Sales Tax and Reseller Permits

Sales tax is a tax on the end-purchase of a product or a service, and is imposed on all retail sales, leases and rentals of most goods, and on some services that are considered taxable. Sales tax normally does not apply on the purchase of a product intended for re-sale or for subsequent processing. Sales tax is usually represented by a certain percentage added onto the price of a good or service that is being purchased.

Your sales tax responsibilities as a new business owner, whether you start a business or buy an existing business, will vary depending on the type of organization or entity you operate. Besides state level, estimation of sales tax is also done on municipal or county levels. Payment of state sales tax depends on your sales and your state’s regulations.

Sales tax is intended to be applied on the end user of the product/service, so normally it is the consumers who are burdened with it. The re-sellers on the other hand are exempted from it, provided they do not use the goods on which sales tax is levied.

Some states don’t have sales tax. Those states are:

• Alaska
• Delaware
• Montana
• New Hampshire
• Oregon

What is Sales Tax ID Number?

Sales Tax ID Number or Sales Tax Exemption Certificate is a legal document issued by the state. This Certificate of Authority gives your business the authority to collect the required sales and use taxes, and to issue appropriate sales tax exemption documents, including resale certificates used for purchasing inventory.

Sales Tax ID Number comes in different forms and is also known by other names:

When Should I Get Sales Tax ID?

If your business is required to be registered as a sales tax vendor, you must obtain a sales tax permit from the state’s Tax Department. If you make taxable sales before you receive the sales tax exemption certificate, your business may be subject to substantial penalties.

Why Should I Get Sales Tax ID?

When selling a product or offering a service that is taxable, you will need to collect sales tax. Your Sales Tax ID Number authorizes you to collect sales tax on your taxable sales. Once you receive your Sales Tax ID Number you are considered to be in business even if you never make a sale or never open the doors of your establishment. It is therefore important that you file your sales tax returns on time, even if you did not have any taxable sales during the reporting period, to avoid being subject to penalties for not filing.

Changing Organizational Structure

If your business changes its organizational structure (for example from Sole Proprietorship to Corporation, LLC, or Partnership), the new organization must register as a new sales vendor and obtain a new reseller certificate before beginning operating under the new organizational structure. You must also file a final return for your existing business and surrender the old sales tax permit.

Displaying Your Sales Tax Certificate

You must prominently display your sales tax registration certificate at your place of business. If you have no permanent physical location you can attach it to your truck, cart, wagon, stand, or other vehicle or facility from which you conduct business.

How Do I Know What Is Taxable?

Nearly all tangible personal property transferred for value is taxable. In the US most goods, wares, and merchandise are taxable, as well as property purchased for lease or rent. Services associated with the sale of tangible personal property may also be taxable. Only installation and repair/reconditioning service is not taxable if it is separately stated on the invoice. Most food purchases of unprepared or uncooked food are not taxable.

Tangible Personal Property

Retail sales of tangible personal property includes, but not limited to:

• furniture, appliances, and lighting fixtures;
• machinery and equipment, parts, tools, and supplies;
• computers and prewritten (canned/off-the-shelf/standard) computer software;
• motor vehicles;
• boats and yachts;
• fuels (e.g., motor fuel, diesel motor fuel, and kero-jet fuel);
• candy and confections;
• bottled water, soda, and beer;
• cigarettes and tobacco products;
• cosmetics and toiletries;
• jewelry;
• artistic items such as sketches, paintings, and photographs;
• animals, trees, shrubs, plants, and seeds;
• coins and other monetary items, when purchased for purposes other than for use as a medium of exchange;
• building materials; and
• prepaid telephone calling cards.

Sales of specifically enumerated services include, but not limited to:

• providing certain information services;
• processing, assembling, fabricating, printing or imprinting tangible personal property;
• personal property furnished by a customer who did not purchase the tangible personal property for resale;
• installing, maintaining, servicing, or repairing tangible personal property that is not held for sale by the purchaser of the service in the regular course of business;
• storing tangible personal property that is not being held for sale;
• renting safe deposit boxes, vaults, and similar storage facilities;
• maintaining, servicing, or repairing real property both inside and outside buildings;
• providing parking, garaging, or storing services for motor vehicles;
• interior decorating and designing;
• protective or detective services; and
• entertainment or information services provided by means of telephone or telegraph.

Other Taxable Items include, but not limited to:

• Sales of gas, electricity, refrigeration and steam;
• Sales of gas, electric, refrigeration and steam service;
• Sales of telephony and telegraphy;
• Sales of telephone and telegraph service (including telephone answering services, facsimile transmission services, and cellular telephone services);
• Sales of food and drink for on premises consumption, for example, when sold by restaurants and taverns;
• Sales of food and drink when sold by caterers;
• Sales of heated food and sandwiches;
• Rent for occupancy of hotel or motel rooms (including bed and breakfasts, boarding houses, guest houses, etc);
• Admission charges to places of amusement, other than live dramatic or musical arts performances, motion picture theaters, participatory sporting events, or live circus performances;
• Dues, including initiation fees, paid to social or athletic clubs when the dues are more than $10 per year; and
• Charges of a roof garden, cabaret or other similar place.
• furniture, appliances, and lighting fixtures;
• machinery and equipment, parts, tools, and supplies;
• computers and pre-written (canned/off-the-shelf/standard)
• computer software;
• motor vehicles;
• boats and yachts;
• fuels;
• candy and confections;
• bottled water, soda, and beer;
• cigarettes and tobacco products;
• cosmetics and toiletries;
• jewelry;
• artistic items such as sketches, paintings, and photographs;