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Is any other non-Michigan framer getting the shakedown from the state of Michigan

Discussion in 'Picture Framing Business Issues' started by johnny, Nov 27, 2009.

  1. johnny

    johnny SGF, Supreme Grumble Framer

    They are threatening audits and tax assessments on me now. When I looked into it when they first bothered me they were saying that because I have a website which is accessible by people living in Michigan (like every other website on the internet) I am actively soliciting Michigan residents and I need to pay the State of Michigan taxes.

    Anyone else getting hammered? How did you handle it? I ingored it thinking that since I do not live in Michigan, sell to anyone in Michigan, or even enter the state or come within 100 miles of it, they were just blowing smoke. I guess I was wrong.
     
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  2. Framar

    Framar SPFG, Supreme Picture Framing God

    Well, if they audit you they would find that you have no customers from Michigan, right?

    I think state governments are all getting antsy about the retail slowdown which in turns has cut down on their fundage. They cannot pay themselves outlandish salaries if their fundage dwindles.

    New York State came up with a doozey - after me being in business for 27 years now they demanded a "Renewal Fee" of $50 which will continue to allow me to collect fundage for them!
     
  3. AnneL

    AnneL SPFG, Supreme Picture Framing God

    Did you check to make sure it isn't a scam and that it is actually the state of Michigan?
     
  4. johnny

    johnny SGF, Supreme Grumble Framer

    Yeah it's real. They are laying claim to 4.95% of my income plus 0.8% of my revenue and if I voluntarily respond now they will limit the audit to the last 4 years.
     
  5. PaulSF

    PaulSF PFG, Picture Framing God

    Will they pay your accountant fees if their audit turns up zero liability? For that matter, how do they get jurisdiction over you? I should think that having a website isn't sufficient to give them personal jurisdiction over you for any legal action. In any response to them, I would make sure to include some language specifying that you do not consent to personal jurisdiction, yada yada. Your attorney should be able to put something together for you.
     
  6. AnneL

    AnneL SPFG, Supreme Picture Framing God

    How can they cross state lines like that?
     
  7. johnny

    johnny SGF, Supreme Grumble Framer

    Here is some info. They are saying that the existence of my website even though it does not sell anything meets the "nexus" condition. I googled the link, it has nothing to do with them. The email address of my auditor is a michigan.gov address, the phone number is a real govt one and it's on state letterhead and i have to fill out real state forms and mail it to a real state office if I am forced to participate.

    http://ip-216-37-52-65.nframe.net/publications/22/doingany.htm
     
  8. RParrish

    RParrish PFG, Picture Framing God

    Yikes got a CPA working for you? Best thing to do with any Department of Treasury is to remain in contact with them, preferably via phone, if you are and show a willingness to work with them they are easier to work with.

    http://www.michigan.gov/treasury

    Michigan has some pretty crazy state laws, like no wine or alcohol can be shipped across state lines, which had really hurt local wineries and breweries that want to expand, some move to Colorado which has better laws for this purpose.
     
  9. freakquency

    freakquency SGF, Supreme Grumble Framer

    It still does not make sense. How can you owe them anything if you did no commerce in the state? What grounds would they have to collect anything? None that I can see. So even with an audit your liability would be 0 would it not?
     
  10. Framar

    Framar SPFG, Supreme Picture Framing God

    That article is from 11 years ago - were there even websites which sold stuff back then and if you do not sell anything on your website (no shopping cart, no sales!) how can they go after you?
     
  11. johnny

    johnny SGF, Supreme Grumble Framer

    With an audit my liability would be zero but the audit would be expensive and expansive, going back through 4 years of sales at a minumum. I don't have the time or money to spend on such an overreaching, insane problem. Tax agencies are in panic mode. This would be my 3rd concurrent audit.
     
  12. Framar

    Framar SPFG, Supreme Picture Framing God

    So wouldn't the solution be to simply ignore them and just make sure yournever step foot into Michigan in your lifetime?
     
  13. johnny

    johnny SGF, Supreme Grumble Framer

    Not if they estimate some insane tax and file an assessment againt my assets.
     
  14. RParrish

    RParrish PFG, Picture Framing God

    Last thing you want to do is ignore them , believe me I tried.

    On all websites I have used, Amazon, Kohl's, Target, business selling in MI on EBay, they always charge Michigan Sales Tax, 6%.
     
  15. JFeig

    JFeig SGF, Supreme Grumble Framer

    That sounds like they are demanding State of Michigan income tax on 100% of your income as well as a portion of your shops retail sales!

