MARS Bulk Purchases
- Thread starter Brian Prestwood
- Start date
Mr. Ugly
New member
A big part of how they arrived at that conclusion was by looking at the posts on the BAR RC forum.
Our club was up for review, and at that time, the IRS saw so much buy/sell/trade/groupbuy activity that they decided our de facto mission was to function as a buying club rather than to promote education and appreciation of ethical husbandry and propagation.
We thought it was very unfair, but they didn't care that many of those posts were from non-members using BAR RC as a regional forum.
That eventually led us to start our own private forum where we could maintain a better focus on the club's real mission.
That also led to the creation of the Greater San Francisco Bay Area RC forum.
For a variety of reasons, we're still keeping our BAR RC forum.
Anyway, we've been working hard at promoting mission focused club activities so that the quest to save a buck doesn't become the default focus of our club.
Staying focused on our mission is also why we're extra sensitive about group buy and buying club activities and even perception of such.
Mr. Ugly
New member
And from the BAR(non RC) forum re group buys:
"Group Buys
The place to organize your group buys. *** Bay Area Reefers does not sponsor group buys and is not responsible for the organization of any group buys posted in this forum. The Group Buy Forum is only provided as a convenience to forum members. *** "
"Group Buys
The place to organize your group buys. *** Bay Area Reefers does not sponsor group buys and is not responsible for the organization of any group buys posted in this forum. The Group Buy Forum is only provided as a convenience to forum members. *** "
Thales
Active member
<a href=showthread.php?s=&postid=11420128#post11420128 target=_blank>Originally posted</a> by GreshamH
Please don't just base it on what I said. That is my memory of it and while I was on the BOD at the time, I didn't deal with the IRS. Talk to bookfishI'll call him tonight and see if I was spot on
Don't call him! He wasn't involved, he was in Tonga.
I however, wasn't in Tonga at the time!Mr. Ugly summed it up pretty well, and that is why BAR is now a 501c4 instead of a 501c3. The basic difference is that the activities of a c3 are supposed to benefit the organization or the public, not the members and c4 is much more open (but c4's cannot write you a tax deductible receipt for your donations). It is interesting to note that among the printouts the IRS sent me to show me that we weren't a c3 was our page talking about fragswaps.
I think the IRS is prolly not going to look at MARS ever again in a meaningful way, but if they do, I think they won't like organizing purchases to benefit the members of a c3.
And of course, it all depends on who at the IRS you end up talking to.
Brian Prestwood
Premium Member
OK, I've got some reading to do. For now...
It looks like we kept it civil, great.
I don't see a lot of boogie man logic. I.e., don't do it because vague and mysterious bad things will happen. Also great.
It looks like we kept it civil, great.
I don't see a lot of boogie man logic. I.e., don't do it because vague and mysterious bad things will happen. Also great.
dots
Premium Member
Great job so far guys, it seems very constructive. It appears to me there are some points that need to be clearly defined so that an informed decision can be made. It appears some of these need to be clearly defined to all and perhaps ammended to the by laws.
1. Taking the arquement and the logic of group buys as not within the scope of the clubs mandate could very well be applied to the networking and frag "swaps" that we achieve by interacting with the club. The mere, "FS" ads taken advantage of in corals and equipment, totaled up over the year does take away dollars from LFS, though not "organized". In fact, if there wasn't MARS or RC, divided and conquered we would be and thier profits would go higher. I am seeing this as "giving back" to our community LFS.
2. Bruce brings up an excellent point, we do have buying power that can be used as a pro as well as a con. I think all to often it is used as a con, than a pro. This would be my main reason for supporting "group" or "power" buys with the LFS, and our local LFS only, which could and should be outlined in our statement of reason. I am seeing this as an oppurtunity to give back to the strores in quantity.
3. My suggestion is that these "buys" are only organized through the club and managed so it is single sourced, sanctioned, and only available to current paid members as a benifit to member ship. As a collective, we are using the clubs relationship with the stores to garuntee "x" amount of sales to them from our members with the hopes that they would extend some credit until funds can be collected and work with thier suppliers based on our promised purchases so that a deal with the wholesalers could be worked out in which all benifit. If this is technically not for profit, would it hurt the clubs tax exempt status?
