Local hobby shop is doing OK

[valenciajim]

This week I ventured out to my favorite LHS in Northridge, CA. My reason for doing so was that I needed some supplies and I was worried that we would have another lockdown soon and the store would have to close. (The store is worried about that as well.)

When I got there, I was surprised to see that there were several customers in the store. This store also sells models and RC aircraft as well as trains. They told me that they are doing a robust business selling models.
The store is having difficulty keeping paint in stock. Particularly silver/metallic paints and clear coatings. They simply cannot get Tamiya paints. They tell me that the supply chain is disrupted and lots of stuff is backordered.

They also have a considerable amount of rolling stock (both HO and N scale) on hand.

Overall, the store is surviving and doing considerably better than they expected. Once non-essential businesses were allowed to reopen, they said business was good. Lots of people have spare time on their hands and are engaged in hobby activities.

I wonder how other LHSs are doing.

[sd40dash2]

Thanks for this. I think your post is spot-on as I could say similar things about the closest store in my part of the country. This also echoes something I heard in that virtual train show video that James posted yesterday. One of the participants said that business right now was very good and people are buying things, can't remember who it was but their comments were consistent with the above.

So we can't travel, leave the house except to grocery shop or stay-cation and there are restrictions everywhere. Many of us are lucky to still have our jobs and are working at home without income disruption. Sounds like all the stars and planets have aligned for most facets of the hobby to continue thriving.

[Deleted]

I try and swing by my local store to chat with the owner when I have time. Last time I was there, he had a steady stream of customers for about an hour straight. I don't think that he's hurting. I hope not at least.

[Gary P]

Good to hear Jim - That's encouraging news. My LHS has been gone for a number of years now, so I can not make a comparison. Mostly online purchases for me now, and when traveling, I look for a hobby shop to see what they carry, and spend a few hobby dollars there as well.

[brammy]

I've been going to my LHS, AA Hobbies in Warwick RI for the last month or so buying stuff for my layout. He seems to be doing well. There were customers there every time I went, and about the same volume of folks.

[riogrande]

Jul 30, 2020 5:22:34 GMT -8 brammy said:

I've been going to my LHS, AA Hobbies in Warwick RI for the last month or so buying stuff for my layout. He seems to be doing well. There were customers there every time I went, and about the same volume of folks.

I visited AA Hobbies in Warwick RI back around 1998 and it was a very nice shop. I was working at an Environmental site on the other side of the state, a wopping 30 minutes away, but staying in Warwick while working on that project - Superfund site.

Anyway, wow, it's been 22 year since I've been there. Sometimes I'm amazed some shops I visited that long ago are still open, but it's good news. So many shops end up closing when the owner gets old enough to retire. He must be getting up-there, or the owner was relatively young when I visited.

[lars]

Shipping prices are driving me back to the local stores. My local shop is only $3 or so above the heavy discounters on a $30-40 freight car, but when you're paying a minimum of $10 to ship anything it pays to shop local. States requiring the collection and remittance of sales tax also work is favor of the local shop. I just found out that the threshold for remitting sales taxes to PA is $100,000 in sales during the previous year, so some of the smaller retailers may not charge sales tax.

[valenciajim]

Aug 6, 2020 18:33:48 GMT -8 lars said:

Shipping prices are driving me back to the local stores. My local shop is only $3 or so above the heavy discounters on a $30-40 freight car, but when you're paying a minimum of $10 to ship anything it pays to shop local. States requiring the collection and remittance of sales tax also work is favor of the local shop. I just found out that the threshold for remitting sales taxes to PA is $100,000 in sales during the previous year, so some of the smaller retailers may not charge sales tax.

The Wayfair Supreme Court case really changed the landscape helping bricks & mortar stores (and the states who were losing the sales tax revenue to online sales). The $100,000 threshold for nonresident sales is what was upheld in the Wayfair decision, so many states are adopting what the court blessed. In other words, states don't impose use tax unless there are at least $100,000 of sales to customers residing the the state.  Are you saying that in PA, bricks & mortar retailers don't need to charge sales tax unless they have sales of $100,000? That does not sound right, but I am not a PA sales tax specialist.

I know that Walthers is now charging sales tax to California residents. I recently purchased some scratch building supplies from Plastruct who moved from Los Angeles to Illinois. They used to charge sales tax (because they and I both located in California), but my latest purchase did not include a sales tax charge.

