Paying with Cash

[ambo]

I''ve heard that paying with cash to avoid taxes is illegal and not recommended. Is this true and what should I look out for in regards to paying for the stone in cash?

Thanks!

 

[Lula]

I''m not a lawyer, but it''s my understanding from my previous experience working in retail sales, that if you pay in cash to purposely avoid paying sales tax, the state may hold you just as responsible for evading the taxes as they do the vendor.

Also, will you get a receipt saying what you bought, how much you paid, the date, and how you paid (i.e., in cash). You''ll want to protect yourself if something goes wrong with the purchase and you need to return it. Without a receipt, that''s difficult.

Sales tax is only an issue if you are paying in cash, in person, and are responsible for paying the state''s income tax.

If you do not live in the same state as the vendor and you buy online, in most states you do not have to pay sales tax (but this may be changing as states realize how much lost revenue this is costing them).

 

[Stone-cold11]

I am guessing you are saying this in reference to buying from a brick store as oppose to an online vendor?

As long as there is a receipt, it is not illegal. Cash is known a the legal tender for a reason.

 

[Rockdiamond]

HI Ambo,
AS Stone says- there''s absolutely nothing illegal about paying with cash.
AS Sara pointed out, it IS a big NO NO if a store is trying to get you to collude in cheating the state out of sales tax.

The other problem for you, as the buyer, is that you will have less recourse than if you paid using "official" channels such as bank wire transfer, or credit card.

Be careful out there!

 

[Lorelei]

Date: 10/27/2009 2:05:26 PM
Author: Rockdiamond
HI Ambo,
AS Stone says- there''s absolutely nothing illegal about paying with cash.
AS Sara pointed out, it IS a big NO NO if a store is trying to get you to collude in cheating the state out of sales tax.

The other problem for you, as the buyer, is that you will have less recourse than if you paid using ''official'' channels such as bank wire transfer, or credit card.

Be careful out there!

This is an important point.

 

[D&T]

Date: 10/27/2009 2:20:12 PM
Author: Lorelei

Date: 10/27/2009 2:05:26 PM
Author: Rockdiamond
HI Ambo,
AS Stone says- there''s absolutely nothing illegal about paying with cash.
AS Sara pointed out, it IS a big NO NO if a store is trying to get you to collude in cheating the state out of sales tax.

The other problem for you, as the buyer, is that you will have less recourse than if you paid using ''official'' channels such as bank wire transfer, or credit card.

Be careful out there!

This is an important point.

thritto.. on a diamond purchase especially, what if it turns out not what you wanted or even asked for? how will you protect yourself then?

 

[Paul-Antwerp]

Even more important, and I am shocked to see how limited the professional knowledge about this subject is in the States, a jeweler is risking a lot if he accepts cash as a payment.

A cash payment is a strong red flag, pointing to possible money laundering, and a jeweler accepting cash will have to prove that he thoroughly investigated the customer, to make sure that he was not being paid by proceeds from any criminal activity. And being charged with money-laundering brings you very close to terrorist-financing in the current book of criminality, so I would advise both jeweler and consumer not to consider this path.

Live long,

 

[Karl_K]

Date: 10/27/2009 3:46:55 PM
Author: Paul-Antwerp
Even more important, and I am shocked to see how limited the professional knowledge about this subject is in the States, a jeweler is risking a lot if he accepts cash as a payment.


A cash payment is a strong red flag, pointing to possible money laundering, and a jeweler accepting cash will have to prove that he thoroughly investigated the customer, to make sure that he was not being paid by proceeds from any criminal activity. And being charged with money-laundering brings you very close to terrorist-financing in the current book of criminality, so I would advise both jeweler and consumer not to consider this path.


Live long,

Paul is 100% correct and I was going to point this out.
In this day and age anyone who accepts cash payments for over $2500.00 can be in a world of hurt.
Over $5000.00 and they can get in even more trouble.
Do a google search for "know your customer laws"
These laws on the federal level rely on banks for initial reporting but the requirements filter down to vendors once reported.
On the state level there are similar laws that vary state to state.
The state of IL loves to run sting operations for tax avoidance.
On a large purchase it is a felony for both the buyer and seller in IL.
A friend of mine used to work at a used car lot and the owner got nailed for this and was fined over $150000.00 and a short jail term on the state charges and the feds made his life very hard for years.
The DEA, FBI, IRS and local drug task force all investigated him.
Luckily for him they couldn't prove a connection to drugs or they could have taken everything he owned as proceeds from the drug trade.

