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Is this true? I received this Email from BGD.

Discussion in 'RockyTalky' started by Dancing Fire, Mar 28, 2019.

  1. Gussie
    Ideal_Rock

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    by Gussie » Mar 29, 2019
    And only $10K SALT, if I remember correctly, is now deductible from fed income tax. Yikes, sorry @Dee*Jay

    My youngest daughter was born on tax day. We always tell her there's no money left for gifts, lol.
     
  2. Wink
    Ideal_Rock
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    by Wink » Mar 29, 2019
    Many interesting questions here. I can tell you that yes, as of April 1st HPD will join the ranks of those collecting California State Sales Tax and there are about a bazillion local zones in the state where local taxes are commingled with Sales Tax and each of them will demand their share, so it is not easy to say the tax in California is X%. I think Texas has the most zones, with over 1500.

    As Karl has correctly stated, it has been the law since day one that you are supposed to report out of state sales to the State on your annual tax filing. According to the Head of the State Sales Tax Commission here in Idaho, less than 2% of people actually do this. It is costing even the smallest states billions of dollars in lost revenue, but it sure helped the Internet to grow like crazy!

    As TreeScientist states, it was often considered by many states to not do this to smaller companies, then they considered annual revenue rather than number of employees. In the end, most states have decided to go by annual sales volume. In California, if I sold more than $100,000 in sales in California in 2018, I have to register and start collecting tax on all sales in California on April 1.

    On the upgrade issue. Clent X wants to buy a diamond for $38,000, upgrading a diamond he paid $30,000 for. The invoice must be written to show the upgrade. Line one will show the value of the new diamond. Line two will show the value of the original diamond as a negative value. (This could be the trade in of a diamond not sold by the retailer making the sale also, so whether the purchase is an upgrade or a trade in, the net tax implication is the same.)

    The resulting total of the invoice will be the taxable amount.

    38,000
    -30,000
    $8,000 plus tax

    I hope this helps.

    Wink
     
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  3. yssie
    Super_Ideal_Rock

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    by yssie » Mar 29, 2019
    :lol:
     
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  4. oldminer
    Ideal_Rock
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    by oldminer » Mar 29, 2019
    It seems to me as a business owner that sales tax fairness would level the playing field in order to allow B&M retail stores an equal opportunity to sell to the public as Internet sellers. There ought to be a simple solution to collect all local and state sales taxes no matter where the customer lives. It could be as easy as a Federally collect flat sales tax distributed to states to offset normal local sales taxes. Without high cost software it is a nightmare filing for every place individually.

    The end result leaves everyone paying their fair share for what our state and local governments say they require to operate. If all the sales tax due was collected, it might mean rates overall would be reduced. Of course, that's just a daydream. Needs for more money tend to be increased whenever we collect more. Reduction of tax rates are rarer than blue diamonds.

    I know it is a very good deal, while it lasts, to avoid or evade sales taxes. It has been a huge advantage for Internet sellers, but for many good reasons it is coming to and end. We are all on the same earth and we need to learn to act fairly with one another. No doubt, someone will figure out how to get around what they owe anyway. People are creative.
     
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  5. Wewechew
    Brilliant_Rock

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    by Wewechew » Mar 29, 2019
    This. I work in accounting and finance for a 28 branch company. Calculating and filing our sales tax is a bear already.
     
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  6. the_mother_thing
    Ideal_Rock

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    by the_mother_thing » Mar 29, 2019
    Separate, but related ... Didn’t the Supreme Court ruling/decision note that companies only had to do this if they sold X# items or X amount of $ to a particular state? :confused:

    I’m just wondering what the impact here will be for smaller businesses like CvB, DK, etc. Will they have to also collect sales tax for out-of-state purchases, or was there some cost/quality-per-state threshold they’d have to achieve. I don’t mind paying sales tax; I just want to make sure I’m not going to be double-paying somehow if they do/don’t collect or perhaps have to do so retroactively for the calendar year once they ascertain they sold X amount/dollars to a state in that given year.

    So confusing ... :wall:
     
  7. Wewechew
    Brilliant_Rock

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    by Wewechew » Mar 29, 2019
    @Wink stated above that it's based on your sales to that state from the year prior.
     
