From the President
Book Selling on the Internet: Record Keeping
Customer Service
An Informal & Historical Intro to Book Cases
A Conversation with Dick Weatherford of Alibris
The Pros and Cons of Using Abbreviations
So You Want a Website
Digital Photography for Booksellers
About ten years ago, now, in December, I sat with my parents watching the CNN coverage of the Granada military action. This is significant only because at the time I was a ten year veteran in the military, working Special Operations, and those units were my own, those guys in BDUs running around, the gunship crews, they were all friends of mine and I was sitting home recovering from successful surgery to remove an ovarian tumor instead of working on the mission. It’s the only action I missed, and the funny thing was, it didn’t bother me to not be on the inside knowing what was actually going on.
For me, the prospect of cancer had been a wake up call, one of those reminders in life, which made me think about what I wanted to use my time and mind and energy for. Travelling to foreign places and blowing things up, for whatever reason, wasn’t what I wished to be remembered for.
I recovered, returned to work, finished my hitch and left the military to become a deputy sheriff here in Okaloosa County, Florida instead. It seemed a worthier form of warfare to me, and at least this way, if I died, it would be on my own ground and for a cause I personally believe in rather than one I got told to believe in. It was the right decision for me. However, my old nemesis came back to hassle with me again and about three years ago I had two more operations, both successful, to beat tumors, this time trying the breast cancer route.
This second “go round” was harder than the first, really knocked me down and took a long time to recover from. In ways, I am still trying to recover the energy I once had. Just another reminder, and I started Books By Blondie, an online business, to have something to fall back on should another round be ahead of me and I not prove able to continue as a cop. Shortly after this, I got recruited into IOBA by Rik Pavlesak, one of the best friends anyone can have and the owner of Blue Monkey Books. I poured a lot into it, because I believed it could be important for me and others as a small, independent bookseller. I wanted it to be here and be strong in case I ever needed it.
IOBA was just an idea then. I had the pleasure and heartburn both of being one of the Founders and working with the others as we struggled to define and give birth to this dream. Life is strange at times. I started by working as the webmaster for the website, then was drawn in to be the interim Vice President and later was voted in as the first acting President of IOBA. It’s been a very long couple years, full of challenges and hard work to learn the job and juggle this responsibility along with being a cop and a bookstore owner and, occasionally, having a life, too. I’d never done anything like starting and then running a corporation with a board. I was still learning the book business as well. Did mistakes get made? Yep. Did I lose some battles? Yep. I also was in on some great calls and big wins. Life is like that. One battle won or lost doesn’t make the whole war, and it is good to keep your eye on the long term perspective as much as you can to weather occasional setbacks and losses.
Next week, I have another date with the surgeons for another battle with the old nemesis. It will be old news by the time this goes to press. I’m not worried about it, I feel really positive and haven’t chosen to share some of my personal world with you out of some maudlin sense of self pity or doom and gloom. I’m smiling a lot as I type this up. It’s just another one of those reminders in life to run a self check on where I am, where I’m going, what I stand for and what I’d be remembered for if I lost the war today. I like the answers better than I did ten years ago, but I still have a long way to go. I haven’t gotten it right, yet, but I’m learning.
A couple weeks ago, I sent a call for volunteers to the membership for help in the coming elections. Last time around, people lacked confidence, perhaps, and the interim board had to handle it and ended up fortunate to get one candidate for each office. Later, we took some criticism for that, there were some mutters about it. I’d like to avoid that, this time, however NO ONE, not ONE, volunteered or even enquired what we had in mind or needed.
There’s a lot of reasons for this. The biggest one is, you don’t realize how much IOBA needs YOUR help. It really does.
Secondly, some of you don’t know that most of your current board had no prior experience, learned as we went along, and are still learning and making mistakes along with the good moves, and this is OK. Our members have never demanded perfection, just candor, from me. I believe the entire current board would say the same. All you need is the desire to make a difference, to learn and grow some more, to have an effect, to work with your peers, argue and agree and all the usual work of a relationship, be it working or personal. Having a tough skin also helps.
Thirdly, secretly, maybe you lack self confidence to speak up, feeling you are too new, or not good enough in some talent or area or way.
Facing the unknown is scary. I was scared to accept the nomination for president last year, if you want to know the truth. My reasons included all of the above ones. I’m not a fighter by nature, but I’ve learned it’s not being afraid which makes a person a coward. It is what you do despite being afraid which determines whether you face your battles with courage. Win some, lose some, what really matters in life is how you play the game.
IOBA needs volunteers to oversee and help with the election process. IOBA needs several candidates for office to step forward to be the ones to take our association from here. Consider this a personal reminder in life and decide what you’d like to be remembered for a year from now. I really hope and pray with all my heart it will be that, among other things, you choose to add to your short list being much more active in our association, however your volunteerism takes form. No one gets paid here, we’re all volunteers. No more volunteers, no more IOBA.
That would be a damn shame.
In the US, if IRS comes calling, you can never have too many business records. I would think that this same rule would apply to all countries.
When Allen and I were audited a number of years ago, our accountant’s advice was to drown them in paper. In other words, have documentation for anything they had a question about. Her words saved us $45,000. We were flagged for audit because we closed our open shop and began to operate from our home. In order to be able to have room to run our business from home, we added a 2-story library with a cat-walk around three sides. Since our children were grown and not living at home, we lined their old bedrooms with bookcases and were using them as offices for our catalogers, a wrapping room, etc. Our basement family room was lined with bookcases and we wrote that off as well. We claimed 50% of our home as a write-off (we were actually using more) and that brought up the red flag.
