Sales Tax Exemptions

[justafrog]

Hey all,

 

(Apologies in advance, I know there's been a thread or two on this but couldn't find them, please merge if so desired :-)

 

I am in the process of getting sales tax exemptions as we're going to be doing a LOT more Lego buying this year and I'm tired of applying for refunds from the state. 

 

The online ones are pretty straightforward and I'm getting those all done, but can anyone tell me how it works for brick and mortar stores? Do I head to my nearest WalMart and apply there, or do I have to go through a corporate office? And if the former, will the exemption hold at all Walmarts, or do I have to apply at each one individually? Also, do they give you some sort of i.d. card to use at checkout, or???

 

(Same question for Target, TRU, KMart, etc.)

 

Thanks!

[imirish11]

Target, TRU & Kmart require your sales tax exemption form each transaction during checkout, and will key in your info. Walmart will issue a card at CS with a unique tax exempt# which you must present to the cashier at any store before they start ringing anything out.

[justafrog]

Thanks - do Target et al just want to see my certificate, or the signed "affidavit" sort of form that Amazon.com requires?

[jaisonline]

Target requires you to show the cert each time.

TRU (and my Walmart) requires you to show your cert PLUS fill out a form with each visit. See the attached picture what I need to fill out. Cashiers just love this form as most seem not trained about it. Honestly, it wouldn't surprise me if TRU shared the info with Lego due to their strong partnership. Hence, I don't shop much at TRU?

As you already know, forget about Lego stores.

For supplies, Home Depot and Lowes store your info so you only need to show ID and give your phone number.

[jaisonline]

Thanks - do Target et al just want to see my certificate, or the signed "affidavit" sort of form that Amazon.com requires?

Only see the cert and ID

[river41]

Target requires you to show the cert each time.

TRU (and my Walmart) requires you to show your cert PLUS fill out a form with each visit. See the attached picture what I need to fill out. Cashiers just love this form as most seem not trained about it. Honestly, it wouldn't surprise me if TRU shared the info with Lego due to their strong partnership. Hence, I don't shop much at TRU?

As you already know, forget about Lego stores.

For supplies, Home Depot and Lowes store your info so you only need to show ID and give your phone number.

legally you shouldn't be using your tax exemption on supplies.It is only for what you resell not for what the business itself uses.

[jaisonline]

legally you shouldn't be using your tax exemption on supplies.It is only for what you resell not for what the business itself uses.

The buyer pays for shipping materials that I purchase. It is part of their bill. I don't offer free shipping. If I was a contractor, these would like be like something that are a part of an installation that doesn't stay with me (e.g. Caulk for window installation).

I checked with my accountant and another one.

Sent from an iPhone using the Brickpicker app

[exciter1]

So, I guess I need to ask, who and where do you go for accountants?  How does everyone afford an accountant?

[DoNotInsertIntoMouth]

I have a question on this topic (good info from everyone here - great thread as usual Frog):

 

If I have not registered as a reseller (but am about to be done with that) can I still claim the overage from last year since I WAS reselling even though I didn't technically have the license yet?

[jaisonline]

So, I guess I need to ask, who and where do you go for accountants? How does everyone afford an accountant?

Usually word of mouth. Luckily, I have friends on that area. I don't use them yet other than for guidance. One owns his own biz so he's really helpful.

Sent from an iPhone using the Brickpicker app

[exciter1]

Usually word of mouth. Luckily, I have friends on that area. I don't use them yet other than for guidance. One owns his own biz so he's really helpful.

Sent from an iPhone using the Brickpicker app

 

I used some friends for advice this year too, so that works pretty well.

[justafrog]

So, I guess I need to ask, who and where do you go for accountants?  How does everyone afford an accountant?

 

Word of mouth is good, ideally you want a CPA who specializes in taxes (not all of them do) or an EA (Enrolled Agent), which are tax specialists with extra and ongoing training.

 

I only use an accountant for filing our annual federal and state returns, providing quarterly estimated payment forms (and advice for how much to pay), and occasional tax advice when I'm venturing into something new or something weird happens.

