Are you paying sales tax on items you are reselling, or supplies used to create finished pieces you sell? If you are a legit registered business that remits sales tax to your state you could be paying more than necessary.
DISCLAIMER: The following provided for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors for your specific business.
Nobody likes paying more than they should, and when it comes to running a small business you might be overlooking one way to save.
Maybe you’ve noticed that sometimes you pay sales tax on online orders, and sometimes you don’t. I won’t get into the lengthy discussion of sales tax nexus (the bane of my existence as a small business owner), but I can tell you from my situation as a business in Kansas I am responsible for collecting sales tax based on the buyer’s destination.
So, this means I do not have to charge you sales tax when you shop on my website if I am shipping to your non-Kansas address. This is whether you are shopping for business supplies or not. However, if you DO reside in Kansas I am required by law to collect sales tax even if you are purchasing for your business UNLESS you have completed and provided me with this Kansas Resale Exemption Certificate. This document allows me to list you as a wholesale account so that you are not charged sales tax for your inventory purchases. (FYI since we relocate fairly frequently this info may change depending on what state I am currently operating in!)
Now, since Etsy is a different platform acting as a marketplace facilitator, you will most likely be charged sales tax when you purchase from my Etsy store, even if I have a certificate on file for you. I have no control over sales tax on Etsy, and at the time of this writing I have no way to indicate that you have a certificate on file with me when shopping on Etsy.
Here’s another fun fact…you can request a tax exempt account with your local craft and hardware stores, too! Think of all the money you’ve already spent on sales tax for inventory items you are reselling!!
Here’s the info I found for some popular stores:
Michaels – You must create a Michaels rewards account and fill out an application and provide a valid tax-exempt document for each state where exempt goods will be shipped or picked up.
Hobby Lobby – The website asks you to call their Customer Service 405-745-1248 to ask for the proper tax exemption procedures for your state.
Walmart – You must complete the tax-exempt application and provide the necessary documents for review and approval.
Home Depot – Apply for an account online
Lowes – Apply for a Lowes For Pros Account, complete the registration online.
Follow the Rules
Obviously you cannot get these tax exemption for just ANY purchase, this is only for inventory/cost of goods that you will be reselling, and therefore, collecting sales tax from the end customer for which you will be remitting to the appropriate state(s).
Again, if any of this is confusing, you should consult your accountant. I have also found Tax Jar to be quite helpful. They have a lot of resources, and you can find the link for your state’s tax exemption certificate.
Sales tax laws change frequently, so I highly encourage you to do the best you can to fully understand your obligations as a small business owner, and consult with a trusted accountant to make sure you stay in compliance.
I’m sure you love to save money as much as I do so I hope this has been helpful!