    I agree with Paul, if you:
    1. do not have a actual sales function to your web site-
    2. do not travel to Michigan-
    3. do not ship product to Michigan on a regular basis - Michigan "Use Tax" places the burden on the purchaser-
    4. do not live or work in Michigan

    What is the basic for their claim of jurisdiction? It all seems like a loooooong stretch.
     
  16. JFeig

    JFeig SGF, Supreme Grumble Framer

    I have been through several Sales Tax audits as a representative of Montgomery Wards.

    The audit does not have to be done under the auspice of an accountant. All you have to do is offer them a desk and the daily sales reports for the shop in boxes. They then have the task of going through them (without your assistance). If and when they lay claim to anything, you can then and only then call in your accountant or attorney. Let them do their "fishing trip" at their expense at your location - not Lansing.

    PS - their staffs are so overloaded, they might cancel the audit.
     
  17. Framar

    Framar SPFG, Supreme Picture Framing God

    Back in the seventies I used to do outdoor weekend art shows with my macrame and other crafty carp. I did one show in Massachusetts and before I was allowed to set up for the weekend I had to fill out the forms to collect their 5% sales tax on anything I managed to sell.

    It was a hideous show, I sold very little, didn't make my booth rent, and when I got home I mailed them the few dollars that I owed them. For many MANY years after that they sent me quarterly invoices which I dutifully filled out "No sales, no tax collected" and mailed it off to them.

    Then I stopped doing the craft show circuit so I decided to get out of having to respond to Massachusetts every three months. I filled out the "Gone out of business" line - secure that my problem would be solved. But NO! In three months along came another form. And another, and yet another.

    I finally got really angry with them, filled out the part about "Gone out of business" in red Sharpey, tore the card into 8 ragged pieces, stuffed it back into the original envelope, stuck it into the mailbox with "return to sender" scrawled on the envelope.

    Never heard from them again (of course I have never dared to venture back to Massachusetts either!).

    This was of course, before Al Gore invented the Internet.
     
  18. johnny

    johnny SGF, Supreme Grumble Framer

    Thank you very much.

    #### of a Thanksgiving present. My only solace is that Ohio State kept Michigan out of a bowl this year.

    I'll fill out the forms and send them in and wait. Hopefully someone with a brain will see them and realize this is crazy.
     
  19. Framar

    Framar SPFG, Supreme Picture Framing God

    If you have no Michigan customers and no Michigan sales and no shopping cart on your website - how can they be wanting to charge you sales tax and income tax? Have you ever even been in Michigan? (If you have not I might point that out to them) - it sure sounds like they are on a fishing expedition.
     
  20. johnny

    johnny SGF, Supreme Grumble Framer

    They should have absolutely no jurisdiction or power over me. But when has that stopped government?
     
  21. Dave

    Dave SPFG, Supreme Picture Framing God

    I hear they have internet in Nigeria too, Johnny.

    Don't fill any of those internet orders!

    :shutup:
     
  22. freakquency

    freakquency SGF, Supreme Grumble Framer

    I just can't stop thinking that this is some sort of elaborate scam .. made to look like something official
     
  23. FrameMakers

    FrameMakers PFG, Picture Framing God

    Since when is "actively soliciting Michigan residents" in a non red-light kind of way subject to any form of taxation. Sales are taxable, income is taxable but marketing to someone can't be taxed.
     
  24. freakquency

    freakquency SGF, Supreme Grumble Framer

    Talked to my accountant:
    If he can do it electronically, it won't be expensive. If they show up at his door, he has to make himself or a designee available to answer and substantiate all their questions. Then it is a matter of labor costs.

    I guess it depends on who is calling for the audit.

    Sales taxes are a state matter.

    So it would seem it would be the Michigan Department of Revenue or some such arm of the government.

    It might be worth it for him to contact legal counsel to determine if he is even subject to them.
    subject to the state of Michigan.

    Seems to me that when you open yourself up to interstate sales, you now have the burden of proof.

    If he keeps good records, he should be fine.

    Usually though, when something like this comes up, it's a widespread problem and the taxing agency is starting to crack down.

    The IRS does it all the time.

    Like when the IRS started taxing tips for restaurant people, then it spread to anyone who earns tips. Now it's widely known that people have to claim their tips for tax purposes.

    This guy might be the beginning of something like that.
     
  25. AnneL

    AnneL SPFG, Supreme Picture Framing God

    Another possiblity is that he sold something to some place in his area that has corporate offices in Michigan one time and they reported the purchase to that state. If the check was issued from an office in Michigan, they may be counting it as sales there even if what was purchased was never physically in Michigan.
     