I read several recent articles about how FedEx and UPS are raising their shipping prices due to increased demand resulting from on-line shopping during the COVID crisis.

[lars]

To clarify, the $100,000 is for online shippers shipping to PA, consistent with the Wayfair case. All brick and mortar stores charge tax, except where exempt.

I will have to price some things out to see if Train World, MBK, Exactrail and ScaleTrains charges tax or not. I assume the smaller online sellers don't do $100k of business in PA.

Of note, eBay charges tax. For smaller retailers that's an incentive to have an online presence in place of an eBay shop. As a buyer, it wouldn't hurt to check and see if the seller has an online shop in addition to an eBay storefront, as you may not have to pay tax on a stand alone e-store.

[riogrande]

It sucks that tax is charged now for mail/online orders from out of state. I always felt having to pay shipping kind of offset the sales tax you might pay locally. Now Ebay and some online vendors charge tax and shipping so it's a double whammy. Not all do that I've noticed however. I don't have an LHS so buying that way isn't an option anyway.

[valenciajim]

Aug 7, 2020 10:27:15 GMT -8 riogrande said:

It sucks that tax is charged now for mail/online orders from out of state. I always felt having to pay shipping kind of offset the sales tax you might pay locally. Now Ebay and some online vendors charge tax and shipping so it's a double whammy. Not all do that I've noticed however. I don't have an LHS so buying that way isn't an option anyway.

From the consumer's perspective, it appears to suck, but from the merchant's perspective it places everyone on level ground. The reason why we don't have LHSs anymore is because people buy on-line and the lack of sales tax is a huge component of the price differential. State and local governments have lost a huge amount of their revenue to on-line sales. I attended a tax seminar a couple of years ago and they said that fifty years ago, when Reagan was governor of California, sales tax was almost 40% of state revenue. Now sales tax rates are nearly double what they were back then but sales tax only accounts for about 15% of the state's total revenue. This places a huge burden on income tax collections which are considerably more volatile.

State and local taxes are going to increase because states cannot balance their budgets due to COVID costs. State and local governments were already in big trouble. The states are getting much more aggressive in sticking taxes to nonresidents who do business in the state (but don't vote there) and the courts are backing them up. Imposing sales tax on out of state vendors is one way to increase revenue. Loopholes, like on-line sales tax avoidance, are being closed.

I realize this has nothing to do with model trains, but the Supreme Court's Wayfair decision is going to affect more than online sales tax. There was a recent court case involving a screen writer who moved from LA to Phoenix. He worked from home writing scripts, and e-mailed those scripts to the studios. He is an independent contractor and he received a Form 1099 reporting the income he received. California claimed, even though the screen writer did not set foot in California, that he was working for a California business and was subject to California income tax on his earnings. California's argument was based on the rationale in the Wayfair case that affected sales tax. The court backed up the California Franchise Tax Board and found that the screenwriter was liable to pay California tax. The screen writer gets to reduce his Arizona tax by the amount of California taxes paid, but California taxes him at a higher rate, so his overall tax is the same as it was when he lived in California. I am not saying this is right, but I am merely pointing out that the digital economy is changing the way states tax people.     

Getting back to my LHS in Northridge, they were pretty busy this week. It was hard to social distance because there were a lot of customers in the store. Sadly, there were no young people--all old geezer's like myself.

[riogrande]

Aug 7, 2020 13:01:40 GMT -8 valenciajim said:

From the consumer's perspective, it appears to suck, but from the merchant's perspective it places everyone on level ground. The reason why we don't have LHSs anymore is because people buy on-line and the lack of sales tax is a huge component of the price differential.

May be, but I'm the consumer and my perspective, as with most, is what is most important to me. This is true in general. My wife and I both try to get the best deal on ANYTYHING we buy, whether it's Levi's or furniture, food, or model trains. When it comes to model train purchases, the shipping usually far out weighs the tax given a roughly equivalent price on an item, which is why it sucks to have to pay shipping AND taxes. Not in every case but on Ebay anyway.

I get it that the states and governments have to tax to cover their budgets etc. And somewhat to that end, at least in the US, if we don't like the way they do things in our state, we can vote with our feet and move. I used to live in New York state who had very high property taxes, and most of the taxes paid by up-state folks got siphoned down to NYC. I was happy to eventually leave that state. I've read that a lot of "money" is leaving New York city for similar reasons.

