(Comics Retailing) Yesterday, if you'll recall, weblogger Laura Gjovaag alerted us to the plight of Corner Comics, a Washington state comics store which has been facing harrassment by the Internal Revenue Service since last March. Originally targeted for a "compliance audit," the agent assigned to look into the shop's finances decided that the shop owed back taxes on the value of its stock of back-issues. The agent has assigned a total figure of $14,000 in taxes and penalties, although he "helpfully" noted that if the store hired someone to completely destroy its backstock (and provided a receipt that this had been done), the subsequent write-off would cover most of the bill. Oh, and it would also likely drive Corner Comics out of business, but hey, who pays attention to the details these days? Yesterday, Gjovaag followed up her initial alert with a long and detailed account of the situation by Corner Comics owner Paige Gifford. Here's an excerpt:
"Now, the law clearly states that if a business makes less than a million dollars a year in gross receipts, they DO NOT have to recognize inventory. Which means that any store that makes less than a million dollars does not have to take a physical inventory of their store's product at the end of the fiscal year. MY STORE FALLS INTO THIS CATEGORY as do most other comic stores and used bookstores in America. So I have never taken a physical inventory of my store as I have not needed to.
"The IRS agent came up with the following figure: since 1998, 10% of the product that I purchase each year does not sell and stays in inventory and NEVER SELLS. So he has added up 10% of my yearly purchases from 1998-2002 and came up with approx $48,000 worth of inventory in those 4 years that NEVER SOLD AND IS STILL IN STOCK. Therefore, if it is still in the store it is subject to TAX. This number is absolutely INSANE. I in NO WAY have 48k worth of inventory in my store. Not even close!! Where he gets his numbers is anyone's guess. This type of business does not have any sort of 'industry standard' to go by so he has his own magical figures he pulled out of his hat.
"Folks, if I had 48k worth of stuff left in my store I WOULD NOT BE IN BUSINESS. So he and his manager are saying that even though the law states that I do not have to recognize inventory because I make less than 1 million a year, they are interpreting the law THE WAY THEY WANT TO in order to benefit them. They are saying that since the 48k worth of inventory sitting in my store is 'dead inventory' and has not sold, that it is not considered inventory so it goes into another category all together. Since it goes into another category it turns around and becomes an asset to the store as 'supplies' or something (it's all legal tax talk crap...) so it goes back into inventory and therefore is taxable at the end of the fiscal year."
What a mess. Can you imagine what would happen if this interpretation of tax law were to be applied to comics shops across the board? This is a horrible precedent to leave dangling, let alone a horrible thing to do to Ms. Gifford.
While there's a feeling of inevitability one gets when contemplating taxes, concerned readers can nonetheless do something to help out Corner Comics in its hour of need. The story has already begun to slowly seep its way around the comics blogosphere -- here are posts by Jim Henley, Franklin Harris, Mick Martin, Augie De Blieck and NeilAlien -- but it could and should go further than that. People should be alerted. If you're a comics-related journalist, you can make a few phone calls and investigate the story. Webloggers can spread the word throughout the internet. If you participate in a group forum, be it message boards or such collaborative news-sites as Slashdot or Metafilter, you can likewise spread the word. Know of a news-site that might consider alerting its readers to Corner Comics plight? Shoot them an email with the appropriate links. If enough noise is made, more of the press might just pick up on it, which may in turn put pressure on the IRS to handle the situation with a little more thoughtfulness.
If you live in Washington state, you have further options. While it's something of an long shot, legislators in Washington have been known to step in when the IRS was in the midst of doing damage to a cherished local business. You can help build the neccessary momentum by taking a moment to compose a polite letter or email to your local senators, Maria Cantwell and Patty Murray. Readers living in Washington's first congressional district can also email their local congressman, Jay Inslee. Here's a sample letter, to give you an idea of the kind of tone and talking points useful in composing such a message (although you might want to skip that stuff about writing for The Comics Journal).
Of course, in an ideal world this would be a task best co-ordinated by an industry trade group, sufficiently organized to offer legal, moral and financial assistance to a fellow retailer in need -- you know, a "comic book industry alliance" of some kind. Sadly, if such an organization did exist, it would probably be too busy, I dunno, whining about discounters on a message board somewhere to be of practical use. Still, one can dream...
