Tax Question - How to Charge?

[Johnny Gumball]

Hello Fellow Venders,

I have a tax question. We all pay tax on our cost of goods, our product. However, how do you calculate tax when you vend your product at 25 cents. Do you guys just include your sales tax in the 25 cents? Therefore, you divide that amount of tax you paid on your product into how many vends you are able to sell from the original product ?

Tks

[alyssamma]

Most states do not tax gumballs, or items that are $0.25. I want to say *all* states are like this, but there could be 1 or 2 that are different.

Regardless, you would pay sales tax not on your cost of goods, but on your total revenue. So if your business makes $10K, you would pay tax on that.

Like I said, you normally would not pay sales tax (assuming bulk - full line would pay), but you would still have income tax.

Kevin

[Johnny Gumball]

Hows that I paid tax on my product? But I'm not able to charge the customer. So don't we end up loosing money? I understand we need to pay income tax but with 25 cent vending as a business I can't pass the taxes I paid on the product to the customer right?

tks

[alyssamma]

I'm not sure I follow you. Sales tax is just part of doing business. You have to live with it

If you are a full line vendor, then you can buy your products without paying sales tax because your customers will pay. But for gumballs, they don't pay which means you do.

Look at it another way. You also pay income tax on that $0.25...that isn't "recovered" from your customers...it is just the cost of doing business.

Kevin

[Smiley]

If you are re-selling the product you shouldn't be paying sales tax. Sales tax is meant to only be paid by the final customer.

All of my suppliers have my resale number. I am not sure how this works when you buy your products from a place like Costco.

[alyssamma]

Smiley, that is not 100% correct. As I stated above, if you are in full line, or another product where your customers pay sales tax then you would not pay when you purchase.

But, for something like PMMs or Gumballs, you need to pay

If you are purchasing PMMs (or something else) and not paying sales tax when you *buy* them, then you *must* pay sales tax on the gross sales revenue.

Kevin

[Smiley]

I am in 2 states that are sales tax exempt @ 25 cents so I don't know if that changes anything, but I buy my gum from Concord and don't pay sales Tax, don't collect sales tax, don't report sales tax.

I have a CPA handle this stuff and I have been audited for sales tax twice and not been found to owe anything.

What am I missing here? I don't understand why you would have to pay.

[alyssamma]

Well, there are a few issues at work here. First, you are purchasing over the internet. Many people don't pay sales tax this way - although they are required to.

Second, I'm unsure if you are in one state and selling in 2 others or what.

But, the bottom line is when something is sold, *someone* needs to pay sales. This works in 2 ways...

1) The vendor who buys it pays sales tax. The end customer does not. This is typically the case with "gumballs". Note, if you purchase over the net, you might not pay - but you are legally required to.

2) The vendor who buys it pays no sales tax. The end customer pays sales tax. The vendor collects this and pays to the gov.

No other way around it

That being said, what do you mean "audited for sales tax"...I've never heard of anything like that.

[Johnny Gumball]

Hello Guys,

A couple of statements, please advise that I am on the right track.

1. The bulk vender cannot pass the sales tax to the customer? Therefore, the bulk vender is responsible for paying the sales tax on the cost of goods and will not recouperate this from the customer?

2. Does the bulk vender need to report to the gouvernent the sales tax paid on the cost of goods?

3. How does this differ from full line vending? How can you charge tax on a chip for example, a one dollar product?

tks

[alyssamma]

1) Correct - assuming you live in a state where sales tax is not collected on $0.25 cent sales (most if not all I believe).

2) No. However, this is a business expense and you report that. For example, you pay $9 for PMM ($8 + $1 in tax). You just report $9 as an expense.

3) For full line, you are (usually) required to pay sales tax. I say usually because it varies from state to state. For example, some states may tax sode but not water. Or no liquids at all but tax food. It is complicated. Regardless, whatever you have to collect sales tax on, you do not have to pay sales tax for. So, let's say your state taxes soda. You buy a case of soda for $10 and you do not pay tax on it. Going back to #2 above, you only report $10 in expenses. Now, let's say there are 20 cans you got for that $10 and you charge $1 each for them. So you now have sales of $20. You would report $18 in profit on your income tax returns and $2 in sales tax collected. You pay income tax on the $18 and give the $2 to the state.

Note, I am making up #'s to show an example, not to illustrate actual tax rates.

Kevin

[Smiley]

I am not buying my products over the internet so that doesn't apply here.

I am in NY and my machines are in NY and NJ.

In both states sales of 25 cents from bulk vending machines are exempt from sales tax (50 cents in NY).

A sales tax audit is when you get a letter from the State Dept. of Finance telling you they want to make sure your company is paying the right sales tax.

I have had 2 of these audits and have had 2 different CPA's doing my books over the years. None of the 4 people involved  have ever said I need to be paying sales tax on the gumballs that I buy from Concord.

