Recently, I heard about a women that purchased a new appliance from a big home improvement store. Although she was expecting to save money on sales tax because the store was in a lower tax area, much to her surprise, sales tax was only a few dollars. When inquiring about how this was possible, the salesman simply stated that he doesn't ask questions. Being computer savvy, one can only speculate about a million ways this could happen. Most likely, the sale was listed for a tax exempt organization and the only sales tax probably pertained to a separate purchase order that listed just the appliance accessories. That would effectively reduce the taxable dollar amount but needless to say, it is still illegal.
Catching the people that do this is no easy task. The IRS simply does not have enough staff to investigate every suspicious transaction. OfficeSalesUSA.com requests proof of tax exempt status before processing a tax exempt order. Typically, this proof is kept on file and in theory, the EIN (Employer Identification Number), the tax exempt number and organization are properly vetted. However, not all accountants and bookkeepers are as astute or even conscientious enough to do a proper check.
While it is certainly possible to scam online dealers and even large brick and mortar establishments, there is no question that a much bigger problem occurs every day in places like barber shops and other local businesses that deal with mostly cash transactions. This not only denies money used to fund road construction and other needed repairs but also puts other businesses that do pay taxes at a disadvantage. The one saving grave is that the people that perpetuate these deals are often so brazen that they call attention to themselves by living well beyond their means. Ultimately, no one gets a free ride and anyone that thinks they are above the law can only hope they are not already on the government's radar.
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