Sales tax question

[LED Signs & Designs Texas]

Knowingly accepting a sales tax exempt form you know or do not know is legit or not can get you in some serious trouble. Read up on it and enlighten yourselves. Not knowing the laws and how they are applied DOES NOT exempt you from wrong doings. Negligence does not hold up in court of law.

ok so he’s says it’s for resale, is it really your job to question his intent?

 

[LED Signs & Designs Texas]

One has to do reasonable due diligence in making sure. Them signing say a waiver of your responsibility isn't really going to hold up.

Home Depot doesn’t care what you do with it because they know your the one that signed the resale form.

 

[WildWestDesigns]

ok so he’s says it’s for resale, is it really your job to question his intent?

It is your job to verify if the sale qualifies for the exemption or not. Because if it doesn't, then certain circumstances have to be looked at as to if the seller is liable for the tax or if the purchaser is. It is far better to have your own ducks in the row then not, which in my mind would mean to not just put your head in the sand and say well they handed this document to me, so that's good enough for me.

 

[WildWestDesigns]

Home Depot doesn’t care what you do with it because they know your the one that signed the resale form.

Not in my experience, but I can't comment on yours. Seems like I'm always signing away my first born with these types of things, because it's the seller covering their butt in chase I'm trying to get away with something and they (seller) wants it known that they had nothing to do with it just in case it does come into question.

It all depends on how risk adverse you are, I'm exceptionally so, but not everyone is. I just don't blindly accept a document on face value. I'm not as big as HD as well, I don't have the resources to handle something like this that I would be able to deflect it on to the purchaser without making sure my ducks are in a row.

 

[LED Signs & Designs Texas]

Not in my experience, but I can't comment on yours. Seems like I'm always signing away my first born with these types of things, because it's the seller covering their butt in chase I'm trying to get away with something and they (seller) wants it known that they had nothing to do with it just in case it does come into question.

It all depends on how risk adverse you are, I'm exceptionally so, but not everyone is. I just don't blindly accept a document on face value. I'm not as big as HD as well, I don't have the resources to handle something like this that I would be able to deflect it on to the purchaser without making sure my ducks are in a row.

They didn’t “hand you the document”, they signed a legal document, it’s either for resale or tax exempt.
I have been doing this for 30 years and have had plenty of audits on this very topic.
If you don’t want to sell to your customer because of this issue, then that IS your right.

 

[WildWestDesigns]

There are plenty of people that have lax ideologies on legal documents and people don't like paying their lb of flesh. That's why it's up to the seller to verify as there are situations that the seller would be liable.

Sometimes it's an honest mistake, sometimes its not.

Now some concern of mine may also stem from the fact that while my dad was mainly a contract lawyer, he was also a CPA (he did that as a fallback), my wife is also an accountant. Now that does not mean I'm any more knowledgable, just means that they shaped my risk tolerance.

 

[Gino]

Well, according to the laws of the state, IRS and numerous other places, when YOU sign the paperwork to accept tax exempt certificates as a businessman/woman, you have just become the law, so it is your duty to KNOW what you are doing by accepting these documents and making sure you are in fact representing your position correctly and not running by the seat of your pants for 30 years.

Right is right and there are no grey areas, as being discussed. You are a representative of the law, so act it. Learn about business and how to conduct it, rather than these stipid-a$$ wives tales and silly notions.

 

[Texas_Signmaker]

Tell them that everyone pays tax unless they are EXEMPT or SIGN RESELLER. If he pays tax that he didnt need to, HE can claim that on HIS SALES TAX filing.

When I file every month, there is a spot on there for "sales tax paid" that I can deduct from what I owe.

 

[rydods]

How much is this sales tax he does not want to pay? And what is the tax in your area, 5%, 9%.

5.5% is the tax in my area.

 

[rydods]

Thanks everyone. I'll send this over to my accountant today. I appreciate everyone's thought on the matter. This was one of the many things that come up in this industry that I question and wonder what everyone else's take is.

 

[fresh]

cut and pasted from nj st-3 form
option 3 for exemption

For use in the performance of a taxable service on personal property, where the property which is the subject of this Certificate becomes part of the property being serviced or is later transferred to the purchaser of the service in conjunction with the performance of the service.

I've called the NJ Tax department for clarification, and they weren't helpful. I realized that when I sell something like product labels, they fall are under this exact exemption. And most things I use in my business are tax exempt, so why aren't things like signs?

 

[Gino]

Many many years ago, back in the 80's, we had some tax question(s) which were somewhat related to this same subject and they told us, they didn't have the answer and the codes and pamphlets with that information were being updated and printed, so they had nothing to give us. This was before internet and downloading things. It was all done through snail-mail. We asked, what do we do til it comes out ?? Their answer was..... know this stuff BEFORE you go into business. They didn't know....nad it's their job, but we were SUPPOSED to know. That's the government for ya.

