# Do y'all charge sales tax?



## TheWoodenOyster (Feb 6, 2013)

This one is pretty straightforward.

I am trying to start a legitimate side business here and I am wondering if I am an idiot for considering charging sales tax. My wife seems to think I am being too much of a rule follower. Tell that to all the tax evaders in jail…

Anyway, do y'all charge sales tax?

Thanks


----------



## copcarcollector (Aug 8, 2012)

Even if it is a side business, if you are trying to be legit, charge sales tax as required by local authority. To skirt around it is just inviting a problem later.

Have you also looked into a business license with your state and/or city/municipality? What about insurance?

I am a business owner in Nevada and have to do all those crazy things, including filing a list of people in my LLC yearly, which is one person, me, and it costs $200 for the 'privilege'! I charge sales tax but only for sales within Nevada. Ahhh what fun being in business is---


----------



## comboprof (Aug 26, 2013)

You are legally and morally obligated to do so.


----------



## Dabcan (Feb 1, 2011)

Depends where you are. In Canada you don't have to charge tax unless you make more than $30K/year, but if you do you can also get a tax number meaning you get the tax back from all your business expenses.


----------



## TheWoodenOyster (Feb 6, 2013)

I have always sort of felt like I ought to, legally and morally. The state of Texas has done a lot for me, so I don't really mind paying them back, I suppose.

I am the only one, so I don't think I need to do any business licenses, insurance, etc. I haven't heard anything about that in Texas.

Dang, it is just hard to swallow the fact that in earnest, you have to jack up your price by 30 to 40% in order to cover your income tax and sales tax. Sort of a bummer, but I guess it is what it is.


----------



## Dal300 (Aug 4, 2011)

From what little I know while we were setting up our RV park for the new owner, you cannot legally charge sales tax without a sales tax number. To get the sales tax number you need to get a local business license, to get the local business license you will need to show liability protection, (insurance), business insurance and if the business is run out of your home, home owners insurance with a rider for your shop.

You will also get into local, county, state and federal tax issues. Talk to your local, friendly, tax accountant at the local bar.

Good luck!

BTW, my information comes from our county clerk in Robertson county, along with all the other paperwork we had to file when we got the local license because the clerk forwarded our information to the rest of the government.


----------



## stevepeterson (Dec 17, 2009)

I am in California and they make it reasonably easy to collect and turn in sales tax. They hold a free hour long class about once a month in Sacramento. I guess that that they would also have the class in every big city. There is some type of a seller's permit that you need to file. It is either free to file, or really cheap like around $25. They seem to go out of their way to make it easy for small businesses to collect money for them.


----------



## DocSavage45 (Aug 14, 2010)

All good points. If you are in business you should checkout the pro's and cons. items vs service as my dentist doesn't charge a sales tax. If you're in it 1/2 time or full time being a business owner has advantages.

Sale away! :<)


----------



## NoThanks (Mar 19, 2014)

Sales Tax *is tricky*. 
I've gotten different answers from the tax department, by different people in the same department.

Charge sales tax, but don't pay tax when you purchase material?
If it's installed, like a built in, then it becomes real property and sales tax is not charged, but pay tax on material?
Going through a designer, don't charge sales tax it's up to them to collect it when they sell it to the customer, but, pay tax on material? 
I don't have the answers to all of these (and there's many more, such as use tax from out of state purchases) and they may differ depending where you are, but these are questions you need to ask.

I've been audited by the tax department before, (thank God I keep excellent records) and I got different answers to the above questions, so I just pay tax on all my material when I buy it, and I only charge sales tax when it's a free standing project (like a table or buffet). 
I know I pay more because I'm paying tax on material when I charge sales tax to the customer and I shouldn't be, but next time I get audited I won't have to pay. 
90 percent of my work is real property that I don't charge sales tax on, so it's not too bad.


