WJ Seidl on fri 13 apr 07
Well, okay David. I'll concede that it is illegal in Texas based on your
post. I had not heard of that. It seems a VERY strange ruling to me.
However:
If you are doing a show on a street in a pop-up, your goal is to sell pots,
not play mathematician. We wear enough hats, don't we?
You are going to get penny pinchers and hagglers. Nature of the beast.
In that situation, people (customers) tend to "forget" about sales tax. You
already mention that you get those types. Whether or not you encourage
them, they are there.
Saying that sales tax is included means neither of the things you said,
either that you are not collecting or not reporting it. What that says to
me is that you are fully aware of the sales tax, and as a benefit to your
customer have included it in your pricing to save them the headache of
trying to do math in their heads (which, let's face it, most people are NOT
very good at.) It leaves them wondering "Did I figure that right? Do I have
enough money on me? Will I still be able to get lunch/a massage/cuppa
starbux/pay the mortgage after buying this?"
It also means that you are fully aware of the need to charge it (tax) and
are so doing. Reporting it? Well, that's between you and your state
department of revenue. You are rounding (UP, always UP) as a service to
your customers.
For galleries and retail, this wouldn't apply, of course. People go into
"bricks and mortar" situations expecting to pay sales tax and coming up with
funky numbers, coming out with product and change. Not always so for street
sales.
Larry:
If you have access to a calculator, you can always "reverse engineer" sales
tax calculations on your invoice for the sale. Total the invoice. Then
from the total, divide by 1.(put your tax figure here) and come up with the
sales tax figure. The point is to charge enough to cover it, and your time
for figuring it all out, since no one pays you to do this otherwise. (I'm
always scrupulously honest when it comes to dealing with government. I know
from experience what a nightmare they can turn your life into otherwise.)
In FL, the "collection allowance" is .015%, which in most cases for us is
$3-4, with a max of $30/month allowed. That doesn't even pay my time for
figuring it all out, even with software helping.
Best,
Wayne
-----Original Message-----
From: Clayart [mailto:CLAYART@LSV.CERAMICS.ORG] On Behalf Of David Hendley
Sent: Thursday, April 12, 2007 10:30 PM
To: CLAYART@LSV.CERAMICS.ORG
Subject: Re: Pricing nuances
Hi Wayne, I hate to be so contrary, but I strongly disagree
with your 'sales tax included' advice.
First of all, a sign that says "Sales Tax INCLUDED" is
illegal in Texas. I'm not kidding; the attorney general has
so ruled. Any such promotion is required to have wording
which says, 'sales tax is not really included. You still have
to pay sales tax, but we are lowering the price by an amount
equal to the sales tax you pay'.
They have actually taken some furniture stores to court for
this. I wonder if other states have similar laws?
Second, this is just not good marketing. People expect to pay
sales tax, and I want them to be aware that they are paying
sales tax. Saying that it is included can give the impression that
you are either not collecting sales tax or not reporting it.
I already get people, from time to time, who offer to pay cash
if I will not charge tax. I sure don't want to encourage that.
Once you get up into higher prices, sales tax really does add
enough to make YOUR price sound higher. Texas has a high
rate (8.25% in most cities), Tennessee is even higher at over
9%. That means your $100 pot is now priced at $110, a
significantly higher-sounding price.
Generally, I think the best pricing is to de-emphasize price.
You want to attract 'good' customers, not penny-pinchers
and hagglers. The best way to do this is to stick with common
round numbers. Not only should no 'cents' be involved in the
price, but even a number like $19 can give the impression
that you are 'pricing for the market'. $20 is a better price,
for psychological reasons that reinforce the idea that you are
a high-class artist and you expect to receive your quoted price.
David Hendley
Maydelle, Texas
david(at)farmpots(dot)com
http://www.farmpots.com
Michael Wendt on mon 16 apr 07
Wayne:
We face the same issue with some people who want
to buy gift certificates at some value like $50.00.
