Originally Posted by Billy Goat
Can you give me a break down with numbers so I understand you correctly. Purchased 1 yard of mulch for $30 and sold the mulch for $70 installed. The sales tax is 6%. What would be the break down for business records and what would the bill to the customer look like?
as far as the customer and the state are concerned the sales tax would be based on $70 per yard X's the amount of yards used plus 6%.
whether you paid tax on the mulch when you bought it and charged tax on the difference of $40 per yard it works out exactly the same on the bill as if you charged tax on the $70 per yard.
the only real difference is the state already got tax on $30 dollars of your $70 per yard price through your vendor.
and when you do your sales tax monthly or quarterly return depending on how much tax you collected in a month you would just keep a tally of all the jobs like that you did where you paid tax on the material portion of the job and that would fall into the deductions line on your return.
for example, my state charges 7% sales tax and if i did a job like you did and charged $70 per yard x's 10 yards the total would be $700.00 + 7% with a grand total of $749.00. being that i paid taxes on the mulch when i bought it and the mulch was $300.00 i already paid $21.00 in sales tax which means i would owe another $28.00 in tax on the remaining difference.
i would still charge the customer the $749.00 and i would be reimbursed the $21.00 that i already paid.
if that is all i did that month using that as a example i would fill out my return stating that my gross receipts for the month was $700.00 and when it asked me what my deductions were if any i would put down $300.00.
then it would ask me how much tax i collected and i would say $28.00, which is on the $400.00 dollar difference between my gross sales and deductions.
in a sales tax report the deduction line is for amounts that are either non taxable or amounts where tax was already collected.
that is why you need to keep records on the materials you purchased and already paid tax on so in case you do get a audit you have your bases covered.
i know we all live in different states and some things are slightly different but one thing i am pretty certain on is that when a business becomes a state licensed sales tax collecting business that you get a state certificate of authority that has a tax registration #. you are also entitled to fill out the tax exempt form and hand that to all your suppliers to keep on file because you will be re-selling the product.
they do allow for a occasional deductions because they take into consideration that you may not deal with the same vendors all the time as well as you could be working for a church or something like that which is tax exempt.
they do frown on businesses that don't utilize the tax exempt forms as well as like i said it raises red flags if used too often.
it did for me when i started taking care of a large church and cemetery for the last 3 years and deducting 4k each filing.
even though it was all legit they still had to check and i still had to go through the crap of proving so.
if you are not a registered sales tax collector then do not by any means charge sales tax ever.
you will get in huge trouble by doing so if caught and if your customers found out you would be seen as a scoflaw scamming them out of more money.
as i said in a earlier post all the state is concerned with is getting their cut, my states cut is 7%.
at the end of the day all that translates to is they want 7% of all your sales and they don't care if it is all by you or a combination of you and your vendors. as long as the numbers add up to them getting their 7% of that transaction that is all they care about and that is why i can not stress enough how important it is to keep proper records.
sales tax is money that the customer pays and all you do is work out being the middle man between the state and the consumer.
if at any given point you are paying money out of your own pocket for sales tax then you are screwing yourself up big time.