Sales tax

[msc]

I just got my Florida sales tax number so I can buy materials used in products without paying sales tax but must collect and submit sales tax on products I sell. A buddy of mine, a contractor, says he pays tax when purchasing materials but doesn't collect sales tax from clients. He said he doesn't want to be a tax collector for the state.

I realize what I do and what he does have different rules, but I was wondering what many of you (or since this may be a legal issue, "I know a guy that...." ) are doing.

Do you pay sales taxe when purchasing materials?

Do you charge sales tax to customers and file and submit?

Thanks, Mark

[mdwalker]

Each state has it's own tax laws and you would have to check with the state taxing authority to get the most accurate information. I am in Oklahoma and sales tax is due on the total sales price of an item. For example, if you purchase materials and pay sales tax on them then manufacture items from those materials and sell them then sales tax is due on the total sales price. That is why states allow you to obtain a sales tax exemption when purchasing materials for manufacturing so you are not paying tax on the materials twice. Labor is not taxable however you can not separate labor from an item you manufacture. For instance, if I cut out an item, weld it up and paint it, I can not separate the labor from the total taxable sales price. If I take my portable welder to a customers location and repair his pipe fence where the majority of the job is labor then it is not taxable. If I have to use a couple of sections of pipe to repair the fence those materials are taxable but the labor/welding is not. Again, check with your states taxing authority to get the most accurate and up to date information. The best advice I could give you is to not take your buddy's advice because if you ever get audited they won't care that your buddy gave you inaccurate information. I'm not implying that your buddy is doing anything wrong. He may be operating according to your states tax laws but it is ultimately your responsibility to work with your states taxing authority.

Now to answer your last 2 questions:

No I do not pay sales tax when purchasing materials. I not only have a sales tax permit but it is also a manufacturers exemption. This allows me to buy equipment that is directly used in the manufacturing process tax free as well as materials and consumables.

Yes I do charge sales tax to customers and file and submit monthly sales tax returns.

[tnttracy]

in washington state what your contractor friend does would be illegal... you have to charge take on the entire invoice amount, if you already paid the sales tax on a material then you have to file to get your money back!

the big pain is separating what can be re-sold. only item that become 'part of' the end product can be exempt. so weld wire can be bought for resale but the consumables (tips etc) cant be, they basically get taxed twice because i pay the sales tax on it and then i charge it to the customer who pays tax again.