Idaho requires us to collect and remit the sales
tax on the gift certificate at the time of purchase.
Often gift certificates sit for months before use.
I set the problem up this way:
cost + (cost x tax rate (here 0.065)) = final price
(tax included)
Since cost x .065 is the same as 0.065cost
the left side of the equation can be combined
to equal 1.065 cost so 1.065 cost = final price
divide both sides by 1.065 to get
cost = final price/1.065
If you substitute any tax rate expressed in
the decimal form for our 0.065 this will
work just as well for your locale.
Regards,
Michael Wendt
Wendt Pottery
2729 Clearwater Ave
Lewiston, ID 83501
USA
208-746-3724
http://www.wendtpottery.com
wendtpot@lewiston.com
Maurice Weitman on tue 17 apr 07
Well, perhaps with more appropriate math, it can be shown that it's
quite simple to come up with the numbers for an item selling price
that will result in a a rounded total price.
The "trick" is to divide by the tax percentage PLUS 100% (which, when
you think about it is the total amount the customer should pay...
100% of the item price plus 8.5% of the sales price for tax), so for
8.5% tax, you divide by 108.5.
Let's say you want the customer to pay you $100, and your tax rate is 8.5%.
Divide 100.00 (the percentage of the item price) by 108.5, you get
0.92165899... let's call it $92.17.
Now to check it, multiply that amount by 8.5%, you get $7.83.
Guess what? They add up to $100.00.
Not that difficult once you get the idea.
Regards,
Maurice
At 09:27 -0500 on 4/17/07, Pfeiffer Fire Arts wrote:
>This is not as easy as it looks! The tax needs to be on the sales total not
>the total with tax. If you just take you total sales, %100 * .085(my
>upcoming show tax) you get $8.50 tax. Subtract this from 100 you get $91.50
>as the total without tax. If this were true you should be able to go the
>other way and say 91.50 * .085 = $7.78 tax = $99.28. The real number is
>$7.83 tax on a sale of $92.17. This is why I wrote a program to do this as
>it is a pain to get the right number going backward. Not a big deal but you
>over paid if you do it on the total with tax.
>
>>>>>If you have access to a calculator, you can always "reverse engineer"
>sales
>tax calculations on your invoice for the sale. >>>>
John Hesselberth on tue 17 apr 07
On Apr 17, 2007, at 10:27 AM, Pfeiffer Fire Arts wrote:
> This is why I wrote a program to do this as
> it is a pain to get the right number going backward.
It is really pretty easy. 100/ 1.085 = 92.17
Regards,
John
Pfeiffer Fire Arts on tue 17 apr 07
This is not as easy as it looks! The tax needs to be on the sales total not
the total with tax. If you just take you total sales, %100 * .085(my
upcoming show tax) you get $8.50 tax. Subtract this from 100 you get $91.50
as the total without tax. If this were true you should be able to go the
other way and say 91.50 * .085 = $7.78 tax = $99.28. The real number is
$7.83 tax on a sale of $92.17. This is why I wrote a program to do this as
it is a pain to get the right number going backward. Not a big deal but you
over paid if you do it on the total with tax.
>>>>If you have access to a calculator, you can always "reverse engineer"
sales
tax calculations on your invoice for the sale. >>>>
WJ Seidl on tue 17 apr 07
Pfeiffer:
Sorry, but it really IS that easy.
I do these calculations all day long, most of them in my head.
I do hundreds of them for each month of sales, before reporting the
information to my state department of Revenue.
I maintain:
A total sale (including sales tax for FL which is 7.5%) OF 107.50
divided by 1.075 (which is ONE of the item + .075 sales tax)
equals $100. Therefore, 107.50 MINUS 100. equals a sales tax of $7.50.
You CANNOT divide the total by 100 and then multiply by your sales tax. It
does not work that way (because the tax is already in the figure), and
that's where you're going wrong. I made the same mistake until my
accountant beat the correct way into my thick skull with a copy of "Math for
Dumbasses".