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  8. the_mother_thing
    Ideal_Rock

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    by the_mother_thing » Mar 29, 2019
    Gotcha; thank you. I missed that part.
     
  9. sledge
    Ideal_Rock

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    by sledge » Mar 29, 2019
    Here's another interesting spin. Generally speaking labor, engineering, freight, etc are not subject to sales tax.

    So if I'm a contractor, and I bid $100,000 to do a job then only the materials I purchase are subject to tax.

    Maybe I have $50k materials, $20k labor, $10k freight and engineering. The remaining $20k is profit. If I'm in a 10% tax zone I have to pay $5k of tax on the $50k material.

    My total bid would be $105k.

    A guy that doesn't know this may be $110k if he taxes it all. Or if another guy took advantage of strategic placement for materials delivery may reduce his tax rate to 5% overall and have a final bid of $102.5k.

    Of course this places the burden of tax payment on the contractor. The client just pays the bill, and has a contract all taxes are included.

    I'd think this would be really interesting for a company like DK. It may even have benefits for those like WF and HPD where at least a portion of their sales is based on service work.
     
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  10. Wewechew
    Brilliant_Rock

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    by Wewechew » Mar 29, 2019
    No worried :)
     
    


    


  11. the_mother_thing
    Ideal_Rock

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    by the_mother_thing » Mar 29, 2019
    Interesting points @sledge Considering much of the work & cost (I believe) that goes into custom ring design is labor to make the ring, set the stones, etc., and the only materials are the metal & stones themselves, I wonder how any of the businesses we’re talking about would/do break that down, if at all. :confused:

    @Wink @Texas Leaguer If you care to opine, do you leverage that sort of sales tax calculation, or is it on the piece as a whole (assuming tax only on the ‘item/s’ the customer buys ... not the same if they provide the diamond/stones)?
     
  12. princessandthepear
    Shiny_Rock

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    by princessandthepear » Mar 29, 2019
    I already paid this tax on my purchase from James Allen.
     
  13. sledge
    Ideal_Rock

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    by sledge » Mar 29, 2019
    Some more fun facts to wrap your head around. Amazon did $142 billion of revenue last year. At an average tax rate of 8% that is roughly $227 million dollars equally divided amongst 50 states.

    Obviously some states will rake bigger or smaller amounts based on their population and exact tax rates but this gives us all an idea why states are fighting to collect on internet sales. When you figure all online sales that number is even larger.

    I'm flying at an eagle view here and didn't verify if that was US based or global revenue. If the latter some adjustments are needed but regardless it's all about the Benjamin's at the end of the day. And right now, states (counties and cities) are missing out and want to wet their beak.
     
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  14. TreeScientist
    Brilliant_Rock

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    by TreeScientist » Mar 29, 2019
    Exactly. That's a lot of green that they want in their pockets. It's simply too difficult for states to go after individuals. Pretty much an impossibility given the logistics. But now, the states will get their (IMO) rightful share of sales tax revenue. (Again, IMO) if you're living in a state and using the public services (roads, public buildings, school systems, etc) in said state, and your state has a sales tax in place, then you should be paying sales tax on any purchases that you make. Doesn't matter if the purchases are in person or online. You buy it, you pay the tax. Sales taxes are in place for a reason. For states with sales tax, the state income tax is usually lower than in states without a sales tax. By not paying sales tax on their purchases, citizens of states with a sales tax are making everyone else pay higher state income taxes to fund public services.

    Anyway, I'll get off my soapbox now. :mrgreen: #EndRant
     
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  15. yssie
    Super_Ideal_Rock

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    by yssie » Mar 30, 2019
    What do you do, @sledge? Do you work in a financial/accounting capacity?

    Curiosity - you always have interesting thoughts on these sorts of topics ::)
     
    


    


  16. Wink
    Ideal_Rock
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    by Wink » Mar 30, 2019
    Sledge,

    I cannot speak for all states, but in Idaho, for the type of business that I do, I cannot separate out materials cost and labor for making a ring. What many people do not understand is the labor involved in making a ring. For example, it may take ten to fifteen hours of polishing a ring both during the making of the piece and after the final assembly to have the level of polish that I demand on our Custom Crafted rings. That is a pure labor charge, but it is considered an integral part of the ring and I am not allowed to separate it out in order to charge a lower tax on the finished piece. For those of you into fine automobiles, that is also true. A Maserati or a Lamborghini have huge labor costs to produce, but the final price is the price you pay taxes on.