 

[oldminer]

You can pay cash in the USA for any amount you wish. It is NOT illegal at all. If you pay $10,000 or more in cash the seller is required to fill in an IRS reporting form and advise the IRS of the transaction. This is to prevent money laundering, especially in support of anti-terrorist activities, but also to inhibit illicit funds, u=suhch as the proceeds of drug sales, from being used in ways that avoid the eyes of the law. Compliance with the Patriot Act is the effort, but cash is okay so long as the reporting requirements are made. If you make cash deposits into a bank over $3,000, I believe, they also report to the IRS. You cannot legally "structure" payments of $10,000 or more into smaller amounts to avoid scrutiny. This is more illegal in that one, or both parties, knowlingly is avoiding the requirements to report $10K cash deals to the IRS. Large cash deals are done very day, but the legal ones are reported properly.

Most states require you to report out of state retail purchases, such as you make on the Internet, and to self pay Use Tax in your home state instead of Sales Tax. Few consumers make such reports and it is up to the state and the consumer to face off with one another about such matters. Someday it is likely that this inequity will be fixed, but for now, it is open season for avoiding or evading sales taxes. Every 6 months when I pay my limited amount of sales tax collected to Pennsylvania, I report some Internet purchases I have made for my business and pay the Use Tax due. It is relatively small change and hardly worth having a time consuming and costly formal audit. No doubt, I am the exception to the general practice.

 

[Regular Guy]

I dunno...seems to me...cash is king.

I can''t imagine a vendor refusing it, under any circumstances, and feeling as though they have any obligation to anybody as to understanding its source.

That said...yes...I think when paying with cash...maybe virtually similar to bank wire (not sure), the buyer has limited recourse.

Also...

Date: 10/27/2009 1:50:51 PM
Author:ambo
... paying with cash to avoid taxes is illegal and not recommended...

yes...there''s bad intentions there...this is illegal.

That said...consistent with the fact that it seems a common practice for vendors to actually display on their sites that they won''t be collecting tax, unless you happen to be in state,

although it may be against the law to not send to an appropriate state authority (which would it be...where you live, or where the vendor lives?) tax associated with the purchase...

I have to think that doing so (paying the government tax associated with an internet purchase to an out of state vendor) would put you in not only a significant minority, but that doing so would be so much like the people who resist pulling the tag under their chair, and (OK, let''s find better examples), at least like those ill folks who actually resist smoking marijuana for medical purposes, where the authorities have made a point to say that they would not be pursuing these activities aggressively (don''t ask, don''t tell?)...

As long as vendors fear more customers not coming to them because they don''t post this (no collection of taxes) on their sites...than they do the law coming after them for inciting illegal behavior...I''ve got to say you are possibly stupid for paying tax on these out of state purchases. The government is probably also, while looking after the collecting of taxes, also looking after the benefits of the increased commerce made possible because of the internet...and I believe their (non) actions on this speak louder than any available fine print.

This said, spoken as the ordinary citizen that I am, so help me g-d.

 

[Kaleigh]

Date: 10/27/2009 2:20:12 PM
Author: Lorelei

Date: 10/27/2009 2:05:26 PM
Author: Rockdiamond
HI Ambo,
AS Stone says- there''s absolutely nothing illegal about paying with cash.
AS Sara pointed out, it IS a big NO NO if a store is trying to get you to collude in cheating the state out of sales tax.

The other problem for you, as the buyer, is that you will have less recourse than if you paid using ''official'' channels such as bank wire transfer, or credit card.

Be careful out there!

This is an important point.

Big point.

 

[Rockdiamond]

Excellent point Paul. But I think this is one area where the US is quite different than Europe.
Clearly, if a business is in "cahoots" with a person laundering money, they will have problems.
But there''s still a lot of honest hard working Americans who prefer to pay in cash. There is the impression that cash carries a greater weight in negotiating as compared to other methods. Not that I agree with that impression- we discourage people who suggest cash as a payment method for many reasons- but the impression still exists.

