Shop Talk: Practical answers for tough business questions

by : 
Kim Perkins
October 1, 2014

Question: A friend and fellow retail business owner was just audited by our state sales tax office and has to pay more than $700 in taxes and penalties. They were assessed for not reporting and paying the sales tax on merchandise they donated to charities! That seems unfair. Have you ever heard of such a thing?

Answer: Yes, I have, but most store owners are not aware of this requirement unless they have either been audited or their accountant has conveyed this knowledge. It may not even be true for all stores, because sales taxes are county and state jurisdiction, and laws vary.

In Florida, where my store is located, the sales tax law states that if I donate merchandise to a charity, I have to report it to the state and pay the sales tax as if it had been sold. Because I do not want to bother with that level of record-keeping, we only donate gift cards to auctions or local events. No sales tax is due on gift cards until they are redeemed.

Another little known sales tax requirement is if you order something for your store from out of state (items not for resale) and are not charged sales tax by the seller, you are supposed to report that and pay the tax. One way state revenue departments enforce this payment is by monitoring the bills of lading filed by trucking companies that transport larger items, such as bookshelves or display pieces. If you do order large items from out of state, I strongly recommend reporting it and paying the sales tax rather than invite a sales-tax audit.

Kim Perkins is co-owner of Elysian Fields Books & Gifts for Conscious Living (www.elysianfieldsonline.com), an award-winning store in Sarasota, Fla. Send your retail questions to kim@retailinginsight.com.