  26. johnny

    johnny SGF, Supreme Grumble Framer

    That would be epic. If this doesn't go away easily then anything remotely Michigan related is hella-banned from my stores.
     
  27. johnny

    johnny SGF, Supreme Grumble Framer

    Ohhhh, the Cleveland Cavaliers are owned by Dan Gilbert from Detroit..... still not over the threshold.
     
  28. Dave

    Dave SPFG, Supreme Picture Framing God

    I suppose I wouldn't get the red carpet treatment then...sigh
     
  29. Framar

    Framar SPFG, Supreme Picture Framing God

    Dave, if you buy anything at Johnny's be sure and only use cash!!!!! then he won't be needin' to report that ye be from Michigan!
     
  30. Beveled

    Beveled SGF, Supreme Grumble Framer

    It doesn't surprise me. Michigan is desperate for money, and they're grasping at straws trying to find it. Taxation of internet sales is one very untapped area.

    Interestingly, there was a recent proposal here to allow bars to stay open till 4 am. What could they possibly be thinking since Michigan has very strict drinking and driving laws??? You got it! Money. Drunk drivers pay thousands in fines and fees for getting caught.
     
  31. framinzfun

    framinzfun MGF, Master Grumble Framer

    Have you thought of maybe contacting a local politician? Like your state rep or something? It really sounds fishy to me that they are doing this to you at all.
     
  32. johnny

    johnny SGF, Supreme Grumble Framer

    Sorry Dave :( Maybe we can barter under the table... you guys have something in Michigan... lakes? like 1000 of them? Or is that Minnesconsin?

    Seriously it's bad enough dealing with my own state. If the neighboring ones are going to start with the taxes and returns and such it just makes running a business all that more undesirable.
     
  33. FrameMakers

    FrameMakers PFG, Picture Framing God

    I was thinking the same thing Johnny. Being in busness for yourself is getting harder and harder anyways. Adding carp like this starts to tip the scales.
     
  34. johnny

    johnny SGF, Supreme Grumble Framer

    I was thinking of writing the A.G. of Ohio if things got nasty.

    As for the politicians... one state senator is a lame duck retired guy and the other is likely to say "lolz capitalist pig pay taxes"

    The local government is pretty much all under federal indictment. (not a joke)
     
  35. johnny

    johnny SGF, Supreme Grumble Framer

    JFeig and my atty put me at ease, I think it probably won't be so bad.

    The irony of it all is that I was really concerned that those of you who were depositing thousands of dollars in coins at a time to get travel points would get audited... haha.
     
  36. John Ranes II CPF GCF

    John Ranes II CPF GCF SGF, Supreme Grumble Framer

    more information please...

    Johnny,

    I'm not sure if some of the respondants to this thread read the details in your link...
    Not comforting at all in that they appear to be cleaverly disquising a sales tax as an alternative tax to reach out beyond their borders....

    I'm curious if you website did flag them to come after you - what is your website?

    Where in Ohio is your business? Name/Address? Your profile tells me nothing. :shrug:

    John
     
  37. johnny

    johnny SGF, Supreme Grumble Framer

    I choose to remain anonymous in my posts because I want to be completely candid about all the different sorts of business matters here, and these conversations and opinions are not ones that I would openly have with my customers standing right there. So if they would google my name it would be the same difference. The way I feel about it, posting with my business name would change the way I respond and I would censor myself.
     
  38. GUMBY GCF

    GUMBY GCF SGF, Supreme Grumble Framer

    Johnny
    Change your web page to read

    Any offers or solicitaion on this web page are excluded to the residents of the Countries or States of ; Michigan, Mexico, Africa, Iran etc..

    Try and keep that current LOL.
     
  39. johnny

    johnny SGF, Supreme Grumble Framer

    Haha. My webpage hasn't been complete for several months... had a new framework put up and i'm waiting for the content person but that seems to be stalling out. But John asked me some questions in PM that reminded me that my previous site did indeed sell a product... it was one of those commerce sites hosted by Somerset, but they told me that I didn't sell anything on it so I cancelled the agreement.
     
  40. Paul N

    Paul N In Corner

    Weird.

    Since when is having a website equals actually selling anything to pay tax on??

    Let them audit and see if they find anything. Can you sue to recover your costs?? If you can, that might make them a bit less stupid in their demands.

    As to to contacting politicians, forget that. Contact a few TV stations instead!!
     