 

Day to day bookkeeping, sales tax returns, etc. I handle myself, so the expense is pretty minimal --  usually under $500/year. The accountant saves me much more than that in double-checking my work, keeping up on deductions I am entitled to, preventing me from doing something silly, etc.

[mcortez]

For those new to operating a business, it should be noted that rules regarding sales tax can (and often do) vary radically from state to state.

 

For example on the case of containers for shipments, in California -- assuming I'm interpreting the sale tax code correctly -- the tax code differentiates between containers that are generally returnable/reusable versus non-returnable.  In most cases for sales from California to buyers in California your typical cardboard box used for shipping where you do not retain the title, collect a deposit, or expect the buyer to return to you is taxable -- so you could use your Sellers Permit to request a resale certificate and purchase the boxes without paying sales tax as long as you than remit the appropriate sales taxes to the state later (and you can collect the tax from your customer.)  Hover if you are a seller in California that ships the container to a buyer out of state you are not liable for tax on the container (or in most cases the product being shipped.)

 

Your shipping fees paid to your carrier, USPS/FedEx/UPS are tax exempt so you shouldn't charge your customers tax on that, however your handling fees including any fees charged for gift-wrapping are taxable.  In such cases if you wish to collect that tax from your buyer, you are supposed to provide a separate line item for the handling/gift-wrapping services.

 

Of course, YMMV, I am not a lawyer or tax expert (even if my significant other has been a tax professional for many years) -- this should not be construed as tax or legal advice.  Everyone should take at least a little bit of time to do a bit of research of their state's specific laws.  For example many people would be surprised to find out if they make 3 more than sales in the state of California, and this includes holding more than 2 garage/yard sale, you are required to have a California Sellers Permit.  

 

Thousands of people violate these laws all the time and most jurisdictions have no "garage sale police" -- although I have been told that some of the more ritzy tax districts (which frown on the idea of yard sales because they consider them a blight) may actually have people on payroll that drive around their districts and keep records of garage/yard sales...  

[exciter1]

So, is the key message for anyone getting a reseller permit to negate sales tax on purchases, "Always charge customers who purchase from you who live in the same state the valid state/county sales tax?"

[mcortez]

Well, my key message is double check the specific rules for *your* state and local taxes and to take advice on an internet forum with a grain of salt.

 

Even charging valid state/district sales tax can be a bit weird.  General rule in California, if buyer and seller are both in California it appears the buyer's location dictates what tax is due.  

 

If the buyer and seller are not in the same tax district, the seller appears to be only required to collect and pay the state base rate (which I believe is currently 7.25%) -- however if the buyer is in a tax district that requires additional sales tax (additional taxes can be added by both cities and counties) -- those additional local district taxes are still due, however it is the responsibility of the buyer to pay them.  The seller is permitted to collect and pay them as a convenience to the buyer, but does not appear to be required to do so.

 

However if the buyer and seller are both in the same tax district, than the seller is required to remit the full state and local tax district taxes.

 

And of course, in either case you are not actually required to charge the customer for the taxes -- the taxes simply must be paid.  The seller does have the option of passing those taxes on to the buyer...

 

I sometimes envy those people that live in states without sales tax...  That is, until I look into how those states actually pays for the things that other states pay for with sales tax.  States without sales tax, usually (but not always) have either higher income taxes or higher property taxes.

[justafrog]

mcortez, I think you may be incorrect about buyer/seller in California rules. My tax accountant's understanding is that I collect and remit the FOB (Freight on Board) location tax - i.e, my city's tax rate of 8% since I ship with third party carriers, mostly USPS, from my one business location - and remit that.

 

If I had my own trucks for delivery throughout California, or if I had a business presence (my own trucks, additional locations where I did business, etc.) in other districts in California, then I would need to collect those districts rates.

 

Exciter, mcortez is correct that the sales tax laws vary so widely from state to state that you need to know what applies specifically to yours, and a consultation with an accountant, even if you decide to file your own sales tax returns, is a good investment.