I am not saying this is right, but I am merely pointing out that the digital economy is changing the way states tax people.     

Getting back to my LHS in Northridge, they were pretty busy this week. It was hard to social distance because there were a lot of customers in the store. Sadly, there were no young people--all old geezer's like myself.

I realize the digital world is changing business so that's why more taxes are being collected. But I can tell you, my wife finds all kinds of ways of saving money using her smart phone for all kinds of things, so there are ways to get-around and save money and probably no taxes are collected on a lot of money changing hands.

That digital leveling playing field you mention may also account for the younger people you didn't see at the store. The younger generation does much more on line than we do; they live online basically. I expect there are more non-geazers in the hobby than we realize. Some of them are on train forums buying lots of modern, post 90's model trains.

[lars]

It's also worth noting the Minimum Advertised Price (MAP) that some companies are enforcing. It definitely holds back the heavy discounters and results in more price parity between your LHS and the online retailers.

[riogrande]

Re" the MAP thing. I've seen it enforce in some cases and not in others. I think it also has a time limit too, which is part of why after some time goes by after the product is shipped, it is no longer in-effect.

[valenciajim]

Aug 7, 2020 13:30:33 GMT -8 riogrande said:

Aug 7, 2020 13:01:40 GMT -8 valenciajim said:

From the consumer's perspective, it appears to suck, but from the merchant's perspective it places everyone on level ground. The reason why we don't have LHSs anymore is because people buy on-line and the lack of sales tax is a huge component of the price differential.

May be, but I'm the consumer and my perspective, as with most, is what is most important to me. This is true in general. My wife and I both try to get the best deal on ANYTYHING we buy, whether it's Levi's or furniture, food, or model trains. When it comes to model train purchases, the shipping usually far out weighs the tax given a roughly equivalent price on an item, which is why it sucks to have to pay shipping AND taxes. Not in every case but on Ebay anyway.

I get it that the states and governments have to tax to cover their budgets etc. And somewhat to that end, at least in the US, if we don't like the way they do things in our state, we can vote with our feet and move. I used to live in New York state who had very high property taxes, and most of the taxes paid by up-state folks got siphoned down to NYC. I was happy to eventually leave that state. I've read that a lot of "money" is leaving New York city for similar reasons.

When you say that you can vote with your feet and move, I hope you understand that it is the state in which you reside that is requiring the online retailer to charge sales tax.

Also, as a purely technical matter, you previously were subject to use tax on your online purchases, but like 99.999% of other taxpayers, you probably chose not to pay the tax.  One of the compelling arguments made in the Wayfair decision was that most taxpayers are guilty of tax evasion by not paying use tax on online purchases, so requiring online merchants to collect sales tax ought to be allowed to prevent such evasion.  That argument was one of many persuaded a majority of justices to allow states to require on-line collection of sales tax.  It was a way of circumventing the unlawful avoidance of use tax.  Most people don't see it that way, but technically from a legal perspective that is how the situation is viewed.  So, I agree that it sucks to pay taxes, but technically when you purchase items on line and don't pay sales or use tax, its tax evasion.  

A lot of money is leaving high tax jurisdictions like NY, CA and NJ for the reasons you state.  I recently was involved in a study about the states with low taxes that are convincing business to relocate.  Many of those states are running huge deficits reminiscent of California twenty years ago.  Other states have large federal subsidies.  Neither is likely sustainable over the long term and I suspect there will be more high tax states in the future.  Before COVID, I figured that this would take ten to twenty years to play out, but now I believe it is coming this decade.

With that said, I am going to try to get some modelling in this afternoon.  I discovered a building in Santa Paula with an architecturally interesting facade.  I am going to model the structure by building a background flat of the facade.  The building is the corporate headquarters of Limoneira Corp.  Linomeira is one of the largest growers of lemons and I plan to place the building flat behind the citrus packing house on my layout.  I purchased the materials from Walthers & Plastruct.  Walthers charged sales tax, but Plastruct did not.     

[riogrande]

Aug 9, 2020 9:28:57 GMT -8 valenciajim said:

When you say that you can vote with your feet and move, I hope you understand that it is the state in which you reside that is requiring the online retailer to charge sales tax.