You must divide by [the (whole) of 1, PLUS your sales tax] as an integer
(note the brackets).
In your case:
"A"
A total sale of $100 (including your sales tax)
Divided by 1.085 (_1_ + your sales tax of .085) <--the integer
equals a price on the item(s) you sold of $92.1658 or $92.17 rounded.
Taking it the other way:
"B"
92.17 (item price) X .085 (sales tax)= 7.8344 ($7.83)
added, then: $92.17+ $7.83 = $100, your invoice total
If you cannot take the figures from the example in "A" and reverse them in
"B" and come up with the same thing, you've done it wrong. That's how I
check myself .
A quicker way for "B" when you're making sales, of course, is to multiply
the sale amount ($92.17) X 1.085, which equals the total invoice of $100,
(it's actually 100.000445 but no one quibbles over 445 ten thousandth of a
cent anymore)
but that does not split out the sales tax for recording on the invoice, of
course.
A very common error, one that gives the Sales Tax people headaches
nationwide, while insuring continued work for accountants and bookkeepers
.
Best,
Wayne Seidl
-----Original Message-----
From: Clayart [mailto:CLAYART@LSV.CERAMICS.ORG] On Behalf Of Pfeiffer Fire
Arts
Sent: Tuesday, April 17, 2007 10:28 AM
To: CLAYART@LSV.CERAMICS.ORG
Subject: Re: Pricing nuances (response to David and Larry)
This is not as easy as it looks! The tax needs to be on the sales total not
the total with tax. If you just take you total sales, %100 * .085(my
upcoming show tax) you get $8.50 tax. Subtract this from 100 you get $91.50
as the total without tax. If this were true you should be able to go the
other way and say 91.50 * .085 = $7.78 tax = $99.28. The real number is
$7.83 tax on a sale of $92.17. This is why I wrote a program to do this as
it is a pain to get the right number going backward. Not a big deal but you
over paid if you do it on the total with tax.
>>>>If you have access to a calculator, you can always "reverse engineer"
sales
tax calculations on your invoice for the sale. >>>>
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Carl Finch on wed 18 apr 07
At 07:27 AM 4/17/2007, Pfeiffer Fire Arts wrote:
>This is not as easy as it looks!
Actually it is!
Suppose you're selling with Tax included (let's call that price T).
If the sales tax is, say, 8.5%, what is the Real price (call that R)?
The relationship between T and R is:
T = R + (8.5% of R)
This is calculated by: T = R + 0.085 x R
Factoring out the R: T = R x ( 1 + 0.085)
Or: T = 1.085 x R
And so: R = T / 1.085
> The tax needs to be on the sales total not
>the total with tax. If you just take you total sales, %100 * .085(my
>upcoming show tax) you get $8.50 tax. Subtract this from 100 you get $91.50
>as the total without tax. If this were true you should be able to go the
>other way and say 91.50 * .085 = $7.78 tax = $99.28. The real number is
>$7.83 tax on a sale of $92.17. This is why I wrote a program to do this as
>it is a pain to get the right number going backward.
Oh dear! I shan't ask how many lines of code!
>Not a big deal but you
>over paid if you do it on the total with tax.
>
> >>>>If you have access to a calculator,
>you can always "reverse engineer" sales
>tax calculations on your invoice for the sale. >>>>
I don't do sales, but I did do 9th grade algebra--thanks Mr. Olson,
wherever you are!
--Carl
in Medford, Oregon
where NObody does sales tax (heaven forbid),
and where the infrastructure of civilization is such that
all 15 libraries in this county have just CLOSED:
or...
Dan Pfeiffer on thu 19 apr 07
Thanks to all for a very good explanation of how the back out the tax. The
way I was doing it was the brut force method, it works but is not as
elegant as using a bit of algebra! We still have problems with how to
handle the rounding but I guess the easy way it to back out the price and
the difference is the tax.
Dan & Laurel
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