3. The discount? What is it for exactly and who does it really target. Personally, I don't ask for one EVER. The discounts I have recieved have been due to my relationship with the stores I have achieved. I believe that the discounts are really a membership perk for attracting new members and those entering the hobby, I save my "discounts" for them. As I said, this is not a poor mans hobby, and 10% is just a drop in the bucket on day to day purchases. Personally, I don't care for it until the $200+ range, but I digress. My point is, the discount is a null item in this debate and on its own merit needs to be clearly defined on who and why it exists in the first place for the club, its members, and why and who offers it.
4. Impact, if the debate on LFS impact is viable, it cannot work both ways. MARS members only represent 10% of total LFS sales when they could give a care about us. This combined with a saturated market in Sacramento over the last year or so, and each of us spreading our spending dollars all over, I would be willing to bet that they would embrace a group buy program organized through the club, for the club, in the name of forging relations between the club and LFS, and further increasing the attractivess of being a MARS member to further our hobby.
Without a doubt, we should be paying the sales tax up front. I am hoping the real savings would come from discounted mark ups for these greater quanities of sales from both the LFS and thier wholesalers.
I believe Paul should look into that to see if their is an interest in that, which LFS would like to participate, and if thier wholesalers/suppliers are willing to play ball.
I am hoping that this will be a way to give back rather than "benifit" from. As the time and energy expelled even at this point, outwieghs the 3 or 4 dollars in potential savings. If it helps our LFS neighbors and the club, I am always down for it.
1. Taking the arquement and the logic of group buys as not within the scope of the clubs mandate could very well be applied to the networking and frag "swaps" that we achieve by interacting with the club. The mere, "FS" ads taken advantage of in corals and equipment, totaled up over the year does take away dollars from LFS, though not "organized". In fact, if there wasn't MARS or RC, divided and conquered we would be and thier profits would go higher. I am seeing this as "giving back" to our community LFS.
2. Bruce brings up an excellent point, we do have buying power that can be used as a pro as well as a con. I think all to often it is used as a con, than a pro. This would be my main reason for supporting "group" or "power" buys with the LFS, and our local LFS only, which could and should be outlined in our statement of reason. I am seeing this as an oppurtunity to give back to the strores in quantity.
3. My suggestion is that these "buys" are only organized through the club and managed so it is single sourced, sanctioned, and only available to current paid members as a benifit to member ship. As a collective, we are using the clubs relationship with the stores to garuntee "x" amount of sales to them from our members with the hopes that they would extend some credit until funds can be collected and work with thier suppliers based on our promised purchases so that a deal with the wholesalers could be worked out in which all benifit. If this is technically not for profit, would it hurt the clubs tax exempt status?
3. The discount? What is it for exactly and who does it really target. Personally, I don't ask for one EVER. The discounts I have recieved have been due to my relationship with the stores I have achieved. I believe that the discounts are really a membership perk for attracting new members and those entering the hobby, I save my "discounts" for them. As I said, this is not a poor mans hobby, and 10% is just a drop in the bucket on day to day purchases. Personally, I don't care for it until the $200+ range, but I digress. My point is, the discount is a null item in this debate and on its own merit needs to be clearly defined on who and why it exists in the first place for the club, its members, and why and who offers it.
4. Impact, if the debate on LFS impact is viable, it cannot work both ways. MARS members only represent 10% of total LFS sales when they could give a care about us. This combined with a saturated market in Sacramento over the last year or so, and each of us spreading our spending dollars all over, I would be willing to bet that they would embrace a group buy program organized through the club, for the club, in the name of forging relations between the club and LFS, and further increasing the attractivess of being a MARS member to further our hobby.
Without a doubt, we should be paying the sales tax up front. I am hoping the real savings would come from discounted mark ups for these greater quanities of sales from both the LFS and thier wholesalers.
I believe Paul should look into that to see if their is an interest in that, which LFS would like to participate, and if thier wholesalers/suppliers are willing to play ball.
I am hoping that this will be a way to give back rather than "benifit" from. As the time and energy expelled even at this point, outwieghs the 3 or 4 dollars in potential savings. If it helps our LFS neighbors and the club, I am always down for it.
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JJ4417
New member
I started a 3 page dissertation. Glad I deleted it, it was really just questions and counter-points, but would have been taken out of context. Plus...I'm a newb and still need tank help so I can't afford to upset people.
So...I'm a little confused on the tax laws and why MARS is involved at all. Since this can't be directed at anyone....and I believe in knowing history or doomed to repeat it...