The vote with my feet comment had nothing to do with online train purchases, but was a generalized comment about moving out of a state that was tax heavy; in my case, NY State had high property taxes.

But but mail-order or online train purchases, as far back as I can remember, you always paid state sales tax if you bought from within your state of residence, you would pay sales tax, whether LHS or an online/mailorder purchase from another city in your state. That's nothing knew as far as I remember.

Also, as a purely technical matter, you previously were subject to use tax on your online purchases, but like 99.999% of other taxpayers, you probably chose not to pay the tax.

How many people knew that? Same may have, but probably many or most didn't. They don't know by ESP I don't think. It seems to me, if online purchases were subject to tax, the burden of informing or enforcing that is on government bodies; otherwise they stand to lose. Which is probably something to do with this "Wayfair" decision. Take your time there government... how many decades did it take? Yes, online orders is a fairly recent phenomenon, but an old school version called mail order has been going on a very long time.

A lot of money is leaving high tax jurisdictions like NY, CA and NJ for the reasons you state.  I recently was involved in a study about the states with low taxes that are convincing business to relocate.  Many of those states are running huge deficits reminiscent of California twenty years ago.  Other states have large federal subsidies.  Neither is likely sustainable over the long term and I suspect there will be more high tax states in the future.  Before COVID, I figured that this would take ten to twenty years to play out, but now I believe it is coming this decade.

I've read about a lot of money leaving high tax states. I have to wonder when that will finally happen to my old home state of California, which has become so expensive to live in, even middle class families can't afford to buy homes anymore; those who were established before the massive increases seem to in better shape but the younger up and coming families seem to be struggling. It's going to continue to become a bigger problems as those who have been there a long time and are established (i.e. bought homes when they were more affordable) age out and the younger generations find the cost of living is too high. Even now I read about some who have been forced to leave out of inability to afford to live there. Crazy. The scary thing is, there is an old saying, as California goes, so goes the rest of the country.

Many times I've thought it would be nice to move back, but I am pretty sure I wouldn't be able to afford it. The last two companies I've worked for have offices there - one in Monterey and the other El Segundo. I'm ok with Virginia and my 3 sisters and parents ended up here as well so looks like I'm here for a while longer.

[jonklein611]

Aug 11, 2020 4:59:20 GMT -8 riogrande said:

How many people knew that? Same may have, but probably many or most didn't. They don't know by ESP I don't think. It seems to me, if online purchases were subject to tax, the burden of informing or enforcing that is on government bodies; otherwise they stand to lose. Which is probably something to do with this "Wayfair" decision. Take your time there government... how many decades did it take? Yes, online orders is a fairly recent phenomenon, but an old school version called mail order has been going on a very long time.

Some states have a question on their tax forms "have you purchased anything outside of the state that you owe tax on?".  Some have a calculator / estimator of sorts to give you a tax burden for out of state purchases. Others just assume you've paid all applicable taxes.

For mail order, most companies were required to charge taxes IF they were shipping to the same state that they had a physical store in.  You'd see this in old mail in order forms "PA residents, add X% tax", etc. The argument was that state internal sales were taxable and could be enforced by one entity. Crossing state lines, it was impossible to collect the correct tax and it became a huge headache for sellers AND the states.

There's also the challenge of different tax laws in different states. (Example: PA doesn't charge sales tax on clothing, but GA does. If I drive from GA to PA and buy some clothing while visiting family then return to GA, do I owe GA taxes on those items? The answer changes depending on the states involved, what you bought, and how much you spent.) Big ticket items (boats, cars, etc.) are typically taxed based on state of residence, not state of purchase. Small items (clothes, trains, etc) are typically not on the same order of magnitude, harder to verify / audit, and generally not worth tax enforcement.

Now with online shopping, it's based on shipping address and whatever tax laws are applicable to that zip code. Since almost every online store applies the correct tax, it makes my state return much easier.  I just check the "all taxes have already been collected" box and move along.  This varies from state to state (I've only had experience filling in PA, GA, and OH). Your experience might vary.

[lars]

LHS owner said he’s doing real well in the RC business. Has a track outside of the store and makes money off of weekly races and part sales when stuff crashes. He’s happy with Horizon being one stop for trains and RC. I’m happy that he’s moving enough product (trains or RC) to keep the lights on.