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cbarnes

Charge Sales Tax separate or include in price?

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hello all, 

i am doing an art festival next month and was wondering how others handle sales tax in state its required.   I'm in Seattle Washington.  at farmers markets i was just including it in the price, so a bowl would be the price on the sticker, but in reality i'm losing 10.1%.  i found that people wouldn't pay the higher price if i wanted to "mark it up" by the tax.  and my husband didn't want to do the math at checkout :)

i've noticed some vendors charge tax on credit card sales, and not on cash sales (easier on my hubby, and i wouldn't also be eating the 2.75% credit card fee).

what do you guys do?

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People expect to pay tax (especially here in Washington!!!), if you're low tech, use a calculator and when you total it up, multiply by 1.101 and that's your total with tax, you can write it down in a book so you can tell how much to send uncle inslee.  If you're high tech, use a mobile cash register app.  They don't take much time or effort either way.  Why would you want to eat the cost just to save 5 seconds, you're going to have to calculate it later anyway

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When I first started doing shows, I stuck with round numbers.  It was easier for me.  So  you can mark up your items appropriately to take into account the sales tax.  But If you are using an app for Credit cards, it is super easy to put in the sales tax under your settings and have that figure at your fingertips (literally!) And change that tax rate depending on where you are selling.  I run all my sales through Square, cash and credit.  It is a great "cash register" and that way you have all your numbers at your fingertips.  If someone purchases something and wants you to ship, you can make sure that shipping is on your list of non tax items.  Same thing with gift cards. As you said, you don't want to pay that 10% out of your pocket.    I always tell people as I am checking out their purchases, that the "sales tax on this purchase will be..." People seem to understand that is part of doing business.

Roberta

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I charge sales tax on every credit card transaction. The system calculates it for me, so no big deal. I also charge sales tax on cash sales, but I always round down to the nearest dollar so I don't have to deal with coins. If someone asks for no tax because they're paying cash, I'll usually say okay unless it's a high tax rate. There's a big difference between a 3% credit card charge and 10% sales tax. 

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I do it the same way as Neil. I add sales tax to every sale, then for cash sales I round down to the nearest whole number, so that I don’t need to deal with coins. Lots of cash payers are surprised and grateful for that less than $1 discount.

Once you’ve been selling for a while, you’ll realize that NOBODY MINDS being charged sales tax. The only sellers who feel uncomfortable adding the tax are new sellers who haven’t gained their footing yet. 

Shoppers make their decision based on the price on the price tag. If you are building sales tax into your prices, especially if your sales tax is over 10%, you might be losing sales because your work seems overpriced. 

As for your husband not wanting to do the math, fire him for being lazy! Or, like others have recommended, let the Square app do the math. Or, get a calculator that will do the math with one button. 

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thank you so much for the advise.  i will start charging the tax.  i knew it was easy on the square app.  just wasn't sure what buyers expected.  i appreciate the input!!!! 

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3 minutes ago, cbarnes said:

i will start charging the tax

It's semantics but instead of saying you charge tax if/when customers ask, change it to "I collect (and remit) tax". I think it makes a difference with people. 

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5 minutes ago, Min said:

It's semantics but instead of saying you charge tax if/when customers ask, change it to "I collect (and remit) tax". I think it makes a difference with people. 

oh, i like that.  thank you!

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I sell a lot of pots in your state-I add the tax to the sales price on the sticker at the sale-not on the sticker.I run a small cash register and its got tghe tax programed in so its no worries-I also round down to the nearest nickle or dime  but usullay quarter-whatever. Folks are stating to not like coins-(this has taken forever as I hate them)I like to only deal with quarters 

I carry rolls of coins always and look forward to giving it up.I round up or down so pennies are not in the mix in all transactions-cash check-credit card.I tend to do volume business and quik turn over is key so keep it simple. Your husband needs educating about business.

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18 minutes ago, neilestrick said:

An easy way to do it on a calculator is to put the multiplier into the memory so you don't have to re-enter it every time.

On my calculator, it’s even easier than that. It has a “TAX+” button. I can program in whatever the tax rate is for any show. After adding up the items in a sale, I hit “TAX+” and get the grand total including tax. 

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17 hours ago, cbarnes said:

(easier on my hubby, and i wouldn't also be eating the 2.75% credit card fee).

Don't forget credit card fees are tax deductible, I know it doesn't feel like it at the time but the fees eventually pay you in lower taxes.  

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I asked my accountant about the logistics of doing this in Canada, just for kicks.

She mentioned, amongst other things, that if I am in a position of having to collect sales tax in a province I don't live in, I can also claim back all sales tax I pay in that province for the trip to get to the show. So the tax on the booth fee, the meals, the gas, hotel, etc. I can claim back, as long as I'm collecting sales tax. Does something like that apply in the various states?

added: The Province and the Feds here both tend to take a pretty dim view of you not collecting and remitting taxes when you're supposed to. If you get busted here, you owe them all taxes you should have been collecting, plus interest. Not sure how your authorities deal with such matters though.

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It's the same here in the US, but on top of that each state, county and city can also have their own sales tax, so it's probably triple confusing.  It's best to track all of these things in accounting software because everyone wants their cut.  One of the more annoying things is that at least in my area, each city wants you to buy a business license (~20-30 bucks) just to sell in a farmers market or craft show.  Of course that is all tax deductible as well.  Wish there was an artisan license that was statewide to avoid all the extra hassle.  I know my city (and neighboring ones) require you to appear in-person to buy the business license as well. For me that means taking time off of work to wait in line at city halls since they're only open 9-5 m-f.  Ugh.  Im going through all of this in my business planning right now and the bureaucratic stuff is all kind of a small nightmare.

