How to handle Taxes/Tax Status as resellers?

[Achilles]

In the other thread about the state of large set investing, a few people mentioned taxable status and perks associated there with. I've only recently got to the size where I really need to worry about such things, so I was hoping those in the know could provide some insight.

 

I am not incorporated, last year and just was designated as self employed for the purposes of Lego reselling. (Not counting my other jobs, of course.)

 

I have simply just been paying sales tax on the stuff I buy, and when selling I don't do anything special regarding taxes, Amazon charges it to the customer and that's that.

 

If anyone has the time to go into depth on what I SHOULD do regarding reseller tax exempt status - forms to fill out, costs and downsides, I'd really appreciate it (Or really, anything else that goes along these lines). Any pointers and direction would be appreciated here. 

 

 

[justafrog]

It'll depend on your state, but all states that charge sales tax have some kind of resellers license (in California, you go through the State Board of Equalization). You then can purchase  without sales tax from any merchant, wholesaler, etc. who is willing to work with you on that basis.

 

Some retailers may not be interested in dealing with it and won't honor your resale certificate. It would be foolish to even try at a Lego store or with Lego LEGO Shop at Home since they are trying to ban resellers.

 

In those cases, you may (in some states) be able to file for the overpayments you make (paying sales tax on items that you are going to resell) - any decent tax accountant should be able to walk you through the process the first few times, and if you then understand it you can file yourself.

[DoNotInsertIntoMouth]

To me it's really not worth the time. I just factor it into my costs and profits. At the moment, the margin is good enough that tax is not a huge issue. If you are savy enough coupon, credit card, rewards wise you can make that back without issue.

[Achilles]

Yea, I had been factoring it into my costs as well, but %8 seems like a lot to leave on the table, last year I just counted the sales takes in with my cost of goods. So it was a deduction, but not a full credit. 

 

If you have a resale certificate, can you use it online at places like Amazon/Walmart/Target.com? Or is this only for local purchases?

[justafrog]

It depends on the store/site. You'll have to get hold of each customer service department and ask them their policies and procedures.

 

Keep in mind that once you have a resale certificate, you will be responsible for filing a sales tax return (depending on your state, this might be monthly, quarterly, annually, etc.) so you have to determine whether what you save will end up being worth the paperwork or the expense of an accountant to do it for you.

 

I would go sit down with an accountant for a consultation, and they'll be able to better advise you based on your purchasing and sales volume, your state's rules, etc.