Disturbing Conference Call

[erchess]

Sales Tax

Harlan, I don't think anyone in NC pays sales tax on products that end up being installed by contractors who bill properly. I know that anyone who buys products for resale can obtain a certificate from NCDOR exempting those purchases from sales tax. They are supposed to not use the certificate when they buy items for use in the business or obviously for personal use but I don't know how or even whether that is policed.

[JohnH]

It is policed via sales tax audits. Sales tax audits in NC are on the rise, and the first thing the auditor looks for is internet purchases and other purchases for consumption. They usually spend a small amount of time reviewing sales records for proper reporting and then jump immediately into a thorough review of purchases. If the taxpayer hasn't paid the "use tax" on those items, they get tagged with the tax and a nice penalty as well.

[S T]

NC Sales Tax

NC Sales Tax Audits looking for Internet Purchases and Other Purchases and NC Sales tax not being paid.

Is this true for both individual returns as well as individual returns containing a Schedule C,

or are the Sales Tax Audits limited to Business returns such as partnerships and S corps, C Corps, LLC?

Sandy

[JohnH]

Well, you know they do have that pesky little line 17 on the D-400...
I filled it in the first couple of years, but finally just quit doing it since nobody was reporting any problems with leaving it blank. But one never knows - they could always resurrect it.

I am referring to Sales Tax Audits for anyone who reports & pays sales tax for their business, whether corp, LLC, or schedule C. I've seen more sales tax audits in the past couple of years than I saw in the previous 10 years. Some of them were taxpayers reporting relatively low sales tax liability. The auditors told me going in that they were mainly interested in use tax, so they said to get out all the purchase info & be prepared to spend some time on it.

On a lighter note, I have a friend in Michigan who was telling me about a sales tax audit he went through and they began to focus on use tax. They were tagged with additional tax on a few consumption items and the auditor was being a bit of a jerk about it - wanted to look at practically every invoice for a $10 million revenue company. During the second or third visit a flourescent light burned out in the room where the auditor & controller were busy at work. After sending someone down to the hardware store to buy another one, he went in with it and jokingly said "I'm here with a tax-paid bulb so you can see better to figure out how to get more money out of me". Funny thing was, his employee-controller scowled at him but the auditor laughed.

[S T]

D-400

Yep I saw that pesky little line 17, we didn't have that on the Calif 540, although now Calif has added for the business returns, so I am sure Calif will be auditing Business Clients as well, has not been an issue in the past.

Guess we are going to have to be more judicial in asking our clients about internet purchases, etc.

Thanks JohnH,

Sandy

[JON]

Still do not get it..

You are going to get rid of a client, because you do not like who he talked to. If he had you on the line for business advice-of course you tell him you think this was overstated and not a good choice. There are millions of bad business ideas out there and some people make bad business decisions. Getting rid of the client because you did not like what someone else said to him???!! If you were asked there to give an opinion then you should have given it then. That was what you there for...

[erchess]

Am going to caution not fire client

I will repeat that I was not asked onto the call to comment at that time on anything except tax matters. However, when I see him possibly about to engage in misleading advertising speaking up privately is part of what he wants me to do. He would not have wanted me to say anything on the call unless a question was directly put to me.

[DaveO]

Mostly Harmless

There are a bunch of water treatment systems promissing dubious health benefits. Simply drinking more water can lead to better health. There are sytems that promise to increse O2 levels and energize the water or to re-program it to remove its "memory". As was stated before the main danger is to the pocketbook.

I wouldn't worry about Circ 230 issues even if what they promote proves to be untrue any more than I worry about the benefits promised by Quixtar prove to be untrue. The fact that they truthfully report income and expense and generally comply with tax law is what you need to be concerned with.

The promoters of maintaining an alkaline pH in your body will sell you a bunch of supplements to achieve that end. As far as O2 in the water there is no mechanism in your GI tract for absorbing Qxygen. Even if you ingest water with a pH of 7.4 it would be so weakly buffered as to have no effect once it reaches the gastric acid of pH 1 to 2. If you want to buffer your system to the alkaline I would think eating a handful of Tums would be far more effective. I have a very dear Uncle who is into all kinds of this fringe health stuff. While I discount most of it he is 76 years old and in excellant health. He lives high up in the mountains and travels as much as he pleases.

[Bees Knees]

In the wild west, traveling salesmen would sell various elixirs that could cure every disease known to man. They usually consisted of some type of alcoholic mix. A shot of Brandy would have produced the same results.

