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Taxes on company purchased plants?

Discussion in 'Landscape Architecture and Design' started by Ramairfreak98ss, Jan 18, 2007.

  1. Ramairfreak98ss

    Ramairfreak98ss LawnSite Silver Member
    Posts: 2,210

    I have a quick question. Since speaking to some other local small business owners, most in retail business. They all have tax ID exempt #s to use when reselling products.

    If i go to a small nursery, buy $3k in trees for a customers landscape job, why do i have to pay them the NJ 7% sales tax for a total of $3,210. THEN, i resell them to the customer, say even if i made zero markup and resold at $3,210.00, i now am charging them this plus my bills 7% for a total of $3,434.70? The state is double taxing the same item for the same person essentially or is this how it really works?

    For the last few years, ive mainly done lawn service, so mulch, stone, dirt was my only purchases that i was paying out sales tax on myself then reselling.

    When i receive a check from a client, i must claim that as income and is taxable right? Or can you keep an excel form with all of your expenses that were direct resale?

    If i paid all the taxes on specific resold items, can that be deducted from what my yearly income taxes are for 2006? I feel like an arse after speaking with some other people, i always think im on top of things, things like this ive spoken to other guys about and theyve told me no, you have to pay the tax and then charge the customer the tax on whatever your reselling it at.:confused: :cry:
  2. if you have a tax exempt number , you do not pay tax on it when you buy it, you collect sales tax on it when YOU sell it. might want to talk to an accountant to get yourself lind out, and get it done the right way.
  3. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    This post will be moved soon....but here goes.

    In MN, you can either have a tax exempt number for product that's purchased as a cost of doing business. This can be anything from fertilizer, weed control products, to landscape materials, to blades for the lawn mower, but not the lawn mower itself.

    Minnesota's Department of Revenue has an entire fact sheet that pertains to sales tax, what needs to be paid, what can have an exempt number used for it. I would suggest doing a google for New Jersey's Department of Revenue, then searching "sales tax" on their official website.

    As for your other question, about the income tax. You keep ALL receipts for EVERYTHING you used during your course of business for that year.

    You add ALL of your receipts (as long as you can justify that purchase towards the operation of your business). You take that total and subtract it from your gross (all money you received in the same year). The number that you have left over is your profit for that year, the number that you will be paying tax on.

    When you purchase landscape material, yes, you're going to receive a check for $3000 for materials, but you've also wrote a check for $3000 to purchase that in the first place, so they cancel each other.

    If you collected a check for $3500 for $3000 worth of material, then you'd pay taxes on the $500, since you don't have a receipt for that extra $500, therefore, it's profit.

    Obviously, you have other expenses in your business, so those expenses will also take a percentage of that $500, but now we're starting to nit-pick.

    About the reselling part, after I re-read your post.

    Say you buy $3000 in material, and you pay the sales tax.

    Now you're at $3210. You mark up the materials, to say, $4000. You'd charge sales tax on the extra $790 ($4000 minus $3210) since that extra money has not had sales tax charged against it yet.
  4. Ramairfreak98ss

    Ramairfreak98ss LawnSite Silver Member
    Posts: 2,210

    Thanks, thats kind of how someone else explained it to me here. I guess my best bet is to setup another form, to list all directly sold products to the clients. Since for 2006 i paid taxes on EVERYTHING i bought locally, ill check into what i charged for all those products such as mulch, tress, etc that were resold. what a pita. Two years ago, i went to an H&R block for my taxes to be done, the woman was very informative, but they wanted around $700~ for mine to be done, i didnt make much then, was only doing it part time and definitly didnt have that kind of money in january 04 :/ Ill check the NJ site too, thanks
  5. JFGLN

    JFGLN LawnSite Senior Member
    Posts: 953

    $700 for Taxes? You could hire an accountant for less than that.
  6. LwnmwrMan22

    LwnmwrMan22 LawnSite Platinum Member
    Posts: 4,372

    Quick question about your taxes at H & R....

    Did you have everything organized into catagories and totals?? Or just a box of recepits and say "here's what I spent"?

    I've got an accountant, but I've also got an accounting program. Throughout the year, I enter all of my purchases, and then at the end of the year, print of a summary of each catagory, their totals and take that to an accountant.

    He then enters my totals into his computer, prints all the forms off with the right numbers in the right places, and I sign a form that I agree.

    It's about $125.
  7. Ramairfreak98ss

    Ramairfreak98ss LawnSite Silver Member
    Posts: 2,210

    Yeah i know, i thought it was a lot.

    Anyway, yes i do/did keep sheets of all my info. I have broken down all receipts, by month, monthly totals, yearly totals and dates.

    Then for income i have all my on books income, tax totals per month/quarter and when they were paid.... Im pretty organized in that sense, i guess NJ they just like to stick it to you for everything financially related.
  8. Az Gardener

    Az Gardener LawnSite Gold Member
    Posts: 3,899

    Sounds like each state will differ. Here is an Az horror story.

    Older couple had small company man did masonry work for years. Never used a Tax ID # paid tax's at point of sale. In an audit they got tagged for not paying sales tax. They had never charged sales tax to clients using logic of common sense of paying tax at point of sale.

    State could care less about common sense, would not even give them credit for the sales tax they did pay at POS they had lots of documentation too. Imagine 20 +years of not paying sales tax needless to say their retirement was ruined.

    CPA's worth every penny, and yes $ 700 is way out of line. Even if that is what it cost it would still be money well spent.
  9. Allure

    Allure LawnSite Senior Member
    Posts: 426

    get yourself a good personal accountant not H&R. unless you are tax exempt you are paying tax on materials & collecting tax from your customer on materials. As of oct 1, 2006 you also need to collect tax on labor in many cases. I'll see if i can dig up the official docs & i'll PM them to you. I gotta sleep now.
  10. Ramairfreak98ss

    Ramairfreak98ss LawnSite Silver Member
    Posts: 2,210

    Well in NJ im pretty sure its always been that were supposed to charge tax on everything, labor, retail, sales, merchandise etc. They even tax 7% at wawas as of june 06 now. I mean your 99cent bottled water for christ sake is now $1.06 :confused:

    So your saying, since i am not currently tax exempt, which i dont have an exempt cert, that i DO have to pay the sales tax at the register for supplies then charge the customer for another 7% tax on the same product?

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