----------



## CharlesA (Jun 24, 2013)

It really depends on the state. when I was in grad school in NJ, and I had a computer consulting business. I collected and sent in sales tax-at that point didn't cost me anything to "be qualified" to collect it. Just sent it in (quarterly?). Relatively painless.

I wanted legit clients, so I ran a legit business.


----------



## Finn (May 26, 2010)

I include the sales tax in my prices and pay them to Texas. Sales tax permit here is free and simple to get but then the city or county you live in will write you to pay personal property tax on all your equipment. I have about $10,000
worth of equipment and that tax for me is less than $100 a year. One compensation for all this is, I do not pay sales tax on purchases of wood or anything related to this small, part time, business.


----------



## comboprof (Aug 26, 2013)

I recall in New York you are supposed to display taxes as a separate item and can not hide it in the price. I think the idea is that customers have a right to know easily what taxes they are paying.


----------



## wapakfred (Jul 29, 2011)

It's not a choice you get to make, you have to follow whatever the law says.


----------



## comboprof (Aug 26, 2013)

Yes, and thats the bottom line. You must find out what is required by law: for where you are selling, for what you sell and for how you sell it. It's not uniform across the states.


----------



## Mahdeew (Jul 24, 2013)

Most of my sells are online to other states, so, no tax. But the stuff I sell in state, I bake in the tax to the price and report every penny be it cash or checks or cards. State figures out how much tax I owe them and the counties I make the sales and charge me accordingly. Once you get to be big enough to have a few politicians on your speed dial, then they will show you how to legally evade taxes like they do.


----------



## JAAune (Jan 22, 2012)

We do but most of our work goes to non-profits, churches and other contractors. In practical terms, this means we seldom sell to an end-user that is required to pay sales tax.


----------



## runswithscissors (Nov 8, 2012)

WoodenOyster: Well, so much for your "straightforward" question.


----------



## bigblockyeti (Sep 9, 2013)

Depends on how much side work you're doing and what level of liability you're comfortable with regardless of the rules. BTW you should know exactly what the rules are to so as to figure out your liability. If you're selling to a complete stranger paying with a check, probably a good idea, someone you know well paying in cash, that's a different story.


----------



## TheWoodenOyster (Feb 6, 2013)

Thanks for all the feedback guys, I need this info for sure. Seems like the tide is against small business owners, huh?

"Want to start a small business? Ok, we will take 40% of what you make and you'll need to buy crazy insurance, and you'll probably get sued, so you're going to want a lawyer. Oh, and you have to post all your stuff on instagram and twitter if you want anyone to see it."

I don't know how lots of y'all have done it. I guess slowly and steadily figuring out how things works. I think I have that personality where I feel like everything has to be correct and figured out before starting, which I don't think works for small businesses. I think I just need to get started and figure stuff out as I go along.


----------



## a1Jim (Aug 9, 2008)

There's No sales tax in Oregon


----------



## comboprof (Aug 26, 2013)

> "Want to start a small business? Ok, we will take 40% of what you make and you ll need to uy crazy insurance, and you ll probably get sued, so you re going to want a lawyer. Oh, and you have to post all your stuff on instagram and twitter if you want anyone to see it."


Well according to my wife, who ran our/her business. You pay your self salary and contribute to your social security. The goal is to make this equal to about what you sell, hence reducing the business profit to near zero, but positive. We believe that only on this profit do you pay self-emploment tax. *BUT CONTACT AN ACCOUNTANT IN YOUR STATE TO BE SURE*.


----------



## crank49 (Apr 7, 2010)

Here in Tennessee you have to have a tax ID and register your business.
Then you have to file a tax report by the 20th of each month and pay your tax collection to the state.

Don't see how you could pay the tax to the state without having a tax number.

Also, having a tax number makes you elegible to buy wholesale. Most distributors won't sell to you wholesale without a copy of your tax exemption certificate, which is obtained from the state department of revenue along with your resale certificate.

Of course, there are 49 chances your state might be different from mine.