The modern day equivalent elixir is the vitamin/herb/mineral/water/sugar/etc. crowd. True, there may be some health benefits. If vitamin C can prevent scurvy, it seems logical preventing blood vessels from leaking should cure this and that and every other disease known to man, etc. etc. etc…

There is always going to be some elixir for sale with a certain degree of truth to what is claimed, even if it is greatly exaggerated. Fortunately, the IRS has yet to require us to enforce truth in advertising with our clients in Circular 230, although I suppose that could be next.

[erchess]

Don't get me wrong

I am still not going to fire this client but my fear that made me consider doing so was not of the IRS. My fear was that if the client were to be brought up on civil or criminal charges, I might be charged for aiding and abetting him. Then there is the little fact that if the case got a lot of publicity my name and professional reputation could be dragged through the mud. I eventually decided that everyone who wants to obey the tax laws of the US is entitled to competent help doing so and that most people will understand that if push comes to shove.

[Black Bart]

First it was Whitewater -- now there's Tightwater.

...I don't participate in any of this stuff, but will look forward to doing their work as they get rich. A year or two later we are usually trying to figure out when to write off the obsolete inventory sitting in their garage.

I've been through several of these scheme-scams and the junk always ends up like John says -- in the garage. The poor unfortunate "distributor" would like to discard the evidence of his stupidity, but...he just can't do it -- after all, that stuff cost him an arm and a leg. Besides, he's an optimist -- it might sell someday.

My guys sold washing powder "powerballs," Sargasso Sea Supersponges, marten (bird) houses, and a tin carburetor attachment "guaranteed" to get you 40 miles to the gallon.

While I wouldn't have anything to do with the wholesalers, I'd do taxes for any of my clients that were in it. One downside -- when they realize there's no money in it (an uneasy feeling within two days -- the undeniable reality about two years later) -- they recall part of the original sales pitch: "You can write thousands off your taxes." Then, they want the kitchen sink and (worse) they can hardly stand to hear you won't deduct all their Amway-style $25,000 losses in the gross plus personal expenses galore.

I'd discourage my clients' involvement if I could.

[S T]

I am in the market

BB,

I am in the market for purchasing Purple Martin Bird Houses, if you t/p still has some at a fair price.

Sandy

[taxxcpa]

Compressed water

As a physicist, I reject the idea that this system can force water molecules to be compressed so that they are both smaller and closer together.

Gary

I'm no physicist, but I spent about 15 years as a gas revenue auditor and had to learn a lot about gas which was described as a 'compressible' fluid vs fluids such as water and oil which can't be compressed. Until I began working with gas, I did not realize that a fluid was anything that flows, not just a liquid.

I don't know if molecules can be altered to make them smaller, but if it involved compression it would not be possible.

[Black Bart]

Thanks for the offer, Sandy.

BB,

I am in the market for purchasing Purple Martin Bird Houses, if you t/p still has some at a fair price.

Sandy

but it's too late -- that "distributor" died ten years ago. However, he eventually got a benefit -- he didn't spend as much as usual on his wood-burning fireplace for quite a while.

Guess I shouldn't laugh about it too much -- I've done similar stupid things.

Years ago, before widespread use and availability of fire/smoke alarms, a former classmate dropped by the house to ask "Can I show you a video?" Two puzzled, curious dopes, we invited the serpent in. He treated us to a charming 30 minute film starring charred bodies of residents of alarmless households. He asked if I loved my family. He asked if I were a smoker (I was). He pointed out that safety, good health, and peace of mind could be mine for for the mere price of a few packs of cigarettes. Warming to the sermon, he waved a pack of Winstons under my nose and demanded to know for which I cared more -- the smokes or the folks?

I can't tell you the vast relief I felt when he generously offered to save my child and immediately install four Old School Chum Company Super Smoker Units. At only fifty bucks a pop, I jumped on that deal.

Thinking about it later, I kinda wanted a drink...and maybe a cigarette too.

[DaveO]

There are a lot worse things you could have blown money on that fire alarms. I did Amsoil for a few years. I repaired motorcycles in my spare time so had a ready market for some of the product and still use some yet today. The two-stroke oil is awesome.

Remember those goofy calling cards that came out in 1994 or so? A buch of people loaded up on over-priced long distance cards thinking they were collectible. It's a plastic calling card folks, not a Honus Wagner rookie card!