A few scenarios:
1)A licensed electrician comes to your home to do electrical work. When it comes time to pay the bill, he asks to make the check payable to his full name not the name of his LLC which he is the sole proprietor/owner.
2)A kitchen cabinet installed installs cabinets in your kitchen. When it comes time to pay the pay, he says “Make the check payable to me or ‘cash’ and I won’t charge state sales tax.”
3)A handyman performs work on your home. When it comes time for the bill, he has no paper work at all, and asks you to pay him in cash.
4)A guy knows on your door, says he will pave your drive way and gives you a contract to sign. The contract has a company name on it, but it clearly says that checks be made payable to his full name. There is no state sales tax or a line for it in the sub-total of the contract.
5)You go to a discount furniture warehouse. They will sell you the sofa, but when the invoice is done the salesman says he will not charge sales tax if you pay cash. But if you put it on a credit card, he has to charge you sales tax.
I’m not being naïve here. I suspect they want to not charge sales tax to make it cheaper for the buyer and in most cases don’t want to claim the sale as income if the check is written directly to a person. With the exception of #5, all the above are sole proprietor/owners. I’m not concerned with someone who has a partner or is trying to hide their income for other reasons, I’m just talking about what is legal for the actual sale to the buyer.
It seems the business has all the risk here, because they would be the ones who get audited. I’ve not heard of a home owner being audited for receipts to see if they are paying sales tax, since for personal income taxes there is no requirement to save receipts for personal items purchased that I know of. No receipts, there would be nothing to audit even if such a thing existed or occurred.
For the buyer of these goods and services, are they doing anything illegal in this transaction? Or does the entire thing rest on the seller? Could the seller be doing this to appear to be doing the seller a favor, but in reality they end up paying the sales tax and/or running it through their own business anyway and is that legal? As the purchaser of goods and services, isn’t it up to the seller to determine what should be charged sales tax and what shouldn’t be, because not everything has a sales tax on it.