Upthread, I mentioned a sales tax audit I once experienced, which sort of illustrates my point:
I used to sell mineral specimens to collectors from a website. It was a nice little business and was connected to my hobby of mineral collecting. 95% of my sales went to addresses in states other than my own or to other countries. At the time, those sales were not subject to California sales tax. When I made a sale to someone in Califiornia, I noted that and filed the required form annually and paid the sales tax. I never charged the sales tax, and just paid the percentage on the total invoice amount. In a year, the taxes i paid amounted to less than $200, so it wasn't worth bothering doing the more complicated calculation.
At one point, I moved my business into a small office suite, built display cases and called the place a mineral museum. I hosted classes from the local schools and did a nice lecture on the importance of minerals. Occasionally, but rarely, someone found their way to my offices and bought a specimen or two. I kept records of those sales, as well, in my little receipt box.
At the end of the year, I added up all the California sales and paid the sales taxes I owed.
Then, one year, i got a letter from the State Board of Equalization, telling me that i would be audited and that a sales tax auditor would come to my location to conduct the audit. I called and explained my business and told them that my most recent sales tax filing was accurate and did not amount to enough to warrant an audit. Nope, they said. The auditor will be there on such and such a date, and that I was to have my books ready. Books? I did not do bookkeeping. I had an Excel spreadsheet where I entered each sale. In each record was the location of the customer. I even entered those few local walk-in sales. Then, I could sort the spreadsheet by state and know exactly how much I had sold within my state.
Anyhow, the auditor came. I showed him around my little "museum" i showed him my box of invoices and receipts, and handed him a printout of Excel spreadsheet sorted by state (or country). I had even printed a separate report showing sales in California with the totals.
It was a tiny little business. In a year's time, I make about 500 sales in total. In California, I made about 40 sales, by mail or in my office. I explained to the auditor that I didn't keep regular books and explained that I paid the tax percentage on California sales on the total amount charged to the customer, which was more than I had to, but simpler.
The auditor guy just laughed and said he wouldn't be bothering me any further, and asked where a good place for lunch might be.
Government tax agencies don't understand my kind of businesses. They just don't. The individual auditor does, though.
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