 

[denverappraiser]

Cash is the recommended way when the deal is between two private parties, at least in the US. It can’t bounce, it’s hard to fake, and there are no bank fees. I suppose this changes when it gets into big money and then letters of credit, cashiers checks and such get involved and the deal looks more like a house closing than anything else but for 'normal' sorts of items, cash is the way to go. As has been pointed out above, your obligation to pay sales/use tax isn’t a function of how you pay the bill, it has to do with what you’re buying and either where you live or where the store is located.

As far as a merchant goes, I never had a problem with it but I got out of the retail business before the Patriot Act came in to play. I loved cash, precisely because checks occasionally bounce and banks charge fees for credit cards. We still had that IRS form and I must say that it’s tough to seamlessly slip into the sales presentation that you need the client to provide a photo ID and fill out an IRS form before you can make delivery. That's a tough thing for your sales people to romance. Interestingly, I went through an audit over this issue as an appraiser. They had me classified as a jeweler and noticed that I had never submitted the form (I still haven’t), which is apparently a bit unusual in whatever category they had me in. Independent jewelry appraiser is such an exotic trade that we don't have an SIC code. I pointed out that I was well aware of the rule and that I would be THRILLED to fill out their stupid form if someone, including the auditor, wanted to pay me for $10k+ worth of work in cash but that, unfortunately, so far no one had made this offer. After a few hours of picking through my books she agreed. My wife just about killed me when I got home and told her what I did that day. She correctly pointed out that you should NEVER be snide to your tax auditor. Apparently they aren't recruited for their sense of humor (mine was actually a very pleasant and professional lady).

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[miraclesrule]

What? No SIC code for a jewelry appraiser? That's surprising. I'll have to check that at work tomorrow.

It seems like Cash is being De-throned.

Although I can certainly understand why a person would choose to use a credit card for large purchase protection. Receipts fade...and they are fading faster every year. I keep mine in a box, but come tax time, some of them having faded to nada.

I still like checks. My daughter thinks I'm "Old School" Whatever.

 

[WinkHPD]

Date: 10/27/2009 4:24:30 PM
Author: Regular Guy
I dunno...seems to me...cash is king.

I can''t imagine a vendor refusing it, under any circumstances, and feeling as though they have any obligation to anybody as to understanding its source.

Then you need to practice up on your imagination skills. As a vendor I am happy to accept cash of any amount. I am also happy to require you to give me your social security number if the amount is over $10,000 so that I can properly report it on the required form. I know that when I make deposits to the bank in more than three or four thousand that the bank will be putting it in its report to the Feds. I have in the past and will probably in the future have to let you walk if you refuse to give me the proper information to fill out my report on a $10,000 or more sale, I am NOT going to jail for failing to report such a transaction.

Trust me, we feel this obligation VERY strongly.

That said...yes...I think when paying with cash...maybe virtually similar to bank wire (not sure), the buyer has limited recourse.

Not so long as the client was smart enough to get a receipt from the vendor. If you live in my state and pay cash you WILL be paying sales tax and getting a receipt. If you are from out of state and sending me cash I am going to be reporting the transaction no matter the size, it stinks a great bit, see the last sentence of the first paragraph re jail.

Also...

Date: 10/27/2009 1:50:51 PM
Author:ambo
... paying with cash to avoid taxes is illegal and not recommended...

yes...there''s bad intentions there...this is illegal.

That said...consistent with the fact that it seems a common practice for vendors to actually display on their sites that they won''t be collecting tax, unless you happen to be in state,

That is in full compliance with the current laws. Under the laws in ALL states that have sales tax, if you buy something in another state and do not pay sales tax on it there you are required by law to report that sale and pay the taxes on it. There is actually a line on your state income tax form to allow you to do this. It is NOT the vendors liability to collect or report this tax, it is encumbant on the purchaser. The fact that well over 90% do not do this is NOT the fault of the vendor.

although it may be against the law to not send to an appropriate state authority (which would it be...where you live, or where the vendor lives?) tax associated with the purchase...

