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Old 02-20-2006, 11:05 PM
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kbacon3231 kbacon3231 is offline
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Tax Exempt?

When buying materials like mulch, rock, ect to do a job what qualifies you to be able to buy these items tax free? Like when you go to Tractor Supply Co. and the ask you are you tax exempt at the counter do i say yes if its for my buisness. This will be my first year totally legal and i keep hearing you can buy material tax free. I just dont want to look like a jacka$$ when i tell them i want it tax free and not reall yknow what im talking about. Help on this will be greatly appreciated.
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Old 02-20-2006, 11:15 PM
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BSDeality BSDeality is offline
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in CT you have to file for a tax exemption certificate, and you must provide it to each of your suppliers.
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Old 02-20-2006, 11:49 PM
palawnman palawnman is offline
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Quote:
Originally Posted by BSDeality
in CT you have to file for a tax exemption certificate, and you must provide it to each of your suppliers.
what makes someone eligible for a tax exempt cert.? just the fact that it is for business purposes?

Ron
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Old 02-21-2006, 12:31 AM
newz7151 newz7151 is offline
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Quote:
Originally Posted by palawnman
what makes someone eligible for a tax exempt cert.? just the fact that it is for business purposes?

Ron
It's not a tax expemtion like it would be if you were say a non-profit group or church..

It's a RESALE Exemption, which means that you are reselling the item(s) and the sales tax will be collected at that point. Double taxation thing..
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Old 02-21-2006, 12:33 AM
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BSDeality BSDeality is offline
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newz is correct, i didn't mean to say tax exempt but rather resale exemption
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Old 02-21-2006, 12:54 AM
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CLARK LAWN CLARK LAWN is offline
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Quote:
Originally Posted by kbacon3231
When buying materials like mulch, rock, ect to do a job what qualifies you to be able to buy these items tax free? Like when you go to Tractor Supply Co. and the ask you are you tax exempt at the counter do i say yes if its for my buisness. This will be my first year totally legal and i keep hearing you can buy material tax free. I just dont want to look like a jacka$$ when i tell them i want it tax free and not reall yknow what im talking about. Help on this will be greatly appreciated.
you need the number on you state vendors license. should start with an 89xxxxxx. you will have to fill out a tax exempt form at each of your suppliers and they will keep it on file. Only items that will be RESOLD to a customer are tax exempt(mulch,rock,ect.) but not n tools or equipment.
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Old 02-21-2006, 04:19 AM
topsites topsites is offline
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Quote:
Originally Posted by palawnman
what makes someone eligible for a tax exempt cert.? just the fact that it is for business purposes?

Ron
No...!

If you want to be tax exempt (of sales tax), then you would need to classify your business as a service AND retail business, not just service. In addition, you would need to charge the customer the tax and file monthly paperwork with the state and pay them the tax you got from the customer (you have to send a check for the amount of tax you collected), so it is not free money.

As a general rule, a tax exempt status for a retail business is only profitable when the business can charge a markup in addition to the tax, meaning they sell the product at anywhere from 10 to 300 percent over what they paid for it, most of this depends where they get the product versus the actual street retail value... so buying a 5-dollar product at the grocery store and charging the customer 15 dollars is not cool like that because the retail value is 5 dollars, it would only work if you can get the 5-dollar product for a buck or two... Ok, maybe you can work it if that's part of how you get paid (for picking it up), but it's a lot of extra hassle...

Why not save yourself the hassle, pay the regular price like everybody else and charge the customer the price of the receipt (no money made here). But since you are a service business, you can charge a 40 dollar service fee (or whatever you think is fair) for picking stuff up and taking it to their house. Now you're only charging for your time and equipment involved (such as your truck and trailer), and the customer pays for the stuff the same money they would pay if they went to get it themselves. This bit comes in handy and becomes profitable once you're delivering a few hundred pounds (say seed and fertilizer) of stuff, it will quickly become obvious there is actual work involved in loading and unloading, too.

As for me, I charge 30 dollars (thou I'd like to get 50) so the way I do it is I combine trips, and I start earning a small profit once I can combine 2 or more loads into one trip to the store (2 is ok, 3 is good, 4 is great, 5 I've never been able to do lol).

Hope that helps.

Last edited by topsites; 02-21-2006 at 04:27 AM.
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Old 02-21-2006, 06:29 AM
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yrdandgardenhandyman yrdandgardenhandyman is offline
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Quote:
Originally Posted by topsites
No...!

If you want to be tax exempt (of sales tax), then you would need to classify your business as a service AND retail business, not just service. In addition, you would need to charge the customer the tax and file monthly paperwork with the state and pay them the tax you got from the customer (you have to send a check for the amount of tax you collected), so it is not free money.

As a general rule, a tax exempt status for a retail business is only profitable when the business can charge a markup in addition to the tax, meaning they sell the product at anywhere from 10 to 300 percent over what they paid for it, most of this depends where they get the product versus the actual street retail value... so buying a 5-dollar product at the grocery store and charging the customer 15 dollars is not cool like that because the retail value is 5 dollars, it would only work if you can get the 5-dollar product for a buck or two... Ok, maybe you can work it if that's part of how you get paid (for picking it up), but it's a lot of extra hassle...

Why not save yourself the hassle, pay the regular price like everybody else and charge the customer the price of the receipt (no money made here). But since you are a service business, you can charge a 40 dollar service fee (or whatever you think is fair) for picking stuff up and taking it to their house. Now you're only charging for your time and equipment involved (such as your truck and trailer), and the customer pays for the stuff the same money they would pay if they went to get it themselves. This bit comes in handy and becomes profitable once you're delivering a few hundred pounds (say seed and fertilizer) of stuff, it will quickly become obvious there is actual work involved in loading and unloading, too.

As for me, I charge 30 dollars (thou I'd like to get 50) so the way I do it is I combine trips, and I start earning a small profit once I can combine 2 or more loads into one trip to the store (2 is ok, 3 is good, 4 is great, 5 I've never been able to do lol).

Hope that helps.

What if I'm buying at a "contractor's price"? Changes things doesn't it?
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Old 02-21-2006, 04:07 PM
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kbacon3231 kbacon3231 is offline
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Thanks for the help on that. OK here is another question. Now that i dont have to pay sales tax for resale items how do i get them to cut me a deal on mulch and other items like that. Tell the guy selling the mulch i would strictly buy mulch from him if he can give me a deal? I usually dont buy it more than 5 to 6 yards at a time so buying a large quantity at once does help. Nor do i have a place to store a mountain of mulch. Like i said this is my first real year so they probably will not heard of my company before.
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Old 02-21-2006, 04:25 PM
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yrdandgardenhandyman yrdandgardenhandyman is offline
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Quote:
Originally Posted by kbacon3231
Thanks for the help on that. OK here is another question. Now that i dont have to pay sales tax for resale items how do i get them to cut me a deal on mulch and other items like that. Tell the guy selling the mulch i would strictly buy mulch from him if he can give me a deal? I usually dont buy it more than 5 to 6 yards at a time so buying a large quantity at once does help. Nor do i have a place to store a mountain of mulch. Like i said this is my first real year so they probably will not heard of my company before.

Just tell them you are a contractor, show your sales tax permit and most will just offer contractors' price. Tell them it's for resale and you can get tax exempt. You will probably have to fill out a form the first time.
Just remember that you have to collect sales tax on the amount the client pays you and not on what you paid. The state will get their piece of the pie.
Contractors' price on, say mulch, saves me about 25% on the price. So I can sell it at retail, charge for delivery and install and make a reasonable amount of money and still give the client a fair price.
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