wooden_flower Volunteer Community Mentor.
mam98031 • Volunteer Community Member • Buyer/Seller since 1999
You should include the tax you actually paid on the items you buy for resale as part of your purchase cost when you prepare your schedule C for taxes.
You must also deal with buyer paid tax if you receive a 1099 and use that as your starting point for gross income. You can either reduce your gross receipts, or you can record the tax on the tax expense line on schedule C - per IRS guidelines either method is acceptable. I prefer the tax expense method, so that you are starting with the 1099 amount, which is reported to the IRS.
If you do not receive a 1099, just start with your gross sales wothout the buyer paid sales tax.
Be careful not to deduct the sales tax a second time, if you are starting with a total that does not include the tax. The final value fee on the tax is an expense, the tax itself is not.
I think you may have some misunderstandings.
To have a resellers certificate, there should not be any "thresholds" to meet with your state. If you are a registers business with your state, you should be able to get your reseller's certificate. You may want to look into that. The reseller certificate has nothing to do with sales tax charged to your customers. A reseller's certificate is so YOU don't have to pay sales tax when you purchase items for resale or that end up a component of what you sell. And for some states they will allow you to purchase your shipping supplies with no sales tax too.
If you are currently paying sales tax on items you purchase for resale, then yes those are expenses you can write off.
https://www.revenue.pa.gov/FormsandPublications/FormsforBusinesses/SUT/Documents/rev-1220.pdf
You don't get 'reimbursed' for the sales tax that you paid on the items you bought for resale - you just include the cost of the item plus the sales tax you paid as your cost of purchases on schedule C.
So the total you paid for the item including tax is deducted from your sales, along with other expenses to calculate your net profit. It is your net profit that is taxable.
As suggested, if you intend to continue to buy items for resale, you should register with your state as a retailer/reseller so that you do not have to pay the sales tax when you buy.
Yes, but you should deduct as part of your product cost, not as a tax expense, just to keep things nice and tidy on schedule C.
The OP is still out of pocket the majority of the sales tax - it being a deductible expense means he saves just a % of what he spends. The best solution is still to register as a reseller and not have to pay it.
@aphroditeanderotes wrote:If I'm understanding what the question is asking, which is the question I have issues finding an answer to, then it hasn't been answered. I'm not saying that the information stated is incorrect, just that what is being asked isn't answered. Although I could be wrong.
I believe the question has to do with the sales tax paid by the reseller. I also do not have a certificate which would allow me to purchase wholesale without paying sales tax on the retail value of the products. Therefore, when I resell an item, that item is being taxed twice. Where on the tax form Schedule C to I report that sales tax I paid so that I can get reimbursed?
If I'm wrong about my evaluation of the question, I should probably submit a question on my own.
Sales taxes are STATE taxes. The only thing that have to do with a Schedule C is that they are a deduction IF there was sales tax reported in your Gross Sales.
Or on the Schedule C you deduct the products costs of items sold, that cost would include the taxes you paid, so the deduction is a little larger and being considered in the net income. This is what you are talking about above.
Sales tax paid by the seller on products they actually resold is a write off as part of the cost of goods sold on the schedule C. It is NOT broken out separately, it is just part of what the seller paid for products they sold.
If you are spending a decent amount of money on taxes when you are reselling the stuff, it is likely more cost effective for you to file the appropriate paperwork with your state and get a tax exempt status on stuff you resale.
