Question about tax exemptions for resale goods

[soloinstaller]

Hey guys im located in Canada. As im outsourcing my digital prints, they will be tax exempt from paying PST(Provincial Sales Tax) on these purchases are they will be for resale when I install them for my clients.

I was wondering if this same "reseller" tax exemption also applies to the vinyl roll supplies I purchase from my local supplier to make my signage? I should probably call them to ask but they're already closed at this time. Sorry guys, completely new to sign making and business in general!

 

[binki]

I am not in Canada but if you have a VAT then that is a tax every time something is sold. You have a GST a PST and an HST. According to the link below your GST is a VAT. If that is the case then you will have a sales tax on what you purchase and also when you sell.

Canada - Corporate - Other taxes

Detailed description of other taxes impacting corporate entities in Canada

taxsummaries.pwc.com

 

[Solventinkjet]

It's going to be different everywhere but, I'm a supplier and we don't have to charge tax, as long as the customer has a license, on any product that ends up in their final product for resale. So inks, vinyl, laminate etc. are not taxed but printer parts are for example.

 

[binki]

The OP is in Canada. They have a VAT so everything is taxed on every sale in the supply chain.

 

[Solventinkjet]

The OP is in Canada. They have a VAT so everything is taxed on every sale in the supply chain.

That's crazy.

 

[kcollinsdesign]

I'm in Illinois. I don't have to pay retail tax on things I buy for resale, but I do need to collect retail tax when I sell my products to the consumer, the exception being if the item sold becomes part of a real property (most signs). In that case, I must pay use tax when I purchase the materials I need to construct the sign, and it is in fact illegal for me to collect sales tax when I sell the sign (when it is attached to a property). The reasoning is that the sign improves the property, and that improvement will be reflected in the valuation of the property for property tax purposes. If I were to charge retail (use) tax when I sell a sign, then the property owner pays additional taxes for the improved property, that would be double-taxation and a taking by the local taxing bodies.

The reason it is illegal for me to collect it is because the State doesn't require me to pay it, and I could just pocket the money. Most customers won't know any better; everybody is used to paying sales taxes on things they buy. But I would be collecting money on false pretenses, which would be an illegal taking on my part.

Now if a client walks into the shop and buys a sign, then walks out with it, I would be required to collect sales tax because I am not attaching it to a real property.

At least that's my interpretation. I am not a tax attorney so follow my advice at your own peril!

 

[Notarealsignguy]

I'm in Illinois. I don't have to pay retail tax on things I buy for resale, but I do need to collect retail tax when I sell my products to the consumer, the exception being if the item sold becomes part of a real property (most signs). In that case, I must pay use tax when I purchase the materials I need to construct the sign, and it is in fact illegal for me to collect sales tax when I sell the sign (when it is attached to a property). The reasoning is that the sign improves the property, and that improvement will be reflected in the valuation of the property for property tax purposes. If I were to charge retail (use) tax when I sell a sign, then the property owner pays additional taxes for the improved property, that would be double-taxation and a taking by the local taxing bodies.

The reason it is illegal for me to collect it is because the State doesn't require me to pay it, and I could just pocket the money. Most customers won't know any better; everybody is used to paying sales taxes on things they buy. But I would be collecting money on false pretenses, which would be an illegal taking on my part.

Now if a client walks into the shop and buys a sign, then walks out with it, I would be required to collect sales tax because I am not attaching it to a real property.

At least that's my interpretation. I am not a tax attorney so follow my advice at your own peril!

If you collect it and remit it then it is not illegal. The person that pays it can claim the tax they paid for a refund on their own sales tax return.

 

[ikarasu]

In Canada... At least in BC.

You don't have to pay per on vinyl rolls. However you have to collect PST on prints you sell / vinyl you install. But buying the supplies your exempt from PST.

Premask... Because you don't sell premask to a customer and it's considered an "installation item" your technically supposed to pay pst on it.

 

[kcollinsdesign]

If you collect it and remit it then it is not illegal. The person that pays it can claim the tax they paid for a refund on their own sales tax return.

I think it is still technically illegal (in Illinois) because you are not required to pay it (opening the door for fraud), but if you collect the tax and remit it I don't imagine the state will complain too loudly.

In any case, the collected tax (whether legal or illegal) is still a burden on the final customer, and the tax deduction will not even come close to the expense. It's easier, safer, and more fiscally responsible not to collect use tax on signs that are attached to real property. The state will get their pound of flesh when they collect the property tax.

 

[binki]

That's crazy.

That is the way most of Europe works as well. Tax rates most other places are well over the USA.

 

[binki]

I think it is still technically illegal (in Illinois) because you are not required to pay it (opening the door for fraud), but if you collect the tax and remit it I don't imagine the state will complain too loudly.

In any case, the collected tax (whether legal or illegal) is still a burden on the final customer, and the tax deduction will not even come close to the expense. It's easier, safer, and more fiscally responsible not to collect use tax on signs that are attached to real property. The state will get their pound of flesh when they collect the property tax.

In The People's Republic of California the business is supposed to report the purchase and the selling business not only collects a sales tax (up to 11% in some places) but the county will charge a property tax until the property is retired. It is between 1% and 1.25% annually based on the purchase price with a depreciation schedule supplied by the county but the value NEVER goes to $0.

 

[Notarealsignguy]

I think it is still technically illegal (in Illinois) because you are not required to pay it (opening the door for fraud), but if you collect the tax and remit it I don't imagine the state will complain too loudly.

In any case, the collected tax (whether legal or illegal) is still a burden on the final customer, and the tax deduction will not even come close to the expense. It's easier, safer, and more fiscally responsible not to collect use tax on signs that are attached to real property. The state will get their pound of flesh when they collect the property tax.

If it's cash and carry you collect sales tax, no matter what the customer is doing with it. If they install it then it's up to them to get what they paid back. If you install it on a building then probably no. It's all about where and when possession takes places.

 

[Solventinkjet]

That is the way most of Europe works as well. Tax rates most other places are well over the USA.

I grew up in New Hampshire. No sales or income tax on the state and local level. First job I had in another state was eye opening!