    Construction is a whole different level of costs and it makes sense to the construction lobbyists and apparently also to the state and federal tax collectors and the legislators who make the rules to allow this separation. I admit to being slightly jealous, but I cannot imagine the nightmare of bookkeeping that this would create if the laws were changed.

    However, if you send a ring in for repair, so long as the repair is for labor, I am allowed, in Idaho, to write that invoice up as being non taxable. The same is true, in Idaho, for appraisals and consultations.

    The software I bought to do my sales tax collection and sign ups is not overly expensive nor is it cheap, but it is a WHOLE LOT cheaper than fighting with state governments from sea to shining sea. I have greatly enjoyed the competitive advantage that the laws gave me, and still does in many states. For those for which I meet the financial Nexus requirements, I will be collecting taxes. Darn that California for making the Nexus so low...

    Wink
     
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  17. rocks
    Brilliant_Rock

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    by rocks » Mar 30, 2019
    Not in ny. Our income taxes, sales taxes and property taxes are out of control. Among the highest in the country...particularly the southern part of the state. That said, I am among the fools that pay sales tax on untaxed purchases when I do my state return. It's only fair.
     
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  18. Texas Leaguer
    Ideal_Rock
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    by Texas Leaguer » Apr 1, 2019
    It's complicated. Ridiculously complicated. But as others have said, the obligation has always been there for the consumer. But now states have a way to collect that will greatly improve consumer compliance. Unfortunately, most have put ALL of the burden on merchants to collect their tax for them. And a HUGE burden it is.

    This could be done so much simpler, which would lead to even higher compliance rates. A standard internet tax that could be collected at the federal level and distributed the states. Then merchants would have one rate and one entity to collect for. Instead of potentially thousands! In my opinion, the Supreme Court should have made implementation of this tax conditional on the development of a standardized protocol that would be easy for merchants to understand and comply with. Why Justice Roberts did not give me a call we may never know. Instead, the court unleashed chaos into the marketplace unnecessarily.

    So many small jeweler businesses are mom and pop or micro businesses. They simply can't cope with the accounting complexities of collecting and paying sales tax the way it it currently 'structured'.
    Not only are all the secondary taxing authorities potentially in play (local, county) in addition to the states, each state has different rules on who must collect, sales threshholds, when they must start collecting, and whether they must collect the additional secondary taxes. And of course each taxing authority has a registration process and a separate address for remittance. It's absurdly onerous for small businesses.

    A few states only require the merchant to report the sale amount and customer contact and then they collect. I think all states should follow this model as it is their benefit and should therefore be their responsibility to collect. This too would have been easy for merchants to comply with. But noooo!

    We will be updating our website yet again today with the latest info (as we understand it to the best of our ability). Oh, oh here's a good one - some states require collecting the tax on the shipping component and others do not. Sheesh.
     
    Last edited: Apr 1, 2019
  19. Texas Leaguer
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    by Texas Leaguer » Apr 1, 2019
    There is no breakdown as far as I understand between material and labor that would apply on a finished product. All taxable as far as I understand. I would assume there is an exclusion for labor only servicing. Lordy I hope that is not up to individual states as well!
     
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  20. Texas Leaguer
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    by Texas Leaguer » Apr 1, 2019
    From what we have seen most base the registration requirement on trailing 12 months sales, as opposed to the prior calendar year. Once you meet the threshold and register, then you are of course required to collect and pay tax on all future sales, even if you don't make the threshold in the following 12 months.
    And because of the expensive nature of diamonds and fine jewelry, the thresholds are quite easy to meet, even if you make few sales.
     
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  21. Texas Leaguer
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    by Texas Leaguer » Apr 1, 2019
    Each company will have to calculate their own individual exposure to the requirements and decide how they are going to handle it. The requirements and threshold levels are different from state to state. But generally, because of the high dollar products the industry sells, the thresholds will be met if you are doing even a small number of sales in a particular state.
     