 

[Solventinkjet]

Here in Colorado if I sell ink to a sign shop it's not taxable as the ink ends up in the end product that my customer is selling. If I sell them parts for their printer, they make us tax them as they don't end up in the final product.

Also

ok so he’s says it’s for resale, is it really your job to question his intent?

At least here in Colorado, that doesn't fly. If your customer gets audited and they find out they bought something from you and weren't taxed properly, they come after you. We simply tax everything that we have been told to tax and don't budge when someone tells us differently. Learned that one the hard way.

 

[unclebun]

I've called the NJ Tax department for clarification, and they weren't helpful. I realized that when I sell something like product labels, they fall are under this exact exemption. And most things I use in my business are tax exempt, so why aren't things like signs?

Things that you buy in your business which are not going into the products you sell are not tax exempt. You may be allowed an income tax deduction for them but you still pay sales tax on them. You need a computer for design or billing? You'll pay sales tax on it, but get to depreciate/tax deduct it. Need toilet paper? Same thing. Buying vinyl or substrate or preprinted signs from signs265? You don't pay sales tax, but you have to charge sales tax to your customer who is going to use them.

 

[WildWestDesigns]

At least here in Colorado, that doesn't fly. If your customer gets audited and they find out they bought something from you and weren't taxed properly, they come after you. We simply tax everything that we have been told to tax and don't budge when someone tells us differently. Learned that one the hard way.

In general, that's the case. Yes, they filled out a legal document, but "you" also verified that you found it to be true and accurate (at least to the best of your knowledge and that has to be shown that reasonable steps were taken, no different then the reasonable steps have to be taken to make sure that your customer has the legal ability to use the designs that they give you). In the OPs jurisdiction on the revenue site, it said that the seller has to verify that the transaction qualifies. I highly doubt that it would be any different in any other jurisdiction. Now, I haven't lived in Texas for going on 3 decades, so it could have changed there, but I doubt it. TN (where I live now), one has to verify. It just makes sense that the seller would have to verify that the transaction does apply.

 

[fresh]

Things that you buy in your business which are not going into the products you sell are not tax exempt. You may be allowed an income tax deduction for them but you still pay sales tax on them. You need a computer for design or billing? You'll pay sales tax on it, but get to depreciate/tax deduct it. Need toilet paper? Same thing. Buying vinyl or substrate or preprinted signs from signs265? You don't pay sales tax, but you have to charge sales tax to your customer who is going to use them.

Yes, I pay sales tax on things consumed in the shop that are not part of selling signs. But I don't think I paid sales tax on my computers, I have to look it up. And I know I didn't pay sales tax on our printer and other equipment.

 

[Solventinkjet]

Yes, I pay sales tax on things consumed in the shop that are not part of selling signs. But I don't think I paid sales tax on my computers, I have to look it up. And I know I didn't pay sales tax on our printer and other equipment.

A lot of states have sales tax exemptions on manufacturing equipment. Makes sense. The more machines producing theoretically would mean more tax revenue in the future.

 

[Greg Kelm]

IMO, you can't be held responsible for someone else's use tax. If you have a resale license on file with any retailer, they don't spend any amount of time verifying whether or not you're going resell or use. If you want to cover yourself, include his resale certificate on the invoice and mark the line item as resale. When he pays his quarterly sales tax, the burden will be on him to pay or not.

 

[unclebun]

IMO, you can't be held responsible for someone else's use tax. If you have a resale license on file with any retailer, they don't spend any amount of time verifying whether or not you're going resell or use. If you want to cover yourself, include his resale certificate on the invoice and mark the line item as resale. When he pays his quarterly sales tax, the burden will be on him to pay or not.

You're conflating use tax and sales tax. Use tax is what a consumer pays for goods purchased through a channel which does not charge sales tax, i.e. internet sales. Sales tax is required to be collected by the vendor. If you have a resale sales license, you are bound to collect sales tax on taxable goods.

The doctor is not reselling the graphics the OP is putting on his trailer. That is not a tax exempt purchase with his reseller certificate. As a licensed seller, you HAVE TO collect and transmit sales tax for the sale. If you don't, the state can come after you, the seller for the tax. Not the consumer.

 

[Greg Kelm]

You're conflating use tax and sales tax. Use tax is what a consumer pays for goods purchased through a channel which does not charge sales tax, i.e. internet sales. Sales tax is required to be collected by the vendor. If you have a resale sales license, you are bound to collect sales tax on taxable goods.

The doctor is not reselling the graphics the OP is putting on his trailer. That is not a tax exempt purchase with his reseller certificate. As a licensed seller, you HAVE TO collect and transmit sales tax for the sale. If you don't, the state can come after you, the seller for the tax. Not the consumer.

Sales and Use tax go hand in hand. He provides you a resale license, you pass off the burden of collecting the sales tax to the buyer, end of story. If he uses his resale license to avoid paying the sales tax, but opts to use the product, then the buyer is responsible to pay the sales tax in the form of a use tax. If the guy says he's going to use the graphics to help sell the trailer, are you still going to charge him sales tax?