Sales Tax Overcharges: How to Not Overpay and Report Store

Latest update: April 17, 2022. Page URL indicates original publication date; meanwhile, times change and the updates continue.

Have you been overcharged on sales tax? Here is a way on how to mentally calculate state sales taxes on the spot and stop being cheated, catch errors, and prevent fraudulent attempts.

Sales Tax - Regressive Taxation of the Poor

Business, Vendor, or Store Overcharging on State Sales Tax?

When it comes to sales taxes, fraud is not that rare of an occurrence. Many times, smaller stores do deliberately overcharge state sales tax. In fact, I’ve seen news reports where even the larger, national chain stores have been caught overcharging sales taxes. And employees in all stores have also been known to make price and thus state sales tax mistakes as well.

Mentally calculating state sales tax to prevent being overcharged is easy. It all has to do with rounding, no degree in rocket surgery required. You are simply doing a quick approximation to prevent yourself from being a victim of sales tax fraud or simply to prevent being mistakenly overcharged.

[Be advised that this page is US-centric. Canada and most European countries have sales taxes or a value added tax (VAT) far exceeding 10%. However, if the VAT tax is close to another round number, one can still make this method work.]

Here are the four main premises of this page:

• Most combined state, country, city sales taxes do not exceed 10 percent, but most sales tax totals are reasonably close to 10 percent.
• Most thieves are greedy and will exceed the 10 percent amount.
• Even my dog can mentally calculate 10% of something.
• Even my dog can mentally add 10% of something to something.

You do not need any of these...

How to Mentally Calculate State Sales Tax – Some Examples

How do I calculate sales tax from a total?

The best way for this tutorial to demonstrate mentally calculating state total sales taxes is by giving examples. In reality, you already know how to do this. You just may not know that you know yet. So let's begin. You walk up to the counter and engage in a purchase which sells for...

$49.99

1. You round the price to $50.
2. You calculate the 10% as $5.
3. You add the $50 plus $5 to get $55.
4. If the counter person wants more than $55, welcome to the world of sales tax fraud and overcharges.

Other Examples...

$29.99

1. You round it to $30.
2. 10% is $3.
3. Total is $33.
4. If the final price is over $33, welcome to the world of sales tax fraud and overcharges.

$5.99

1. Round to $6.
2. 10% is $.60.
3. Total is $6.60.
4. Anything over $6.60, welcome to the world of sales tax fraud and overcharges.

$79.98

1. $80.
2. $8.
3. $88.
4. Over $88, cheated.

It should be noted that honest mistakes do happen. You will find out soon enough if the overcharge was deliberate or accidental.

Is It Sales Tax Fraud?

What to Do When the Person at the Counter is Overcharging You on total State Sales Tax

This depends on your mood, time constraints, the amount of money involved, the store and neighborhood, etc. Below are some typical scenarios and what one can do in each situation; followed by what you can do after the fact.

You Don't Care About the Amount Involved

1. Say nothing.
2. Pay it.
3. Say nothing. Or say the routine "Thanks."
4. [Optional] Locate and take one of the business cards offered on the counter.
5. Leave.
6. Once outside, note the date and time.
7. Never go back.
8. Maybe tell everyone you know.

You Do Care About the Amount Involved (Option One)

1. Don't pay it.
2. Say nothing.
3. [Optional] Locate and take one of the business cards offered on the counter.
4. Leave. Be advised however, the counter person (probably the owner) will immediately know that you know he was trying to cheat you. And you took one of his cards... And state sales tax fraud is a very serious offense...
5. Once outside, note the date and time.
6. Never go back.
7. Maybe tell everyone you know.

You Do Care About the Amount Involved (Option Two)

• Politely point out the total is incorrect and explain why you think so.
• If the counter person reviews and corrects the error:

1. Pay it.
2. Call it a day.
3. Maybe or maybe not give the place another chance in the future.

• If the counter person denies, disputes, or otherwise argues with your statement...

1. Don't pay it.
2. [Optional] Locate and take one of the business cards offered on the counter.
3. Leave.
4. Once outside, note the date and time.
5. Never go back.
6. Tell everyone you know.

Reward for Reporting State Sales Tax Fraud?

How to Report Stores and Other Businesses Who Overcharge State Sales Taxes

Not only are you doing a good deed for society, you might even make some money in the process.

1. Find your state's website dealing with all things sales tax.
2. Find where to report what you experienced. As an example, in California the California State Board of Equalization would be where to go. California does not pay a reward the last time I checked. However, reporting the fraud is still a good idea; wouldn't you like the thief (employee or owner) removed, so you can have an honest, local place to shop? Reports can be made anonymously and will still be investigated.
3. For other states, determine if you might get a reward. Tell them your experience in detail, including date and time. Give them all the information on the business card. If you don't have the store's business card, that is ok; just be sure the store name and address you are reporting is correct. And don't worry; they're not going to just take your word for it. They will probably send the equivalent of a few "mystery shoppers" to the store to confirm. When they have absolutely verified and proven it is not an isolated incident; only then will the hammer fall on the deserving thief.

More than likely the store location is leased. With any luck, the thieving employee or owner will soon be gone; hopefully replaced with a new, honest employee or business.

A separate note as to state sales tax billing errors by business vendors. There it is in writing; it's a pretty good bet that this is an honest mistake and a simple phone call will fix it. While you're at it, you might want to review the previous invoices from this vendor.

A July 2020 Update
If you do online shopping, you will want to read this site: Dark Patterns.

April 2021 Update
Depending on your state, retailers can be subjected to both criminal and civil penalties for frequent overcharging of sales tax. There can even be class action suits against the larger retailers.

October 2021 Update
Another holiday shopping season approaches, chaos expected to be even worse than last year. Here is a very worthwhile .gov page about sales taxes for Californians: California Buyer’s Guide to Tax.

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