Not at this time. When the laws are changed then you will see the Internet sites collecting these taxes, but not until.

I have to think that doing so (paying the government tax associated with an internet purchase to an out of state vendor) would put you in not only a significant minority, but that doing so would be so much like the people who resist pulling the tag under their chair, and (OK, let''s find better examples), at least like those ill folks who actually resist smoking marijuana for medical purposes, where the authorities have made a point to say that they would not be pursuing these activities aggressively (don''t ask, don''t tell?)...

As long as vendors fear more customers not coming to them because they don''t post this (no collection of taxes) on their sites...than they do the law coming after them for inciting illegal behavior...

Again, at this time there is no law requiring the Internet vendors to collect taxes on out of state sales. Thus we are not acting or inciting illegal behavior. The failure of the buyer to report this purchase is in fact illegal, but it is NOT our responsibility.

I''ve got to say you are possibly stupid for paying tax on these out of state purchases. The government is probably also, while looking after the collecting of taxes, also looking after the benefits of the increased commerce made possible because of the internet...and I believe their (non) actions on this speak louder than any available fine print.

This said, spoken as the ordinary citizen that I am, so help me g-d.

That having been said, I believe that someday there will be laws passed that require us to collect and distribute taxes to the various states. It will be a nightmare unless there is some kind of uniform collection and amount as it is very difficult for me to know which of the two or three hundred various taxing districts and rates you live in, and that is just within the state of California. Nationwide there are literally thousands of differing tax rates depending on exactly where you live, a veritable nightmare for someone collecting taxes on the opposite side of the nation.

However. Believe this. When the laws are passed and someone (federal or state) goes to the vendors and says give us a list of who bought what from our state or we will tie you up and drain your resources in court for the next ten years, those lists are going to be freely given. If the only reason you are buying on the net is to avoid taxes, then you are buying for the wrong reasons.

Buy from the net because the vendors have earned your trust and respect and thus your business. Not to save a few dollars that will eventually come back to haunt you.

Just my opinion of course.

Wink

 

[Regular Guy]

Thanks Wink, I did write before I was able to read what became multiple references to a $10K constraint. Generally, though...

Date: 10/28/2009 1:54:00 AM
Author: Wink

Then you need to practice up on your imagination skills.

...this is true! I do.

Otherwise, the tax thing was a small go off, for which I am not embarrassed, and perhaps a little proud. We have laws of taxation, and principles of public policy. So long as Pricescope is an environment where we provide education, vs. write tickets, I''ll stand by what I wrote.

 

[denverappraiser]

Ira,

Sales tax is imposed by the states, counties, cities, bus districts etc. Currently there is no national sales tax. At least around here it’s collected and distributed by the state and it’s imposed on the CONSUMER, not the merchant. The state licenses merchants to collect taxes on their behalf and the merchant submit funds and paperwork periodically to the taxman. The important concept here is that taxpayer is the consumer, not the merchant, who is just a middleman in the deal. For taxable sales, which is on most non-food and non-medical physical purchases that are going to be consumed or stored within the taxing district, the tax applies whether or not the merchant collects it and no matter where you go to buy it. There's usually a deduction or exemption if you pay the tax to some other district, like the one where the merchant is located, to avoid double taxation. If the merchant has no presence in your state, they are not required (or even permitted) to collect the tax but this doesn’t change your obligations to your community at all. The rules vary from state to state but it’s usually prominent on the state Reveneur’s websites because there is so much confusion over this issue. Go there and search for ‘sales tax’ or ‘use tax’ and it should pop right up. Some will have a line item on the annual state income tax return and some will have a special return that you need to file to report your out-of-state purchases.

I agree with Wink that this is surely going to change. There’s big money in it for the states and the fact that tax evasion is rampant is a strong incentive for them to tighten up the rules. There’s only 50 states after all, it doesn’t require that much cooperation for them to share their data on tax rates and make it available so that merchants like Wink and others know how much tax to collect from each client and allow him to submit it to his own state taxman who then routes the funds to the correct place. Computers are good at this sort of thing and it’s a multi-billion dollar question. Frankly I’m surprised it hasn’t been dealt with yet since most states are scrambling as hard as they can to find more money.

