Need help in a hurry - Question about Blue Nile and upgrade tax

[mrs-b]

I'm doing an upgrade with BN. They want to charge me tax on the full price of the item, not just on the upgrade portion.

Does this seem right to you?

They're saying that the tax laws have changed and, since they have, I didn't pay tax on the original stone, so now owe tax on the whole new diamond. But tax wasn't due on the original diamond - so isn't this charging retrospectively? And if I HAD paid tax on the diamond, wouldn't that be double taxing?

Can anyone weigh in on this? @Texas Leaguer - this isn't a WF diamond, but I wondered what WF does with this? Do you charge tax on the whole stone if someone upgrades?

Any help from anyone would be VERY appreciated.

 

[the_mother_thing]

Are you in the same state as BN? How do they know you didn’t pay tax on it directly to the state yourself since they didn’t collect it?

 

[cmd2014]

I think by law they have to charge tax on the total price of the item. Then your trade in amount gets treated like a partial payment towards the item. But I might be mistaken.

 

[MollyMalone]

Did you pay use tax on the original stone (what taxpayers in CA and most other states are supposed to have paid on out-of-state purchases for which no sales tax was charged)?

Probably not (few ever have), but if so, I think you can make an appropriate adjustment on your CA income tax return for 2019. If you didn't, then tax on the new total price actually reflects the legal reality of what's due. Would it be any consolation to think about the fact that you're not paying interest on the back, use tax owed?

 

[the_mother_thing]

Here’s the thread where this was discussed recently, and I asked your exact question @mrs-b

https://www.pricescope.com/community/threads/is-this-true-i-received-this-email-from-bgd.247875/

See Wink’s comments re: upgrades in post #32 and TL responded about this in post #53.

Hope that helps!

 

[yssie]

BN’s response is absolutely unreasonable - it punishes those who did pay use tax as they were supposed to!

I am very curious about BN’s answer to this myself. I suspect you’d have to talk with someone in accounting, and they’re probably M-F... I’m honestly surprised there isn’t something in their documentation on this already!

 

[mrs-b]

I have 2 homes - one in CA and one in MA. The stone went to CA, so I paid no tax, as there was none due. But that should be irrelevant; I paid the tax due. Why should I have to go back and pay tax on something already purchased since the old stone is basically a credit, not a new purchase?

Here's a curve ball, too.....

The new stone is coming to MA, which has lower tax than CA and they want to charge me at the MA rate for the whole. If they were being truly logical, wouldn't they charge me CA tax on the portion representing the first stone, and MA tax on the upgrade amount?

And Yssie - great minds and all that - I asked BN if I could speak to someone in their tax dept, and then my internet and phone crashed. Yay. <sigh>

I just find this new system a big, fat mess.

 

[mrs-b]

And thank you all. Sitting here in Starbucks trying to work this out with thunder rolling overhead and no internet at home to work this out. Nightmare.

And @MollyMalone - I always pay my tax. All of it. This is what happens when you have 2 parents who were both tax accountants then you marry an actuary. My father specialized in tax disputes where people had underpaid their tax, or who had massive back-tax bills. He said one thing - over and over, all my life - "Pay your taxes. It's painful - but getting caught is more painful." Very true. And despite how well he knew the system, I never once heard of him taking a shortcut of working the system. The man had true morals.

 

[MissGotRocks]

The last upgrade I did with a B&M store charged me sales tax on the WHOLE amount. I felt the same as you - it was completely unfair as I had paid tax on the first stone. I threatened to just walk away from the deal and they made an adjustment to the price but not the tax. The adjustment amounted to deducting the sales tax on the first purchase. I promptly called the tax office in my state and they absolutely confirmed that the jeweler was absolutely correct - sales tax was due on the ENTIRE amount of the purchase even though it included the first stone purchased and I had already paid tax on it! I was flabbergasted to say the least. The receipt of course showed the entire amount of sales tax - the stone price was just reduced. I have no doubt that they are probably correct mrs-b although you are actually being double taxed on the first stone. Crazy - and they wonder why people squirm about paying taxes! Make the playing field fair and no one would balk!!

 

[lissyflo]

Might comparing what happens on car part-exchanges clarify the tax rules, as it’s the same situation but will have been going on for years so the tax rules are probably bedded down and the info freely available online? (I assume cars would also be more likely to be instate purchases so the tax paid historically would be clearer cut too.)

 

[AV_]

.