It was alluded that the IRS was looking at BAR and MARS in the past. Seriously? What in the world happened? A crime or lawsuit of some kind? Did the local tax guy not win the Xmas raffle?
Also...what was the rationale to even start the NPO? Liability? From what? Taxes are based on income. We don't do fund raisers that I am aware of...did I miss my invitation to the MARS charity golf tournament? Do they seriously count the raffle as a fund raiser? If we are talking about membership dues, then all of your office coffee clubs would have to file business paperwork...
So...I'm a little confused on the tax laws and why MARS is involved at all. Since this can't be directed at anyone....and I believe in knowing history or doomed to repeat it...
It was alluded that the IRS was looking at BAR and MARS in the past. Seriously? What in the world happened? A crime or lawsuit of some kind? Did the local tax guy not win the Xmas raffle?
Also...what was the rationale to even start the NPO? Liability? From what? Taxes are based on income. We don't do fund raisers that I am aware of...did I miss my invitation to the MARS charity golf tournament? Do they seriously count the raffle as a fund raiser? If we are talking about membership dues, then all of your office coffee clubs would have to file business paperwork...
Brian Prestwood
Premium Member
Still reading. A point for now.
There are currently 85 MARS members. Of those 85, 17 for or against opinions are represented here. No one can claim any opionion, for or against, voiced here represents a majority.
There are currently 85 MARS members. Of those 85, 17 for or against opinions are represented here. No one can claim any opionion, for or against, voiced here represents a majority.
Brian Prestwood
Premium Member
This buying club issue could make it a mute point.
Was BAR paying sales taxes on the goods as they group purchased them? If not, I can see why the IRS got on them. If so, I see no point in continuing. The club can't officially sponsor GBs.
Was BAR paying sales taxes on the goods as they group purchased them? If not, I can see why the IRS got on them. If so, I see no point in continuing. The club can't officially sponsor GBs.
Mr. Ugly
New member
Hi Brian,
It wasn't even BAR that was doing all the buying.
Seriously, there were all kinds of group buys and for sales going on in the BAR RC forum by just various Bay Area people including some BAR members.
When the IRS took a look at the forum to get an assessment of what was "our" focus, they said, "Oh I see, you're a bunch of hobbyists that buy and sell stuff and get together for the purpose of getting great deals."
We were like, "But.. but... those aren't even BAR members! See our cool mission statement? That's what we're about!"
Well, they weren't convinced.
Anyway, you see that kind of stuff go on in the various club forums. Sometimes people will post, "Hey this isn't Craigslist. Can we have some reef topics instead of FS/FT/WTB please?" Kinda goes in cycles.
We figured that we have to actively promote the good reefy stuff so that "buying club" activities don't become the predominant thing on our forums.
People say "perception is reality". Meaning that people will act on their perception of what we are. If people look at our forum and think we're a buying club, they'll join in and bring those expectations with them. By their actions, it *will* turn us into a buying club. It's something that sneaks up on you, and it takes a lot of work to prevent that from happening.
Anyway, instead of spending energy prohibiting a bunch of stuff, we're trying to encourage positive mission focused ideas from the membership. We set up a "Wouldn't It Be Good If... ?" forum for our members to work out their cool ideas. And we set up ad hoc and standing committees to try to turn the ideas into the reality we want.
After all the IRS stuff, it's not even the tax status that's the big thing for us. It's more that the club was perceived not to be living up to the values and ideals of our mission statement. In a way, we looked like hypocrites, and that was very sad for us.
It wasn't even BAR that was doing all the buying.
Seriously, there were all kinds of group buys and for sales going on in the BAR RC forum by just various Bay Area people including some BAR members.
When the IRS took a look at the forum to get an assessment of what was "our" focus, they said, "Oh I see, you're a bunch of hobbyists that buy and sell stuff and get together for the purpose of getting great deals."
We were like, "But.. but... those aren't even BAR members! See our cool mission statement? That's what we're about!"
Well, they weren't convinced.
Anyway, you see that kind of stuff go on in the various club forums. Sometimes people will post, "Hey this isn't Craigslist. Can we have some reef topics instead of FS/FT/WTB please?" Kinda goes in cycles.
We figured that we have to actively promote the good reefy stuff so that "buying club" activities don't become the predominant thing on our forums.
People say "perception is reality". Meaning that people will act on their perception of what we are. If people look at our forum and think we're a buying club, they'll join in and bring those expectations with them. By their actions, it *will* turn us into a buying club. It's something that sneaks up on you, and it takes a lot of work to prevent that from happening.