Neil Beaty
GG(GIA) ICGA(AGS) NAJA
Professional Appraisals in Denver

 

[elle_chris]

I''m still wondering what kind of protection a bank wire offers? I was under the impression that you have no recourse, and that a wire transfer is pretty much the same as cash.

 

[Regular Guy]

Neil,

This is not a Sunday morning talk show, (or maybe it is more than I think), where the ideal scenario would be for questions to be raised, and the person responding has a pet answer they shape to fit, without that much regard to the question.

I actually have mostly stayed in the market for my retirement savings, and this is as a function as being a) lazy, b) not too bright, but also c) believing there is something to the theory that what people actually do makes sense, and that it may not be a perfect market (unfortunately, way too far from it), but that people are actually working with more or less the best information they have available to them.

I think your last paragraph does the best job of proving my point. Please maybe read again my distinction between taxation and public policy, both of which seem to be at work. I had almost given up trying to find a contemporary example of a jeweler that advertises they don''t collect sales tax on their front page, but I did finally see this, scrolling through, at Union Diamonds. It is not a comment about what they can or can''t do. It''s an example of what could be allowed, based on contemporary practice.

I could go to read what you''ve pointed me to, Neil, and I won''t even quarrel it at the outset.

But...g-d, can you believe at the amount of times I am actually asked by purveyors of software to sign that I have read their "fine print" before accepting and actually saying that I have, when in fact no reasonable person would have such an expectation.

I believe I am responsible for paying my equitable portion of the roads where I live and abroad, and also understand that collection of taxes is for that purpose and more. I also have some thought that my government in the broader sense maybe is not entirely sure what I should be doing after all, in the very good consideration of what can be done with computers, as you say, and it may be appreciating that I might spend a dollar more readily if certain vehicles made it a bit more easy to do so.

At the level of my actually deciding which vendor to choose, and on what basis, I am not encouraging anybody to let the issue of taxation be substantive factor. But...I guess I am saying that if as individuals on this board, we feel a compunction to re-direct what is an otherwise established pattern of practice, it is always helpful to clarify what ones beef is, if you have one.

 

[WinkHPD]

Date: 10/28/2009 12:30:16 PM
Author: elle_chris
I''m still wondering what kind of protection a bank wire offers? I was under the impression that you have no recourse, and that a wire transfer is pretty much the same as cash.

That would depend on what kind of merchant you were dealing with. If you are dealing with a well known and respected merchant you have full recourse just as you would with any other payment, check, etc. Granted you have more power over the merchant with a Credit Card since the CC cards tend to back the consumer no matter who is right in a dispute.

If you are dealing with one of the here today, ??? tomorrow companies then you are SOL no matter what kind of payment you use.

Wink

 

[Gleam]

VERY interesting. Wow, I wonder if my fiance made a faux-pas. He offered to pay in cash, mostly so our jeweler who we've never had to deal with before wouldn't have to worry about our check clearing before she set my diamond.

She said it wasn't necessarily so he wrote a check instead. I never even thought of cash being construed that way.

 

[elle_chris]

Wink- Regardless of the merchant, your only real protection is with a CC. Even if the company is here today and gone tomorrow, you can fight the CC charge and usually win. Your bank however will not reimburse your account. I mentioned it because earlier in the thread, someone said that cash offers little recourse as opposed to bank wire or cc. And as far as I know, bank wires offer no recourse according to my bank (Citibank).

 

[WinkHPD]

Date: 10/28/2009 1:36:17 PM
Author: elle_chris

Wink- Regardless of the merchant, your only real protection is with a CC. Even if the company is here today and gone tomorrow, you can fight the CC charge and usually win. Your bank however will not reimburse your account. I mentioned it because earlier in the thread, someone said that cash offers little recourse as opposed to bank wire or cc. And as far as I know, bank wires offer no recourse according to my bank (Citibank).

That is correct, so it behoves you to do business only with good people or with CC.

Even that is not one hundred percent, especially for us merchants who even when we can prove a client has our item we mostly lose if the client claims he does not.

It does not always work that way though, when I was food poisoned at Tucson many years ago American Express took the restaurant''s side and told the two of us who were poisoned too bad.

Wink