Some days being a libertarian would almost make sense. From Bloggity Blog-Blog-Blog:
So she got some help. At times the thing seemed almost resolved. But the IRS is determined to run her out of business. Within the last week she was told that she cannot have any backstock of comics. She has to destroy her backstock – shred or burn every comic book – by December 31st in order to get out of the debt. And she needs a receipt to prove that she destroyed the comics. Otherwise, she owes the IRS $14,000, and will owe the IRS an inventory tax every year from here on out. Even though her lawyer and accountant are convinced that she’s completely in compliance with every pertainable law.
A more detailed account, written by the comic book store owner, is also on Laura’s blog.
This is a frightening case. I’ve been around comic book shops enough to know that virtually no comic book shop is taxed this way by the IRS – and if they were, virtually no comic book store would still exist. There may be more information which makes the IRS’ position look reasonable, but as far as I can tell, this is genuinely a case of the IRS driving a small businesswoman into bankruptcy for no reason.
Dirk Deppey has more information. He also requests that Washington residents drop a quick, polite note to their senators asking that they intervene – check out his post for more info..
This is just insane. They want to tax her on what she sells and on the items that haven’t sold yet? And the only way she can get out of paying the tax is to completely destroy her inventory before the end of the year?
Actually, it is tax law. Every year you are supposed to pay tax on inventory. If your current year end inventory has greater value than your last year end inventory, you are taxed on the difference.
I only found this out while running my own business. It’s an absurd tax that is extremely hard on small business. But easy, for the most part, to avoid for long enough to be able to set aside the necessary funds.
I can kind of understand the logic behind the tax. Keeps companies from hiding their profit by loading up on inventory towards the end of the fiscal year.
I think the question at hand then is: was the value of the inventory determined arbitrarily? I mean, that seems to be the thrust of the post. The best he could have done without a reputable price guide (assuming such a beast exists…) is add up the cover prices. Then again, adding up the cover prices of books in a quarter bin could be disastrous for the shop owner.
Well, also, from what seems to be said in the articles, stores that do under $1,000,000 in business annually are exempt from the taxation of inventory. IANAA, of course, so I really can’t debate the ins and outs of these laws, but there could certainly be a case made for the fact that, were these laws applied across the board in the way the IRS seems to want to apply them, there would be damn few comic book stores (or used book stores) able to stay in business for long.
—JRC
Personally, this situation has “witch hunt” written all over it. If the agent’s comment about the worth of the comics is verbatim, he was looking for a reason to begin this process.
I agree with Dan J- how was the figure arrived at? Was it cross-checked against several sources to ensure accuracy?
I’m no tax expert… but something smells rotten in Denmark (err, Kenmore).
Writing my senators now, thanks.
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