I remember well the day the two auditors showed up at the front door. I was greeted with Congratulations, you have won the lottery, unfortunately, it is the tax lottery. Funny, huh? Just what we needed – an IRS comedian. They were there to do an on-site global audit on all our records for three years. This global audit was an option that IRS could arbitrarily determine. It was a true lottery in that the IRS would just pick someone who came up for some individual question and do a global audit. This meant that they wanted to see every piece of business-related paper. Over the course of a year, the auditor spent 175 hours going over our records and in the end decided we owed the government $60,000 in additional taxes. To make a long story short, we appealed and ended up paying the government $15,000.
We won a number of points because the auditor was new and making some very basic mistakes. The auditor informed us that we could not write off our library in its entirety because a picture had been seen of our grandchildren gathered around a Christmas tree in the library. We also had a small bar built into one corner, and we didn’t have bookcases on all four of the walls. Appeals ruled that “incidental use” was allowed in the library, and accepted that it was hard to put bookcases against a wall which had a 12-foot wide sliding door in it and a circular staircase next to the doors. We won the point because the IRS Appeals Officer had offered us a beverage while in the IRS office and we pointed out that was why we had a bar in our library so we could offer our visitors a beverage. The auditor also said we couldn’t write off our basement book room (even though there were over 3,000 books shelved there) because our daughter’s exercise bicycle was stored in the room. The Appeals Officer just laughed at this one and crossed it off.
IRS measured the space we were using and gave us a 54.8% write-off of our house instead of the 50% we were claiming that had triggered the audit in the first place. A fact that we delighted in noting on our tax forms for rest of the time we were in that house (“54.8% as determined by IRS auditor”).
Where we lost was on how we were writing off our book purchases. We were using a cash basis (and had been for the previous 25 years) which many bookdealers also use. IRS required that we use the accrual method. Accrual requires that you account for both expenses and income at the time they are billed. Cash basis meant we recorded expenses when we paid them and revenue when payment was actually received. So, if we had sold books in December that weren’t paid for until January, we counted them in the next year’s sales. IRS said we couldn’t do that because their rules state that if you maintain an inventory you must use the accrual method. That meant that even though we didn’t get paid until the next year, we had to include those orders in our sales for the current year.
However, we won on a couple of big points when they were readjusting our taxes from the cash basis to the accrual basis. The auditor had moved back cross-over sales (in the auditing period) from the year they were paid to the year the invoice was written. Since they were only auditing for three years, the auditor argued that we should pay taxes on what they moved but not be given credit for the year previous to the audit period, thus inflating our sales for one year. Also, even if you haven’t paid the debt, under the accrual method you can write-off expenses the year they are billed. The auditor didn’t want to give us credit for those expenses. Appeals said they had to give us the credit.
We lost on a point we knew we were going to lose on all along. Because we tend toward being obstinate when we feel something is obviously unfair, we wrote off the health insurance policies we were supplying for two of our daughters that work for us, as well as our own. Employee’s policies can be written off, our own could not because we weren’t incorporated at the time. The tax law has changed and you can write off some of the owner’s insurance now but it is a tax deduction that is being phased in over time. The write off will eventually be a 100%.
We won on business travel expenses. The auditor said we couldn’t write off our daily expenses in states we visited on a cross-country book buying trip, unless we bought books that day. The Appeals Officer agreed that just because we couldn’t find books we could mark up for resale that didn’t mean we weren’t conducting business. Therefore, if we had evidence of having been in a shop in a particular state (we had business cards from the shops we had visited) or had to drive through one state to get to a state where we could do business, we could write that day’s expenses off. The auditor also said that we couldn’t write off a trip if we stayed in someone’s home instead of staying in a hotel or motel room. We argued that if we had a friend in the same town where we buy books, the IRS should be glad. The Appeals Officer agreed and also agreed that we could write off the dinner we bought our friends for their hospitality.
We talked to three or four dealers that had been audited in other states and they were also initially told that they would have to change from the cash basis to accrual. At the end of their audits, their auditor’s said they could stay on cash basis as long as they were consistent but we weren’t so lucky.
All in all, we came out smelling like a rose when you consider the adjustments involved in changing us from cash basis to accrual. The good news for everyone is the “kinder and gentler IRS” global audits are no longer done, at least on an arbitrary basis. They can still do line-item audits. But, it’s important to keep in mind that because you never know which line they are going to question, you will need exhaustive records to back you up.
Records to keep for tax audit:
– Supporting documentation for business-related expenses, including all checks written, credit card charges, and cash receipts.
– All bank statements. IRS looks at these to see if your deposits are in line with what you are reporting as income (in other words, don’t claim $300,000 in sales and deposit $400,000).
– All receipts for any fixed business assets (e.g. bookcases, desks and chairs, computers, copiers, mailing scales, etc.)
– All sales invoices you have issued to customers.
– All sales-tax reports. Resellers are required by most States to collect and file sales tax reports.
– Resale tax numbers. You should have Resale Tax Numbers for all in-state customer on invoices where you have not charged tax. While we understand that this is not always easy, your State’s tax office probably will not be quite as understanding.
