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How much do small company's really save by accepting cash only/no sales tax?

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imported_Tomato

Diamond Member
I purchased a game for $25 yesterday at a small store in a mall. The owner told me that I wouldn't have to pay tax if I paid cash, but if I paid with a credit card I would have to pay tax. Which lead me to wonder... how much do small businesses/merchands really save by accepting cash only and not charging sales tax? It seems like a significant risk to take for a few extra bucks here and there...
 
probably exactly what the sales tax is.

remember, the merchant pays a few percentage points to the credit card company on every transaction - so by taking your credit card he is losing money.
 
if you did it via cash, you can claim that the item was never sold. If it was not sold, it can not be put in the books.
 
What if they were to get audited ?

Wouldnt there be lots of merchandise come in, and little go out if they did not enter those in the books ?

If they didnt sell it... where did it all go ?
 
If I ran into that I would likely report them to the tax commision. Sales tax directly funds services you use, police, fire, ambulance, your local street maintenance, etc.
 
Originally posted by: AdamSnow
What if they were to get audited ?

Wouldnt there be lots of merchandise come in, and little go out if they did not enter those in the books ?

If they didnt sell it... where did it all go ?
Click to expand...

why in a fire of course.
😉
 
Originally posted by: Tomato
I purchased a game for $25 yesterday at a small store in a mall. The owner told me that I wouldn't have to pay tax if I paid cash . . .
Click to expand...
Burn your own warez, you lazy, low hanging, red skinned fruit.

 
Originally posted by: spidey07
Originally posted by: AdamSnow
What if they were to get audited ?

Wouldnt there be lots of merchandise come in, and little go out if they did not enter those in the books ?

If they didnt sell it... where did it all go ?
Click to expand...

why in a fire of course.
😉
Click to expand...

hehehe 😉
 
$ 0. Businesses pay out exactly as much as they collect, they don't pay extra like with payroll taxes.

Gibson486 is probably right about the shop owner keeping the sale off the books, so at the end of the year the profit will look smaller as (recorded sales - costs for inventory) won't include it.

spidey07 is also right that the owner saves 2-3% in CC fees too, as well as the money from cheating on business taxes.

 
Originally posted by: Perknose
Originally posted by: Tomato
I purchased a game for $25 yesterday at a small store in a mall. The owner told me that I wouldn't have to pay tax if I paid cash . . .
Click to expand...
Burn your own warez, you lazy, low hanging, red skinned fruit.
Click to expand...

WTF? How does buying a game from a small store equates to DLing warez?

As for small businesses skimping on taxes, every business tries to dodge the tax. For small business, it's about receiving cash and not putting it in the books, for big-time corporations, they invented "Creative Accounting".
 
Originally posted by: Tomato
I purchased a game for $25 yesterday at a small store in a mall. The owner told me that I wouldn't have to pay tax if I paid cash, but if I paid with a credit card I would have to pay tax. Which lead me to wonder... how much do small businesses/merchands really save by accepting cash only and not charging sales tax? It seems like a significant risk to take for a few extra bucks here and there...
Click to expand...


think of it this way.

legal sale
25 x ~ 8.25% sales tax = total sale - 3% CC fee - self employment/ income tax

illegal
25 = total sale = profit!
 
Originally posted by: Hammer
Originally posted by: Tomato
I purchased a game for $25 yesterday at a small store in a mall. The owner told me that I wouldn't have to pay tax if I paid cash, but if I paid with a credit card I would have to pay tax. Which lead me to wonder... how much do small businesses/merchands really save by accepting cash only and not charging sales tax? It seems like a significant risk to take for a few extra bucks here and there...
Click to expand...


think of it this way.

legal sale
25 x ~ 8.25% sales tax = total sale - 3% CC fee - self employment/ income tax

illegal
25 = total sale = profit!
Click to expand...

The end user pays sales tax. Also, the game costs money..
 
Originally posted by: CrazyDe1
Originally posted by: Hammer

think of it this way.

legal sale
25 x ~ 8.25% sales tax = total sale - 3% CC fee - self employment/ income tax

illegal
25 = total sale = profit!
Click to expand...

The end user pays sales tax. Also, the game costs money..
Click to expand...
The owner pays for inventory either way, but keeping some sales off-book means the cost of the off-book items is applied to reducing the profit of recorded sales.

I buy 10 games at $10 each.

I sell all 10 at $25 each, but keep 5 off the books.

My taxes should have been:
income $250 - cost $100 = $150 profit, I pay $45 in taxes.

I do my taxes:
income $125 - cost $100 = $25 profit. I pay $8 in taxes, and keep the extra $37.

Inventory costs are not applied game-by-game but (roughly) as a lump sum.
 
Originally posted by: Tomato
Originally posted by: Perknose
Originally posted by: Tomato
I purchased a game for $25 yesterday at a small store in a mall. The owner told me that I wouldn't have to pay tax if I paid cash . . .
Click to expand...
Burn your own warez, you lazy, low hanging, red skinned fruit.
Click to expand...

LOL... 😀
Click to expand...
:laugh::thumbsup:
 
99% of the businesses out there cheat on thier taxes, no matter what size company.

But you can only do it in small amounts, overall the money gained is not worth the effort, or the guilty conscience/worry of being caught.

The IRS has oodles and oodles of complicated algorithms that scour your tax data from every which angle, looking for clues to behavior such as this. If they realize you bought more things this year than money you made, it will raise a flag, or if they notice you seem to be living quite comfortably but your mall store reports it can barely pay the rent, they will take notice. If the difference is minimal, you will probably be safe, if its substantial, expect an audit. And if your audited once, you might as well expect one every year for the rest of your life, they will be going over every piece of data on you with a fine tooth comb til the day you die, then probably a few years after as well.
 
a lot of them do it... the guy who checks our sprinkler system for backflow prevention every year for the town does it... $55 cash. The mechanic also did it for me... at a large gas station too...

Most will if you ask... some simply don't want to risk it.
 
The only stores I've encountered that do this are Asian owned stores. If you talk to them enough, you can get any asian storekeep to give you a cash deal. They could be cooking their books or not.
 
Originally posted by: richardycc
I bet the store owner is asian.
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misconception, although a lot of them who do this are. The 2 I spoke about just now are good 'ole white businessmen in white suburbia.
 
Originally posted by: rh71
a lot of them do it... the guy who checks our sprinkler system for backflow prevention every year for the town does it... $55 cash. The mechanic also did it for me... at a large gas station too...

Most will if you ask... some simply don't want to risk it.
Click to expand...

those are services, no product is sold which would mean charging the sales tax. They are doing cash only so they dont have to report it on their 1040 tax return as personal income.
 
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