  41. Not your average framer

    Not your average framer CGF II, Certified Grumble Framer Level 2

    I think it's best to be nice to them and tell them that you are very happy to make any information available for their inspection at your premises and that as far as possible you will endevour to assist them as far is reasonably possible.

    If your customer details are recorded on a database, you can also mention that fact and that as all customer details are fully searchable, it will only take them a few minutes to establish that you do not have any customer records connected with Michigan.

    It also would not go amiss to mention that as far as you know this is the first time anyone has contacted you after seeing your website!

    Send the letter by recorded delivery and keep a copy on file, just in case!
     
  42. jim_p

    jim_p SGF, Supreme Grumble Framer

    You might want to pass this along to the Ohio Attorney General... he might be more than a little annoyed at another state attempting enforcement actions in his territory...

    This is something that dusts up around here every once in a while. New Hampshire has state-run liquor stores that are cheaper than their Massachusetts counterparts. Every so often MA sends unmarked state troopers into NH to take down any MA license numbers parked at such an establishment... until the NH state troopers arrive and escort them back over the state line :)
     
  43. PaulSF

    PaulSF PFG, Picture Framing God

    The absurd thing is, most of us have websites. I have a website, and I'm sure anyone in the state of Michigan with internet access can view my website. Does that subject me to a potential audit from the state of Michigan? Well, if they want to pay the airfare and hotel, bring it.
     
  44. Framar

    Framar SPFG, Supreme Picture Framing God

    Be careful what you wish for Paul - you don't know how desperate those Michiganders can be!
     
  45. GUMBY GCF

    GUMBY GCF SGF, Supreme Grumble Framer

    Don't offer anything they do not ask for......
    I would make a call to the attorney generals offce though before I did anything....He is a big Buckeye fan.....
     
  46. johnny

    johnny SGF, Supreme Grumble Framer

    I'll post if I hear anything back after sending in the information. Although I do like the idea of calling our AG office first.

    They listed several reasons for this in thier first notice, that either I was conducting business in Michigan, or had a sales agent conducting business in Michigan on my behalf, or was soliciting residents of Michigan or had a website which was accessible by residents of Michigan. The website thing is the only possible way I can be connected to Michigan. Except for selling to the Cavs I now realize, but just cuz the majority owner lives in Michigan doesn't mean they are a Michigan entity. And at any rate I'd never sell enough to reach their threshold so the whole thing is assinine.
     
  47. GUMBY GCF

    GUMBY GCF SGF, Supreme Grumble Framer

    the products you did for the cavs were they delivered in Ohio or did you ship them to Mich.? Were they paid by a company out of Mich? IF you shipped them to Michigan you may have to get your check book out. If they took possession in the state of Ohio Let the Attorney general tell you what to say.
     
  48. johnny

    johnny SGF, Supreme Grumble Framer

    Delivered to the arena here in Cleveland. I did quite a bit over time but it could have been more since lost a lot because I like checks and not tickets for payment. Still, not so much as to fall under Michigan's iron fist haha. I never looked at the addy on the checks, or even saw them myself actually. I bill a Cleveland address.
     
  49. Candy

    Candy SGF, Supreme Grumble Framer

    This is a response from my tax accountant......

    1. Is your correspondence from the Michigan Department of Treasury - Sales Tax or is it Michigan Department of Treasury - Michigan/Single Business Tax?

    2. If it is Michigan Single Business Tax, then you have to have $350,000 of gross Michigan Sales per year to be subject to it.

    3. If it is Michigan Sales Tax, then you have to have Nexus, that is either a Michigan location or a Michigan Sales Agent.

    4. If your correspondence has a phone # or an individual's name, I would contact them and explain your situation. Be sure to reference point #2 and #3 above in your conversation.

    5. If then sent you forms, either SBT or Sales Tax, I would file the forms with zeros and submit them to Michigan. That way you have no liability for penalties or interest.

    6. I am going to PM you with a bit more information.

    By the way, I have know this guy for over 35 years and he is good. He is so good, I married him!!! LOL

    Candy
     
  50. johnny

    johnny SGF, Supreme Grumble Framer

    Thank you Candy! I don't know which one for #1, they are at work I'll check tomorrow. They said that if I do whatver this is.... http://www.michigan.gov/taxes/0,1607,7-238-43519_43525---,00.html ...that they would limit the lookback period to 4 years. But I'm thinking that won't be necessary in the long run.

    Then I have a specific form to fill out. They gave me the form number but not the form. Again, have the number at work. I'll be looking up that form on Sunday.

    I do have a specific individual there to work with. I tried calling him today but he's still sleeping off the turkey.
     
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