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  22. Texas Leaguer
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    by Texas Leaguer » Apr 1, 2019
    I agree. The ruling was inevitable for its fairness value. Implementation was (and is) a nightmare.

    If they collected a flat fee of say 4% or 5% across the board for internet sales tax, and made it easy for merchants to do the right thing, I believe all the states would see more money in their coffers. As it is, there will be merchants avoiding it, if for no other reason than it is unmanageable to administer for many small businesses.
     
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  23. Texas Leaguer
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    by Texas Leaguer » Apr 1, 2019
    With regard to an upgrade under our trade-up policy, you would pay tax only on the difference between the price paid for the diamond, and the purchase price of the new diamond. You presumably would have paid tax on the original diamond, so only the differential is taxable.

    *This would likely have to be treated differently if you were doing another type of trade where the vendor is allowing a cash equivalent trade on a new purchase. Then the entire new purchase would be considered taxable.
     
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  24. the_mother_thing
    Ideal_Rock

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  25. Gussie
    Ideal_Rock

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    by Gussie » Apr 1, 2019
    It seems like it would have been easier for businesses to implement if buyers paid state/local taxes to the state in which the purchase was made. I.e., any purchase from WF requires an added 8.625% tax, paid to Texas and locally. Any purchase from HPD pays to Idaho, etc. This is probably to simple on everyone though, lol. :lol:
     
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  26. MeowMeow
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    by MeowMeow » Apr 1, 2019
    I dunno. I like the 5 percent or whatever number federally suggestion best. I'm not opposed to paying sales tax one bit. I'm just opposed to silly and complicated ways of doing it and boy does all this new stuff seem needlessly complicated.
     
  27. gm89uk
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    by gm89uk » Apr 1, 2019
    Things seem much easier in the UK; more tax, but simpler..
     
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  28. flyingpig
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    by flyingpig » Apr 2, 2019
    The US tax system is a complete mess.
     
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  29. sledge
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    by sledge » Apr 2, 2019
    This makes logical sense. Earlier I gave an example of a vehicle purchase and how they didn't discount the original trade (rather the trade vehicle was purchased there or not).

    I'm sure the difference is the type of purchase. Here vehicle purchases are handled at a different tax rate, etc than normal merchandise. I suspect if I dug there is a rule stating trades don't reduce taxable amounts for vehicles.

    I know other states collect the full sales tax value on vehicles. So in that regards I'm happy as vehicle taxes are roughly 1/3 normal sales tax rates.

    Which brings me back to this. Is the trade in value you mentioned a rule under TX law or federal law? And would you need to modify it from state to state depending on their specifics?

    Again, just illustrating the complexities any retailer has to go through.

    Because of the volume going through the internet I doubt this would ever fly. Too many dollars are at risk of escaping.

    Also, are they collecting at the address of the corporate office or the warehouse location/ship point. I'm sure we can see how that could be manipulated.

    When people are on vacation and buy $1,000 stuff out of state all those taxes stay where purchased as that is the point of sale. With internet, point of sale is considered the shipping address.

    Would you be a proponent of higher taxes with less complication? And is that a consumer or business owner view point?

    I think most consumers don't care enough to pay more. Even if at some minor level they know it hurts the retailer and makes their life hard. I think most see it as the cost of doing business.

    I'm not voicing my opinion, just what I seem to notice as a trend with most people.
     
  30. TreeScientist
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    by TreeScientist » Apr 2, 2019
    Exactly @sledge. Plus, every single online company would immediately move their headquarters to either Alaska, Delaware, Montana, New Hampshire, or Oregon. Would be great for those 5 states, but would cripple the economy of every other state. I'm sure you can now see why this would be a problem @ceg.

    I still like the idea of having a national sales tax that was divided among the states based on their total population and/or yearly sales totals. Would of course make it easier for retailers to just levy a single tax rate regardless of the sale, but given the crazy ball of red tape that is the American tax system, I'm sure regulators would even find a way to F-up and overcomplicate something as simple as this.
     
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