 

mcortez, re states without sales tax having higher income tax, this is generally true -- except in California, of course, where we get to enjoy high sales tax AND high state income tax. The worst of both worlds, good thing the weather's nice. ;-)

[belljohn]

I have collected a grand total of $0.11 in tax this year from 1 in-state minifigure sale.  I have always charged my home tax rate to any buyer within Wisconsin and report those sales as sales in my county.  I charge tax on the full shipping and handling cost.

 

Wisconsin lists

 

"Containers and other packaging, packing, and shipping materials, used to transfer merchandise to customers of the purchaser"

 

as a reason to ask for a tax exemption on those purchases.

[StarCityBrickCompany]

I sometimes envy those people that live in states without sales tax...  That is, until I look into how those states actually pays for the things that other states pay for with sales tax.  States without sales tax, usually (but not always) have either higher income taxes or higher property taxes.

 

Not to mention tolls at every corner.

[jaisonline]

So, is the key message for anyone getting a reseller permit to negate sales tax on purchases, "Always charge customers who purchase from you who live in the same state the valid state/county sales tax?"

 

the key message (at least to me)  is to buy and drink a 6-pack while an accountant does the work. 

 

seriously, the laws are complex with rules at every turn and vary state to state.  heck, even the definition section on my PA's e-tides web site is confusing.  

[mcortez]

Well I know I made one factual error, one of the publications I was looking at was an older publication that indicated the 7.25% rate, the rate is now 7.50%.

 

As for whether to use the seller's location or the buyer's location when determining taxes (in California) here is how I got to my conclusion:

 

Pub 105, Basic Rules, is based on Shipping or delivery destination (not source of shipment):

 

https://www.boe.ca.gov/formspubs/pub105/index.html

 

Additionally on the Special Situations tab:

 

"Generally, if you are not engaged in business in a special tax district and you ship by common carrier into the district, your customer is liable for the district use tax. As a courtesy to your customer, you may choose to collect the district use tax from them."

 

 

 

From the Tax Rate FAQ, question 10: https://www.boe.ca.gov/sutax/faqtaxrate.htm#10

 

 If I am located in a district, am I liable for my district's tax if I make a sale to a person located outside the district?

You are generally not liable for your district

[mcortez]

And to put everything I was trying to say in easier to read terms, I just found this article:

 

http://blog.taxjar.com/sales-tax-for-california/

[justafrog]

I see what they're saying - but the flat 8% I'm charging now and remitting to the state is still legal, we're just adding a charge to our out of district customers by possibly as much as 3/4 of 1 percent depending on their local tax rate.

 

Since I would have to raise prices on all my customers (and possibly by more than 3/4 of 1 percent) to justify the extra time in bookkeeping for calculating those outside my district, I'm good with charging everyone 8%, remitting 8% to the state, and calling it a day. ;-)

 

Especially since there aren't many, if any, districts in California that are under 8%, so if I'm collecting it and paying it for them, they don't have to pay that portion themselves to the state separately. If their rate is over 8%, it's on them to pay the difference - I can collect it as a courtesy, but I'm not required to do so.

[mcortez]

Indeed your method is probably simpler and is legal as long as you remit the overcharge to the state.  It is than the buyer's responsibility to submit a request for refund of the sales tax from the state.

 

Than again, there are the horror stories :  http://www.taxrates.com/blog/2013/07/31/suing-over-sales-tax/

 

Hmmm, you said you have 8% tax, you wouldn't happen to be in Riverside County now would you?  If so, damnit too many of us here, gotta find a place to buy caltrops to slow you all down when I'm bargain shopping...

[justafrog]

lol, no, I'm in San Joaquin County - a nice, depressed local economy. ;-)

[mcortez]

I am in the process of getting sales tax exemptions as we're going to be doing a LOT more Lego buying this year and I'm tired of applying for refunds from the state. 

 

 

Have you been successful with the refund requests so far?  Are you using the BOE-101 form and just providing your store receipts and ebay sales records as the proof of overpayment?  http://www.boe.ca.gov/pdf/boe101.pdf

 

So far only one of my ebay listings has sold in California with all of the rest going out of state -- I know I can claim the sale tax I've paid as deductions against my sales tax liability, but if the current trend continues I'll have paid significantly more sales tax locally than I'll be liable for to the state later.  Thanks!