Anyway, instead of spending energy prohibiting a bunch of stuff, we're trying to encourage positive mission focused ideas from the membership. We set up a "Wouldn't It Be Good If... ?" forum for our members to work out their cool ideas. And we set up ad hoc and standing committees to try to turn the ideas into the reality we want.
After all the IRS stuff, it's not even the tax status that's the big thing for us. It's more that the club was perceived not to be living up to the values and ideals of our mission statement. In a way, we looked like hypocrites, and that was very sad for us.
Brian Prestwood
Premium Member
Hey Paul
The PRO is in the know about the LFS and he says the club is against GBs. I guess there's no point in discussing it further.
Back at ya babe
All kidding aside, I was just seeking input here. Obviously, if I make the motion the board will have to vote on it.
As always, I can be persuaded by a compelling argument or quantitive analysis. However, boogie man logic, i.e. logical fallacies, like appeals to authority and appeals to force get my blood boiling. I'm not real big on appeals to popularity either...
Logical Fallacies
At this point, I'm researching this Buyers Club issue. I had heard about it before this came up. I assumed that BAR hadn't been paying sales tax. To hear that they had paid sales tax and that they weren't using club funds strikes me as a waste of the IRS’s time.
As I understand it...
The IRS treats for-profit corporations like people. They have to pay taxes on the profits that are on the books when they file. Most corporations simply turn profit into non-taxable assets (e.g. bonuses) to avoid paying taxes. Establishing a non-profit buyers club corporation to shield corporate profits/assets from lawsuits is against the law.
However, I couldn't see BAR having enough profits/assets to justify the IRS's effort. And, it seems obvious to me that there was a significant non-buyers club component to their activities.
Also, all BAR had to do to continue just as they were with GBs was dissolve the corporation. Yes, they loose their corporate shield. However, the corporate shield doesn't prohibit lawsuits against corporate officers; it just makes them harder to win. And, if any corporate officer was criminally negligent the corporate shield would not protect their personal assets. Finally, the liability insurance that the club would have to carry, incorporated or not, to do many of its activities would shield the officers.
Why did the IRS waste their time on BAR? My guess is someone turned them in. Let’s see, who benefits from stopping a fish club from doing GBs?
In case you didn't notice, that last paragraph is innuendo. I hope no one here found it compelling.
The PRO is in the know about the LFS and he says the club is against GBs. I guess there's no point in discussing it further.
Back at ya babe
All kidding aside, I was just seeking input here. Obviously, if I make the motion the board will have to vote on it.
As always, I can be persuaded by a compelling argument or quantitive analysis. However, boogie man logic, i.e. logical fallacies, like appeals to authority and appeals to force get my blood boiling. I'm not real big on appeals to popularity either...
Logical Fallacies
At this point, I'm researching this Buyers Club issue. I had heard about it before this came up. I assumed that BAR hadn't been paying sales tax. To hear that they had paid sales tax and that they weren't using club funds strikes me as a waste of the IRS’s time.
As I understand it...
The IRS treats for-profit corporations like people. They have to pay taxes on the profits that are on the books when they file. Most corporations simply turn profit into non-taxable assets (e.g. bonuses) to avoid paying taxes. Establishing a non-profit buyers club corporation to shield corporate profits/assets from lawsuits is against the law.
However, I couldn't see BAR having enough profits/assets to justify the IRS's effort. And, it seems obvious to me that there was a significant non-buyers club component to their activities.
Also, all BAR had to do to continue just as they were with GBs was dissolve the corporation. Yes, they loose their corporate shield. However, the corporate shield doesn't prohibit lawsuits against corporate officers; it just makes them harder to win. And, if any corporate officer was criminally negligent the corporate shield would not protect their personal assets. Finally, the liability insurance that the club would have to carry, incorporated or not, to do many of its activities would shield the officers.
Why did the IRS waste their time on BAR? My guess is someone turned them in. Let’s see, who benefits from stopping a fish club from doing GBs?
In case you didn't notice, that last paragraph is innuendo. I hope no one here found it compelling.
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Thales
Active member
Moot point!
It had nothing to do with taxes. What they 'saw' was a group of people who by sales, trades, group buys, and frag swaps were using the club to benefit the primarily the members collections, not the organization or the public. Giving people a method to materially benefit their own collections is not something they give 510c3 status for. I left my discussions with the IRS with the feeling that most reef clubs operate mostly outside the scope of the 501c3 status and should really be 501c4, but that once 501c3 status was given, the IRS wasn't really going to look at it again.
