For those of you with a state sales tax, how do you handle "tax exempt" customers? A lot of people claim to be tax exempt, but very few actually provide me with the appropriate tax exempt certificate. They always promise to to avoid paying the taxes, but either never do, or give some dumb tax ID # thinking that makes them tax exempt (which it doesn't).
Just wondering if anybody else has this problem.
Thanks,
Rusty
Last edited by rusty; August 15th, 2008 at 07:05 PM.
Just require the proof of the seller's permit (or whatever certificate your state requires) or charge them tax.
Just like many of our blank t-shirt seller's do.
They either provide proof, or they get charged tax. You don't want to have to mess around with that stuff when your state comes after you for the sales taxes that you were supposed to have collected or the proof you're supposed to have on file when you didn't.
It might cost you some orders, but that's better than an audit
In NC there is a form all tax exempt customers are supposed to fill out...not sure about Texas. If they dont fill it out before the sale, they sure arent going to fill it out after.
Even if they provide sellers permit, they may not be tax exempt for what they are buying from you.
Only if they are going to resell what they get from you.
You can go to www.texasonline.com and find the tax forms. Print some blanks to have available for your customer to fill out, sign and date. If they won't do that then you charge them sales tax. If you ever have a sales tax audit you have to have these certificates on file or you will be charged the tax on that sale and probably penalties and interest.
Thanks for the comments. The problem with me is that I work out of my home, and take most of my orders over email, and then send invoices and get paid with checks in the mail. So it doesn't do me any good to have the forms physically on hand. And they tell me they are tax exempt and that they will provide me with a certificate, but just never do. And some of them, even after I charge them tax on the invoice will still send me a check without the tax including in it. And they promise to get me a tax exempt certificate, but I never hear from them again. It's a pain. I might have to just set my wife loose on all of them :-)
Even if they provide sellers permit, they may not be tax exempt for what they are buying from you.
Only if they are going to resell what they get from you.
This is not exactly correct. Churches and schools can be tax exempt even though they are not reselling things. They are the worst about not providing a tax exempt certificate. At least, that's the way I understand it. Maybe I'm wrong. But they always tell me they are tax exempt.
Most companies that are actually being managed well have a copy already made that they just toss through a copier and hand out. We charge tax until provided
Don't process the order until they provide you with the certificate.
They can fax it to you or email it to you.
You are the one who is liable to the state if you don't have this information and it could cost you a lot of money.
If they are legitimately tax exempt then they should have no problem providing you with the document you need in order to sell to them and not charge sales tax.
Actually its already is costing me a lot of money because I'm the one that ends up paying the taxes. I always write the invoice as Taxable until I receive a certificate. And then when I get the certificate I go back and modify the invoice. But as I said, customers will often just not pay the tax saying they will get me the certificate. So when it comes time to pay taxes, the invoices show that I collected tax, and must therefore pay the state, but it actually just comes out of my pocket.
Obviously I just need to stop being nice and demand payment in full. This is the kind of stuff that I hate having to deal with. I just like printing shirts.
Thanks for the comments. The problem with me is that I work out of my home, and take most of my orders over email, and then send invoices and get paid with checks in the mail. So it doesn't do me any good to have the forms physically on hand. And they tell me they are tax exempt and that they will provide me with a certificate, but just never do. And some of them, even after I charge them tax on the invoice will still send me a check without the tax including in it. And they promise to get me a tax exempt certificate, but I never hear from them again. It's a pain. I might have to just set my wife loose on all of them :-)
My .02!
I don't like taking checks because many times they have a habit of bouncing! To try and collect on a bounced check is not worth your time unless it is in the thousands.
If I were you I would not accept checks and make an emailable credit card authorization form for them to fill out and for you to use to charge their credit card. This way you can tell them that if they are not able to provide you with the proper tax exempt form at that time that when they do you can return the tax portion that will be charged to their credit card. At that point they will either be too embarassed to say no or will decline ordering. Better to not have that kind of customer anyways!
If, for some reason, you don't or can't do the credit card thing then I wouldn't ship the merchandise until you receive the check.
How Do You Handle "Tax Exempt" Customers? 
To try and collect on a bounced check is not worth your time unless it is in the thousands.
