Collecting sales tax...and keeping it. How serious?

antrobus

I'd suggest that actually the "artist friend" has very little to fear from the IRS, as there is no federal sales tax in the USA, and the IRS only deals with federal tax. Some jurisdictions within the US have a sales tax, and presumably they have some sort of state, city (whatever) based agency that collects the tax and pursues evaders. I therefore imagine that the penalties etc will vary from place to place.

But then I've only ever been to the USA once, and that was just a weekend in Vegas, so !!!!!! do I know about it?

John_Pierpoint

Just wait until you get Value Added Tax:
That is Europe's (including the UK) sales tax. It is spreading round the world. The difference being that those buying supplies for commercial resale can reclaim the sales tax on their purchases and thus only pay the difference between the sales tax they paid on their purchases and the sales tax they charge on their sales.
Here in the UK it is currently 20% on everything except food (0%) and energy supplies (5%) (**). We also have specific duties (ie a sales tax charged on the unit of measurement no the value) on life's luxuries like petrol & diesel (road fuels), alcohol, tobacco, in addition to the 20%.

So there is a lot of government tax money in the hands of "traders" and an enforcement service to match!

(**) That is a little bit simplistic, as we have interesting little legal debates like: what is the difference between a chocolate cake and a chocolate biscuit (cookie)?. What is the difference between a boot and a shoe?
Is there a material difference between corn flour and potato flour?

zygurat789

And the artist friend who has been charging VAT(sales tax) wouldn't have been in the VAT net because her income was too low and, therefore, would have been guilty of nothing more than increasing her prices - a heinous crime.

John_Pierpoint

That does mean that the Original Poster's friend would be paying the 20% tax on her inputs and would not be able to reclaim it - even if she gets an order from USA.:D

I was rather thinking along the lines of someone fraudulently charging 20% VAT, complete with fake VAT number.

I have been known to have my suspicions with some suppliers and checked with a web site to see if the number is genuine.

We had an example on here about a year ago if I remember correctly - the fraudsters had not even managed to get the check digit in the VAT number correct.

Do you remember the case of melting down gold coins and casting the resulting jewellery "ingot" in the "frog" of a London Brick Company (LBC) "Fletton"?