This is just hearsay:

I suspect the seller needs to pay (or there is some doubt that they might have had to, on the past transaction), so they are charging (why not, easier to argue you than any tax authority). The fact that it is the SAME seller as for the upgraded stone might be crucial (another seller is not responsible for that past transaction; this would now play into the sum total trade in terms...).

 

[LLJsmom]

This seems to be a sales tax issue and that would vary by state. You should see what your state requires. I think in CA people need to pay tax on the retail price the new stone regardless of what has been paid already.

 

[Lookinagain]

@mrs-b I’ve done trade Ins with Longs in boston and was always charged full tax on the upgraded or new item. I questioned it too as I thought I would get credit for the value of the item traded in as you would if you traded in a car. You get credit for the “equity “. But this is not the case for jewelry per Longs and I do enough business with them that I don’t believe they would charge me something they didn’t have to. But yes then I did pay tax twice on some portion which doesn’t seem right. These were B&M purchases from Longs traded in so there was no question that tax had been paid on the item being traded.

 

[the_mother_thing]

It would seem fair if the ‘full cost’ of one’s trade-in diamond (original price + tax) is subtracted from the price of the new diamond ... then I can see charging tax on the full price on the new diamond because you would not be double-taxed. But it sounds like most dealers subtract only the original diamond price (not including any sales tax paid to them at time of original purchase, if any) from the new diamond price?

 

[hypermom]

The sad thing @mrs-b is that I have an advanced degree in taxation and cannot definitively answer your question. I have my tax returns prepared by a tax firm. I can at least prepare estimated tax payments and answer my tax preparer’s questions somewhat intelligently!

I tried to do some research and did see some indication that BN is correct but I’d prefer you confirm that with a professional. It looks to me that the only trade in’s in Mass that are allowed to be deducted are for cars, boats, and another category that escapes me but it wasn’t jewelry.

You cannot use common sense when understanding tax laws. You need to memorize them. That’s why I think one person working alone can’t understand everything and needs to be in a firm with other individuals to bounce ideas off of.

Just an example for you to show there’s no concern for double taxation at the state level:
My husband is a consultant who works in multiple states during the year. If he works in Arizona and earns $5000 there he pays Arizona taxes on those wages. Now he is supposed to get a credit for those tax amounts in our state of residence, Illinois. Or so you’d think, right? Well no. Illinois doesn’t allow credits for out of state taxes for wages. They want it all taxed in Illinois. So we pay Arizona and Illinois taxes on that same income. This is according to my tax accountant who explained the situation to me last year. He told me that clients who were taking the deduction for taxes paid to other states were getting that deduction denied by the state. So I took his advice and did not attempt to claim it.

Just to illustrate check your common sense at the door. It’s all about maximizing receipts not fairness.

I would be interested to hear what a tax professional in your state says.

 

[Shanster]

I hadn’t thought about that when I upgraded with BN. They charged full tax then refunded me the difference on their own about a week later.

 

[MissGotRocks]

The state tax department can easily answer the question. The vendor really has no choice but to do what the state requires them to collect. I suppose that maybe they take the position they do on jewelry as it is a luxury item and not a necessity but I agree that it seems unfair.

 

[mrs-b]

The sad thing @mrs-b is that I have an advanced degree in taxation and cannot definitively answer your question. I have my tax returns prepared by a tax firm. I can at least prepare estimated tax payments and answer my tax preparer’s questions somewhat intelligently!

I tried to do some research and did see some indication that BN is correct but I’d prefer you confirm that with a professional. It looks to me that the only trade in’s in Mass that are allowed to be deducted are for cars, boats, and another category that escapes me but it wasn’t jewelry.

You cannot use common sense when understanding tax laws. You need to memorize them. That’s why I think one person working alone can’t understand everything and needs to be in a firm with other individuals to bounce ideas off of.

Just an example for you to show there’s no concern for double taxation at the state level:
My husband is a consultant who works in multiple states during the year. If he works in Arizona and earns $5000 there he pays Arizona taxes on those wages. Now he is supposed to get a credit for those tax amounts in our state of residence, Illinois. Or so you’d think, right? Well no. Illinois doesn’t allow credits for out of state taxes for wages. They want it all taxed in Illinois. So we pay Arizona and Illinois taxes on that same income. This is according to my tax accountant who explained the situation to me last year. He told me that clients who were taking the deduction for taxes paid to other states were getting that deduction denied by the state. So I took his advice and did not attempt to claim it.

Just to illustrate check your common sense at the door. It’s all about maximizing receipts not fairness.

I would be interested to hear what a tax professional in your state says.

Oh gees, @hypermom - what hope for the rest of us?!

