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CONSUMERS : When You Can’t Get It Wholesale, You Still Have Options

TIMES STAFF WRITER

Got your eye on a Queen Anne armchair, a Regency desk or a Donghia sofa that you saw in one of Los Angeles’ many designer showrooms?

You can look, but in most cases, you can’t buy, because the majority of interior design showrooms are open only to the trade. That means they sell wholesale to interior designers, decorators, architects and their clients, but not to the public.

Consumers who want to purchase such items without hiring an interior designer can:

* Wait for one of the open-to-the-public design center sales where you can buy floor samples.

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* Contact a shopping service that will buy for you at a wholesale price plus a 15% charge, as opposed to the usual interior designer markup, which ranges from 33% to 40% over the wholesale price.

* Get a resale number from the state Board of Equalization for the sole purpose of gaining access to the showroom and purchasing at a wholesale price.

The first two options are certainly above board; the third is against the law and, design experts say, ends up costing the state millions of dollars.

For example, you can attend the Pacific Design Center’s semi-annual sample sales--the next one is Aug. 18 and 19--and buy furniture, accessories, linens, etc. for a big discount, but you will have to pay sales tax.

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Or, you can hire representatives at L.A. Design Concepts, a buying service, to hunt for designer furnishings for you.

If you see to-the-trade furnishings in a designer magazine or catalogue that you’d like, L.A. Design Concepts will purchase them for you, said owner Frank Keshishian. Consumers nationwide can call the firm’s toll-free number, (800) 926-SHOP, and order what they want, paying 15% over the wholesale cost plus sales tax and shipping.

If you want to personally peruse items in the designer showrooms, Keshishian will send one of his interior decorators with you at a charge of $20 an hour, plus the 15% charge.

“We’re geared toward providing designer furniture to consumers,” he said. “That’s much higher-end furniture . . . You never see that same merchandise in retail outlets. Through our home shopping service, consumers can easily save $1,000 to $1,500 on an sofa, for instance.”

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But numerous Southern Californians have chosen the third route--the illegal one.

People who are not in the interior design business or selling anything for profit many times have applied for and received a “seller’s permit” from the board. The permit entitles them to purchase items wholesale, without sales tax, and to have a resale number. Others simply “borrow” the number from a friend who runs a small business or is what members of the trade call “a housewife decorator.”

Although the terms seller’s permit and resale number are often used synonymously, they are different. A seller’s permit is issued by the Board of Equalization to a person who claims to operate a legitimate business. That permit, which has a specific number, allows the person to buy wholesale for the purpose of resale. When dealers buy an item wholesale, they are required to fill out a resale certificate, meaning that they intend to resell it and charge the client the state sales tax.

“Some people go to the Board of Equalization and say they’re going to open a fabric or accessory shop. Others say they’re going to sell carpet or furniture and they get a number,” said Kenneth Dean of Dean Interior Designs in Studio City.

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“Then they go down to the furniture mart and buy furniture for their house and they save a fortune. But they get the items wholesale and don’t pay tax on them and the state is losing millions of dollars in tax money.”

Dean, an interior designer for both residential and commercial clients for 20 years, says he has been fighting this permit system since he opened his showroom. He hasn’t had much success.

“Most of the time, people get (a seller’s permit) free,” he said. “Others have to post a security deposit. I had three (interior design) students once who all went to the same Board of Equalization office. Two got the permit free, the third had to pay $1,000.”

Housewife decorators are a particular bug to Dean and other professional interior designers because most have little experience or training in the field. “The people fall victim to the amateurs and if they do a bad job, then it costs people even more to redo it,” said Dean. “It also gives the professionals a bad name.”

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“I have two ways of looking at it,” said Beverly Hills interior designer Barbara Lockhart, winner of several national and international interior design awards. “I don’t have any animosity toward them, nor do they take business away from me. But they don’t have any clout in the design community and if they make mistakes, that’s unfortunate for the client. I hate to see clients fall into this trap, not working with qualified people who have qualified credentials.”

For his part, Dean believes that no one should get a seller’s permit free. “I’d like to see them have to post a $1,500 security bond,” he suggested. “That way a person would be less inclined to get one just to go out and buy furniture for themselves.”

Dean also has devised a system that he thinks would cut down on people using legitimate seller’s permits to buy items for personal use. A person who sells tools, for example, is not supposed to buy other kinds of items wholesale.

If the state simply added two identifying letters to the seller’s permit, said Dean, it would identify what business the permit holder is in, for example, ID for interior designer; FS for furniture sales, and JS for jewelry sales.

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“Anybody can get one,” a San Fernando Valley woman said of seller’s permits. “I borrow one from a friend, especially when I’m buying antiques. The only trouble is if the tax board starts dinging you for not paying sales tax. They do that every quarter. You’re supposed to show that you’re using the number to buy and sell. But I don’t know anybody who’s ever been caught.”

Bob Nunes, chief of field operations for the Board of Equalization in Sacramento, admitted that there is a problem with people who get seller’s permits for personal use.

“The ones who cause us concern are those who have no intention of ever selling anything,” he explained. “They just want to buy at a discount and get into wholesale houses. Unless you’re in the selling business, that is a violation of the law, but I don’t know anybody who’s ever been prosecuted.”

Board investigators do catch some violators if they fill out a resale certificate for items purchased then fail to pay the state sales tax, which runs from 6.25% to 7.25%, depending on the county. In 1984, the state legislature passed a law enabling the board to fine violators $500, or 10% of the tax worth of the item sold.

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“It think it’s diminished since the law went into effect,” said Nunes. “Each month we level a number of those.” Board representatives also give seller’s permits an annual review, he added. “If you don’t report any tax for a year, unless we hear from you, we automatically close out the number. We do several thousand of those a year.”

Nunes said the board often will follow up on a seller’s permit issued after six months if no tax has been paid or if they had a reason to be suspicious in the first place.


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