Breathing Masks vs. Sales Tax

Flintlock · Jul 21, 2020

In NJ the breathing masks that are being sold by the millions are exempt from sales tax. However when I checked (for NJ), all the major retailers were charging sales tax anyway. The retailers I checked included: Amazon, Walmart, Home Depot and Harbor Freight. Amazon was easy to contact and they corrected. At Home Depot I informed a manager. I have no idea what they did. Walmart is too hard to contact.

I imagine retailers in your state may be improperly applying sales tax as well. Obviously the exemption varies per state. In NJ the tax folk publish a user guide, SU-4, on their web page. Florida has similar and I expect your state has an easily read guide as well.

I just wonder what they do with the money? If they are just careless, and remit to the State, you have to wonder about the incompetence of their accountants, who can't read simple directions. Don't you love to pay extra tax? If they keep the extra funds, then we have a much darker issue. What's the deal where you live?

BlackTalon · Jul 21, 2020

I imagine it is hard for them to rework their programs so they do not apply sales tax. I have to imaging their checkout programs are written to charge the sales tax for the state you are in. I do not see them spending hundreds of thousands of dollars rewriting their checkout programs, especially when states can change on a whim. Or for all we know, maybe they ARE rewriting the programs, which takes time.

connieseamaster · Jul 21, 2020

There are lots of items that are exempt from sales tax. It's just a matter of adding the UPC to the system

gatorcpa · Jul 22, 2020

Flintlock
I just wonder what they do with the money?

If sales tax is erroneously collected from customers, it still must be paid over to the state.

The company can file for a refund later on, but if approved, they would need to refund the overpaid tax to its customers. Since the amounts are generally very small, most companies don’t bother.

N-95 masks have been sold for years by home improvement stores like Home Depot as taxable supplies. Once the pandemic hit, the states changed their laws to reclassify them as medical equipment, making the same item now exempt from sales tax. Home Depot doesn’t ordinarily sell medical equipment, so they don’t have this classification in their computer system to match the SKU of the N-95 mask on the date the law change takes effect in that state.

Home Depot now has to reprogram cash registers in all 50 states at different times with different exemptions. In many cases, it’s the manufacturers who make the changes to the sales tax software used by retailers. Home Depot sells millions of different SKU items from thousands of manufacturers. Not all these manufacturers are able to keep up with all these state tax law changes.

Not as easy as you think.
gatorcpa

RI Omega Fan · Jul 22, 2020

Not mask related, but while we’re discussing sales tax, did you know 50 star American flags are also generally exempt from sales tax in 10 states?

These states include Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, West Virginia and Wisconsin. They’re also exempt in New Hampshire, because the state has no general sales tax. Four other states - California, Tennessee, Vermont and Virginia - provide for tax-free sales of U.S. flags, but only if the flags are sold by a government agency or a tax-exempt organization.

In my experience, very few retailers, if any, are aware of this fact. Just FYI...

asrnj77 · Jul 22, 2020

RI Omega Fan
Not mask related, but while we’re discussing sales tax, did you know 50 star American flags are also generally exempt from sales tax in 10 states?

These states include Connecticut, Florida, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Rhode Island, West Virginia and Wisconsin. They’re also exempt in New Hampshire, because the state has no general sales tax. Four other states - California, Tennessee, Vermont and Virginia - provide for tax-free sales of U.S. flags, but only if the flags are sold by a government agency or a tax-exempt organization.

In my experience, very few retailers, if any, are aware of this fact. Just FYI...

I wonder if this applies to US flags produced in China? They may be exempt from sales tax but likely paid customs duties when they entered the US at the port of entry.

tumbler · Jul 22, 2020

Flintlock
I just wonder what they do with the money? If they are just careless, and remit to the State, you have to wonder about the incompetence of their accountants, who can't read simple directions. Don't you love to pay extra tax? If they keep the extra funds, then we have a much darker issue.

