Making sense of the sales tax laws in your state or country is an important part of running a gift basket business.
That’s because you need to know when to collect taxes and how to remit them.
However, there are times when collecting taxes on some sales and not on others will be confusing, a good reason why getting advice from an accountant that specializes in small business rules will be a huge help. That’s a point I make on pages 71 and 72 in the updated gift basket book.
This article about collecting taxes on bagels sold in New York is a good example of a law that makes you say, “Huh?”
According to the article, New York state’s laws on bagel sales are:
- If it’s sold whole, the bagel is not taxed.
- If it’s sliced and/or topped with a spread, it’s taxed.
- If the customer leaves the store without eating the bagel, it’s not taxed.
- If the customer eats the bagel in the store, it’s taxed.
Can you imagine trying to figure out how to apply tax to a gift basket in that manner? Thankfully, U.S. laws generally mandate taxing gift baskets sold to residents in the state where you do business and not to out-of-state customers. Other laws may apply according to where you live.
What if a state’s or country’s laws specified a gift basket tax if:
- The customer owns a cat but not a dog.
- The place where the basket is delivered is surrounded by a white picket fence.
- The recipient works in construction but only on houses, not commercial buildings.
If these examples make you shake your head, you can imagine what bagel sellers are going through.
The bottom line is to know your tax laws and maintain a relationship with a knowledgeable accountant who can update you on rules you can’t possibly decipher on your own.
What problems have you experienced with sales tax laws in your area?
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Hi Shirley,
You’re absolutely right about the confusing nature of tax laws. That’s why I leave this are up to my CPA who actually enjoys keeping up to date on changes in the law.
The best benefit of engaging the services of an accountant or CPA is that you have someone to consult when needed, and an advocate if the IRS rears its ugly head with the words “AUDIT” clenched between its crooked teeth.
Hi Flora,
What you say about leaving the task of knowing tax laws with an accountant is absolutely true.
Not only is their assistance invaluable, their service is also more affordable than many designers who don’t have accountant realize.