civilized society with benefits for its citizens you MUST pay taxes—that's life.”

Sounds like the problem with the internet is that they are not charging taxes. If you buy something in Missouri over the internet, you should pay Missouri sales taxes - what every other consumer must pay. Why aren't they collecting it!

Unfortunately, if Missouri doesn't charge as much as Kansas, you are still supposed to calculate the difference and send it in. It should also follow, if you go to another state and they charge more taxes than Kansas, Kansas will pay YOU the difference - doesn't work that way, though.

“In an ideal world, yes, goods from Missouri would create tax revenue in Missouri. However, a shortcoming in the system as it relates to getting the taxes to their proper destination is not a good reason to allow consumers to skip sales tax—it must still be paid.”

Why is there a shortcoming for Missouri not to tax it's goods? How hard is it to get Missouri taxes to Missouri? And, why should Kansas benefit from Missouri's shortcoming?