----------



## JAAune (Jan 22, 2012)

Having a tax ID does allow us to purchase supplies for most projects tax free. We only have to pay sales tax on stuff intended for our own use. Items used to build things for customers are not taxed but we have to charge it to the customer when they buy finished products from us.


----------



## comboprof (Aug 26, 2013)

> Having a tax ID does allow us to purchase supplies for most projects tax free. We only have to pay sales tax on stuff intended for our own use. Items used to build things for customers are not taxed but we have to charge it to the customer when they buy finished products from us.
> 
> - JAAune


This albeit correct this sounds a little confusing. I'll try to clear it up. If you have a tax ID, then the material you buy to build a customers item can be purchased tax-exempt, but when you sell it to the customer you charge them tax. This way the material is only taxed once.

In truth sometimes we forget to bring our tax number, or repurpose something we bought taxed for our selves into something sold to a customer, and in these unfortunate cases the material ends up being taxed twice.


----------



## NoThanks (Mar 19, 2014)

Question? If you build a wall unit for a home it becomes real property and you don't charge sales tax?
Do you pay tax on material or is it tax exempt?


----------



## barringerfurniture (Sep 17, 2013)

I haven't been good about setting aside sales tax. However, I did report my sales to the Franchise State Tax Board here in California. Ended up with a big fat bill of course, that I wasn't prepared for. One reason I let this happen is that I often have to negotiate and be flexible with my prices, despite the fact that they are clearly stated on my website, in order to make the sale. So, often times the formalities that I've established for myself go out the window.

The reason I try to do everything on the books is because this is my only source of income. Later on down the road, when I need a new truck or need to rent a shop space, buy a house, etc, my only proof of income will be tax records and invoices (not sure if the invoices even count).

When you're self employed, it really hurts to pay taxes (including sales tax) but you really have to if you want to build a future for yourself and keep taking steps forward I think.


----------



## barringerfurniture (Sep 17, 2013)

> Thanks for all the feedback guys, I need this info for sure. Seems like the tide is against small business owners, huh?
> 
> "Want to start a small business? Ok, we will take 40% of what you make and you ll need to buy crazy insurance, and you ll probably get sued, so you re going to want a lawyer. Oh, and you have to post all your stuff on instagram and twitter if you want anyone to see it."
> 
> ...


California is horrible for any small business. Sometimes it seems downright impossible.


----------



## BinghamtonEd (Nov 30, 2011)

I'd go to a tax specialist. Not the guy at the desk at H&R block. A real tax specialist who has experience in the tax implications of running a small business. All of the statements made here should be taken into consideration, but if you want to protect yourself, your livelihood, and your money, talk to a professional.


----------



## intelligen (Dec 28, 2009)

Tax law varies from state to state, so check with your state's department of revenue about what should and should not be taxed. As JAAune points out, there are also many types of customers who are exempt from sales tax. These can also vary by state.


----------



## intelligen (Dec 28, 2009)

> Well according to my wife, who ran our/her business. You pay your self salary and contribute to your social security. The goal is to make this equal to about what you sell, hence reducing the business profit to near zero, but positive. We believe that only on this profit do you pay self-emploment tax. *BUT CONTACT AN ACCOUNTANT IN YOUR STATE TO BE SURE*.
> 
> - comboprof


Typically unless the business is registered as a corporation, its profit or loss flows through to your personal income tax statement. You can pay yourself a salary but in the end you'll be taxed the same amount whether you report it as employment income on your tax return, or as income from your business (schedule C/sole proprietorship or K-1/partnership).

The only purpose of self-employment tax is to prevent you from owing a huge amount at the end of the year and to prevent you from accruing penalties for not paying tax on your income as you made it. If you have another job, you can opt to have extra taxes taken out of each paycheck rather than dealing with the additional hassle of making your estimated self-employment tax payments on a quarterly or annual basis.

If your business is a corporation it may work differently.


----------



## DocSavage45 (Aug 14, 2010)

Now you have your cart and the horse it the right position and direction. LOL!


----------

