Next time you see a lemonade stand run by some children, you might want to let them know about collecting sales tax. Idaho recently told a 12-year-old boy selling raspberries at a roadside stand that he needed to collect and remit sales tax to the state. Sales tax, the law says, is required for all non-exempt purchases of tangible personal property within Idaho’s borders, and businesses, both big and small, need to pay attention to these laws.
The confusion started because the parent had sold produce at the family farm stand growing up in Utah, where sales by family members at farm stands were exempt from sales tax. In Idaho, however, exemptions don’t extend to farm stands as they do in Utah and farmers must collect sales tax on the goods sold to consumers. If they don’t, audits might result in penalties and fines as well as back taxes. The lesson to learn from this youngster’s experience is that you should never enter into a sale without knowing the rules surrounding sales tax and your business. Although he was simply trying to make enough money to buy a new motocross motorcycle, states that charge sales tax see that as a taxable event.
Ignorance, the saying goes, is bliss but only until you’re audited. As a basic rule, if you’re in the business of selling goods then you need to be aware of the tax liabilities your company is taking on during a sale. Although a child selling lemonade is unlikely to be audited for the $10 they might make in the summer, a lucrative raspberry stand that generates a few hundred dollars won’t go unnoticed. Idaho, for instance, has its commission employees look for seasonal stands to inform owners that they are liable for taxes. In some states, sales taxes apply to services as well. Instead of getting caught in a jam, raspberry or not, be sure to check in on laws in states where you do business to ensure you’re abiding by sales tax laws.