From the balance of the comments, I'm guessing I'm on the hook for the whole amount, altho I'd LOVE to hear the rationale behind @Shanster's experience!!

This is seriously turning me off the process. I have a lot of diamonds and a lot of projects; it doesn't take much to make me jump ship and change directions.

Taking a looooong hard look at this BN stone now....

 

[rainydaze]

mrs-b have you asked them to discount the diamond by the amount of tax on the original being traded in? Or is the principle and even if they did that, you wouldn't feel whole about the upgrade?

(I want you to get that diamond dammit! It's fabulous!)

 

[Shanster]

Oh gees, @hypermom - what hope for the rest of us?!

From the balance of the comments, I'm guessing I'm on the hook for the whole amount, altho I'd LOVE to hear the rationale behind @Shanster's experience!!

This is seriously turning me off the process. I have a lot of diamonds and a lot of projects; it doesn't take much to make me jump ship and change directions.

Taking a looooong hard look at this BN stone now....

Forgot to mention I am in PA and this happened last November. BN sent me an email about a week later stating they made an error and refunded the difference. Certainly no complaints but I found it quite odd.

 

[Venzen007]

Sales tax is likely intended by the state to be calculated on the value of the goods we acquire via a retailer, rather than what you're actually paying out of pocket, with the assumption that the sales price is a good estimate of that value. So, if someone is acquiring a 10k diamond, the state wants their percent of that amount. There are sometimes specific exemptions, like car trade-ins, which sort of proves the rule.

It's sort of like the income tax principle that if I trade some legal work to a painter for painting my house, I'm supposed to report, as income, and pay taxes on the value of the painter's services, not on what it actually cost me out of pocket. I'm giving up something of value, my time, to reduce the cost of something else of value, but the Fed considers it all as income for tax purposes. No need to go into whether I would report that.

BN presumably sends in any sales tax it collects to the particular states, and then later gives you credit for the rest toward a new stone, but then the state calculates sales tax on the new stone's price as determined by BN. BN could potentially set the new stone's reported value to just match the difference, but that would undoubtedly have tax implications for their business that they're apparently unwilling to suffer.

My 2 cents.

 

[Tophat1]

I have 2 homes - one in CA and one in MA. The stone went to CA, so I paid no tax, as there was none due. But that should be irrelevant; I paid the tax due.

Just because Blue Nile didn’t collect CA sales tax does not meet none was due. States require that sales tax be collected on out of state purchases though many people do not file. So, if you did not submit the tax to CA, I would not consider you are being double taxed on the upgrade.

 

[WinkHPD]

This seems to be a sales tax issue and that would vary by state. You should see what your state requires.

This. What I do in Idaho has no bearing on what I must do in California. I know that I recently did an upgrade sale in a state for which I collect taxes, and my software, which calculates all of the taxes in all of the states that I do collect taxes for, collected tax only on the upgrade value.

I cannot answer any questions about what other states do, which is why I pay each month for software to make sure I am doing it correctly.

Wink

 

[mrs-b]

Just because Blue Nile didn’t collect CA sales tax does not meet none was due. States require that sales tax be collected on out of state purchases though many people do not file. So, if you did not submit the tax to CA, I would not consider you are being double taxed on the upgrade.

Hi @Tophat1 -

Yes - I referred to that in a previous post.

 

[Mcgregor]

Prayers for you for surgery tomorrow. Sending positive thoughts and prayers. God bless,

 

[mrs-b]

Prayers for you for surgery tomorrow. Sending positive thoughts and prayers. God bless,

Thank you @Mcgregor! And thank you for your lovely card that I received when I got back from LA. I'll definitely get back to you, but can you give me a week or two? I'm pretty off the pace at the moment and don't see myself being able to sit comfortably for a fair while.

Thank you tho - I loved the sentiment, and it was so encouraging. ox

 

[Weecam]

And well wishes for your quick recovery and good health.
@mrs-b.

 

[whitewave]

I would say BN is wrong because I did like we were supposed to do and self pay the tax to the state on state income tax forms.

So for me, it would be double tax on the first half.

 

[mrs-b]

And well wishes for your quick recovery and good health.
@mrs-b.

Thank you, @Weecam!

 

[MissGotRocks]

I would say BN is wrong because I did like we were supposed to do and self pay the tax to the state on state income tax forms.

So for me, it would be double tax on the first half.

And that's exactly the way it is in my state. It's like paying it double - but that's the state law. You pay tax on the whole amount regardless if you paid it on the first half.