My guess is that they remit it to the state, the state keeps it, and neither side worries too much about it unless someone complains. In the case of large operations like Home Depot and Walmart, the companies are almost certainly not keeping the tax for themselves. The computer is simply programmed wrong and treating the masks as taxable. When tax time comes, the company tells the state that they sold $XXX in taxable goods, and turns over the $X that they collected in sales tax on those goods... and everyone moves along. When they notice the issue, they will reprogram the computer and try to do better next time. It's not perfect, but I'm pretty sure that is how they handle it.

gatorcpa · Jul 22, 2020

RI Omega Fan
Not mask related, but while we’re discussing sales tax, did you know 50 star American flags are also generally exempt from sales tax in 10 states?

I wonder if 51 star flags are tax-exempt in DC? 😜
gatorcpa

Flintlock · Jul 22, 2020

Gator, you're certainly right about their lazyness. In NJ the dust masks were already exempt as are items like hard hats, gloves, welders gloves, and safety goggles. All these items will typically have tax applied at the major stores.

If any states did actually amend their laws to exempt breathing masks they should be expected to be compliant. It is especially unforgivable to disregard a state legislature's urgent action.

There should be penalties for retailers that don't make adequate efforts to ensure accuracy. At least, more buyers need to be aware when they are over charged.

Rodentman · Jul 22, 2020

Our gun club tried to find out if membership dues were taxable. We have tried many times to get a straight answer from the State but they remain unable to provide a simple yes or no.

Evitzee · Jul 22, 2020

And look at mail and internet sales...collecting sales taxes was always going to be a problem with the Supreme Court's Wayfair decision......there are 42,000 zip codes in the USA and 3.100+ counties, many have individual tax rates and rules to what is taxable and non-taxable. Sometimes there are 'tax holidays' for going back to school clothing and supplies. It would be a huge effort to set up a system to correctly charge the right tax on mail and internet purchases. But here we are. In my experience businesses just charge the tax to be on the safe side. My wife and I buy wine out of state and have it shipped, some wineries charge sales tax and some don't.

Flintlock · Jul 23, 2020

Evitzee
And look at mail and

You open up a whole new can of worms with interstate sales. The nexus rules are evolving. Now the term 'sales facilitator' is in use and eBay for one is required to charge sales tax. Usually the states basic tax is applied without regard for local reduced rates.

In NJ there are reduced tax zones. They don't apply to mail order sales.
In FL the sales tax is 6% with most counties adding 1%. Internet sales to FL charge 7% and I am not sure how the extra 1% is handled. It may go to Richard Pryor! 🤨

Each state makes its own political decision on taxable items. In SC even groceries are taxed. FL exempts groceries but taxes clothing. NJ exempts clothing and groceries.

These simple regs aren't hard for brick and morter stores with corporate bookkeeping departments to comply with. I'll give Amazon credit, they fixed it fast.

Flintlock · Jul 23, 2020

Rodentman
Our gun club tried to find out if membership dues were taxable. We have tried many times to get a straight answer from the State but they remain unable to provide a simple yes or no.

Clubs may face the issue of federal and state income taxes as well as sales tax. If the club is making sales of items to the public, tax issues arise.
If you have a range and memberships are sold to provide access to it, the issue might arise.

If you're just a few guys that spend all the dues on the summer picnic and Christmas party forget it.

Pvt-Public · Jul 23, 2020

Actually it’s not all that hard. I used to work for a major grocery chain. If they wanted to change the price or category of an item a person in the store with the correct authority could do it in about 30 seconds. They would use a specific terminal look up the SKU and could change price, taxable/non taxable, and even product categories. Any store that is scanner based (Home Depot, Lowe’s, Safeway, Winn Dixie, etc.) will have this type setup. It takes far too much time to update individuals registers. And if not on a scanner based system, just have the cashier enter the mask price in a non taxable category.

Breathing Masks vs. Sales Tax

Flintlock

BlackTalon

connieseamaster

gatorcpa

RI Omega Fan

asrnj77

tumbler

gatorcpa

Flintlock

Rodentman

Evitzee

Flintlock

Flintlock

Pvt-Public

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