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1 hour ago, Callie Beller Diesel said:

So the tax on the booth fee, the meals, the gas, hotel, etc. I can claim back, as long as I'm collecting sales tax. Does something like that apply in the various states?

I wish! That would be especially nice for hotel taxes, which can be very high. But unfortunately, we don’t get to do this. 

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42 minutes ago, GEP said:

I wish! That would be especially nice for hotel taxes, which can be very high. But unfortunately, we don’t get to do this. 

You definitely can deduct lodging, meal and mileage (or airfare/train) costs from your taxes when on a "business trip". Not sure what you mean

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You can use actual expenses or the IRS guide to citys overnight rates-that is the irs has a published fee for city stays-I have my account use the highest number so I give them the actual and also give them a list of some many nights in each location as well so they can check that rate against the actually.

Tax questions this time of year really???

Business expenses for the most part are all right offs.

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1 hour ago, liambesaw said:

You definitely can deduct lodging, meal and mileage (or airfare/train) costs from your taxes when on a "business trip". Not sure what you mean

Those are deductible expenses on our INCOME TAX returns. But the SALES TAX agencies do not give back any sales tax we've paid, just because we are collecting/remitting sales tax to them. 

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12 minutes ago, GEP said:

Those are deductible expenses on our INCOME TAX returns. But the SALES TAX agencies do not give back any sales tax we've paid, just because we are collecting/remitting sales tax to them. 

Oh I thought we were talking about income tax since we were talking deductions.  The only sales tax break I get is when ordering supplies.

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I'm learning all this because I've had to apply for a GST number, which means I have to collect (and remit) Federal Goods and Services Tax. It's 5% on anything considered non-essential. I live in a province that does not have an additional sales tax, but if, for instance, I wanted to go to a show in the province next door, I'd have to apply to also collect the HST (Harmonised Sales Tax), which is GST plus the provincial rate, which can vary. If I'm collecting these taxes, then I can claim back the taxes I pay in the course of doing my business. So if I'm buying materials, I'll be charged GST at the till, but because I have a GST number, I can get the amount I paid back on that quarterly when I remit what I've collected. I can also use the pre tax amount I pay for those same materials as an income tax deduction.

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36 minutes ago, Callie Beller Diesel said:

I'm learning all this because I've had to apply for a GST number, which means I have to collect (and remit) Federal Goods and Services Tax. It's 5% on anything considered non-essential. I live in a province that does not have an additional sales tax, but if, for instance, I wanted to go to a show in the province next door, I'd have to apply to also collect the HST (Harmonised Sales Tax), which is GST plus the provincial rate, which can vary. If I'm collecting these taxes, then I can claim back the taxes I pay in the course of doing my business. So if I'm buying materials, I'll be charged GST at the till, but because I have a GST number, I can get the amount I paid back on that quarterly when I remit what I've collected. I can also use the pre tax amount I pay for those same materials as an income tax deduction.

what are the regulations if someone buys from your website or if you ship to another province?  Or Colorado:D

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50 minutes ago, Roberta12 said:

what are the regulations if someone buys from your website or if you ship to another province?  Or Colorado:D

That actually depends on your state, not mine :). Different States are now allowed to require that out of state internet sellers charge tax on sales in the state. Does your state do this? I don't know. I'd have to look this up, and do my due dilligence as a seller so I don't get nailed. (Interestingly enough, Etsy is supposed to have it set up so that taxes  are collected according to the buyer's state to make it easier on small sellers. Unfortunately, it's not fully compliant yet. Apparantly it's taking some time to impliment it all.)

Because I was looking this up today, I know that if I want to ship to another province, as long as I have a website that isn't directed at a specific locality, I don't have to collect tax. Hypothetically, if I do facebook ads that are targeted to Vancouver in advance of doing Circle Craft and I get internet sales because of that, then I should technically be charging HST for British Columbia on the internet sales. If someone just happened to find me via organic social media presence and makes a purchase, I don't have to worry about it.

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13 hours ago, Callie Beller Diesel said:

That actually depends on your state, not mine :). Different States are now allowed to require that out of state internet sellers charge tax on sales in the state. Does your state do this? I don't know. I'd have to look this up, and do my due dilligence as a seller so I don't get nailed. (Interestingly enough, Etsy is supposed to have it set up so that taxes  are collected according to the buyer's state to make it easier on small sellers. Unfortunately, it's not fully compliant yet. Apparantly it's taking some time to impliment it all.)

Because I was looking this up today, I know that if I want to ship to another province, as long as I have a website that isn't directed at a specific locality, I don't have to collect tax. Hypothetically, if I do facebook ads that are targeted to Vancouver in advance of doing Circle Craft and I get internet sales because of that, then I should technically be charging HST for British Columbia on the internet sales. If someone just happened to find me via organic social media presence and makes a purchase, I don't have to worry about it.

Yes, Colorado requires that out of state businesses pay one of Colorado's numerous sales taxes.  But if I ship out of state, I do not have to pay that states sales tax, unless they require it.  It's all quite layered.  Takes a lot of research to make certain you are compliant.  That is one reason that shows are a bit easier.  All you have to do is learn that locale's rules and regs and you are ok.  

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