Thales
Active member
They were looking at BAR in the process of granting us non profit status. When they reviewed the club online, they didn't see what they consider to be a 501c3.
It had nothing to do with buyers club corporation, but the granting of NPO status.
They weren't looking at our profits/assets.
That had nothing to do with what happened to BAR - it was about being granted non profit status.
More like slander.
And it wasn't about GB's. GB's were only part of it. It had to do with the focus of the club appearing to be to benefit private collections, not the club itself or the public. Does the Sierra Club do group buys?
Brian Prestwood
Premium Member
THales
My bad, I thought they had revoked BARs NPO status, not refused to grant it. That make more sense.
Thanks for the info. Can you summarize the intent of 501c4 corps?
My bad, I thought they had revoked BARs NPO status, not refused to grant it. That make more sense.
Thanks for the info. Can you summarize the intent of 501c4 corps?
<a href=showthread.php?s=&postid=11421783#post11421783 target=_blank>Originally posted</a> by Thales
Don't call him! He wasn't involved, he was in Tonga.
Mr. Ugly summed it up pretty well, and that is why BAR is now a 501c4 instead of a 501c3. The basic difference is that the activities of a c3 are supposed to benefit the organization or the public, not the members and c4 is much more open (but c4's cannot write you a tax deductible receipt for your donations). It is interesting to note that among the printouts the IRS sent me to show me that we weren't a c3 was our page talking about fragswaps.
I think the IRS is prolly not going to look at MARS ever again in a meaningful way, but if they do, I think they won't like organizing purchases to benefit the members of a c3.
And of course, it all depends on who at the IRS you end up talking to.
Not how I remember it (Jim wasn't in Tonga when it first came down) but not debating it either
With no access to the old posts and you having all the access, I'll take your word for it :lol:
Thales
Active member
They didn't really refuse to grant it, they refused to make BAR a c3, but did give us NPO status.
In reality, I think the clubs should mostly be c7, but they told us to be c4 because of the 'social welfare' aspect.
http://www.irs.gov/publications/p557/ch04.html#d0e8109
A 501 C-4 is just as much of a NPO as a 501 C-3 or a 501 C-7.
Please go read the US Govt. definitions if you're not clear on what the differences are. Rich is correct that I was in Tonga when the status review came up and so wasn't dealing with the IRS at that time. When I first started researching the various IRS NPO classes, I actually thought we might be a C-7 but then was told by the IRS that (based on our documentation) we should file as a C-3.
If your LFS aren't making it worthwhile for you to shop there, then I guess having a buying club makes sense. I certainly don't think you can do it through a 501 C-3 club however. I would expect something bad to happen if this was attempted.
Please go read the US Govt. definitions if you're not clear on what the differences are. Rich is correct that I was in Tonga when the status review came up and so wasn't dealing with the IRS at that time. When I first started researching the various IRS NPO classes, I actually thought we might be a C-7 but then was told by the IRS that (based on our documentation) we should file as a C-3.
If your LFS aren't making it worthwhile for you to shop there, then I guess having a buying club makes sense. I certainly don't think you can do it through a 501 C-3 club however. I would expect something bad to happen if this was attempted.
pbetito
New member
They actually are pretty good to us and our relationship with them is definitely on the rise. If we as a reefing community work together and respect one another I think we will have the best club possible as well as a variety of areas to shop and enjoy the hobby even more. Group buys are great from time to time but keeping them private is probably best for everyone involved. This thread has been one of the most productive as far as getting a better understanding of an important topic such as our status is.
Brian Prestwood
Premium Member
THales & Bookfish
Thanks again for helping us avoid the pitfalls you found.
Bookfish & Paul
I have nothing but good things to say about he LFSs I shop at and I will name names, Your Reef & Coral Reef Shop. I haven't dealt with the others in town enough lately to form an opinion. To re-iterate my main point, I believe the board should put the needs of the membership first always.
Thanks again for helping us avoid the pitfalls you found.
Bookfish & Paul
I have nothing but good things to say about he LFSs I shop at and I will name names, Your Reef & Coral Reef Shop. I haven't dealt with the others in town enough lately to form an opinion. To re-iterate my main point, I believe the board should put the needs of the membership first always.
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