I don't have the time to read the entire tax code but I will paste what I feel is the relevant sentence, "you  never collect sales tax because all of your purchases and sales are for resale". No caveats about whether the end user is capable of paying sales tax or whether the item is tax exempt.

If you could find the relevant part of the tax law that backs up your claims, I would appreciate it.

[mizugori]

hey another ny vendor! I keep reading conflicting stuff about what the cap is on items you sell needing to have sales tax apply. some places say if you vend 25 cent items, you don't need a certificate of authority / you don't need to forward sales tax to uncle sam. other places say 50 cents. and in several places, they say in ny it's anything 75 cents and under...

[Smiley]

50 cents.

here's the link if you need it:

http://law.onecle.com/new-york/tax/TAX01115_1115.html

[alyssamma]

Miz, the exemption in NY is $0.75 and applies to all vended products...not just candy (i.e., included food and beverages).

This has been the law since 2000 (you can see here for more info: http://www.nysava.org/)

Smiley, this is why you are not required to pay sales tax. Nothing you vend is taxable. As I've said all along, most vending (bulk) sales are tax exempt and therefore you would not pay sales tax.

This is why your "audits" were passed.

As to whether or not you are required to pay sales tax to Concord - that is a different story. First, understand, that as a buyer, if you don't pay sales tax the gov is not going to come after you. They are coming after the seller - it is his responsibility, regardless of whether or not the buyer pays - to remit all sales tax.

Note, this is not exactly true for internet sales, and that is why I suspected you were buying from them.

You say you are not purchasing over the internet...do you go to their offices and pick up product? If so, exactly what product are you buying?

Kevin

[alyssamma]

Smiley the first paragraph of your link has 2 important sentences...

1)  The  food  and drink excluded from the exemption provided by this

  paragraph under subparagraphs (i), (ii)  and  (iii)  of  this  paragraph

  shall be exempt under this paragraph when sold for seventy-five cents or

  less through any vending machine activated by the use of coin, currency,

  credit  card  or debit card.

This explains it is $.75 and not $.50.

2) Food,  food  products,  beverages,  dietary  foods  and  health

  supplements,  sold for human consumption but not including (i) candy and

  confectionery, (ii) fruit drinks which contain less than seventy percent

  of natural fruit juice, (iii) soft drinks, sodas and beverages  such  as

  are  ordinarily  dispensed  at soda fountains or in connection therewith

  (other than coffee,  tea  and  cocoa)  and  (iv)  beer,  wine  or  other

  alcoholic  beverages,  all of which shall be subject to the retail sales

  and compensating use taxes, whether or not the item is  sold  in  liquid

  form.

This shows that you should be paying sales tax for your purchases from Concord.

Kevin

[Smiley]

The relevant section as it applies to our industry is 13-A.

The exemption is 50 cents.

The paragraph you refer to is for food and beverages only. Who is selling food and beverages in a bulk vending machine for 75 cents?

Same thing with your second point. We are governed by 13-a, not this section.

[Smiley]

I buy my gum by the skid, directly from Corcord. Over the phone. It comes by truck. I've been ordering from them for 20 years. They have my resale number. They know that the gum is going into gumball machines in New York. They don't charge me sales tax. They know what they're doing. They don't have to report any sales tax. Neither do I.

[alyssamma]

Smiley, look at this link: http://www.nysava.org/

It is $0.75.

Also, from the first para you posted: (i) candy and  confectionery,

This clearly relates to what you are selling.

13-a states: Tangible personal property...

Is this what you are vending instead of candy? Do you mean toys or something like that? Everything I posted applied to candy.

The first para clearly applies in that case.

Ordering over the phone and the internet are basically the same thing for sales tax purposes. The key is that you are not walking into a physical building to purchase. You are supposed to pay sales tax, but vendors often do not charge for this. It doesn't mean you don't owe it.

Look, I'm not trying to get into an argument with you, and you seem to be getting a little upset. We can just let other read the first para and then read 13-a and see what they think applies.

Kevin

[Smiley]

I could let people read pages of state tax law and come to ttheir own conclusion but I am trying to save people that effort.

I was in the business when Roger Folz got a 25 cent exemption for our industry in NY and I remember very vividly when he got it increased to 50 cents. I have talked to people in NY who want to try to get it increased to 75 cents. I am 100% certain that the bulk vending exemption in NY is 50 cents. If you were to go to the NBVA page which discusses bulk vending sales tax exemptions (I'll link it in my next post) you wilee see that the exemption is 50 cents.

Now on the point of whether I should be charged sales tax for stuff that I resell I am not as sure. You make an interesting point. But it flies in the face of everything I have heard in the 20+ years I have been in business. We have also purchased from NY suppliers and no one has ever charged us sales tax. None are of the caliber of a Concord or A+A but the subject never came up.

It seems like an open and shut case. Sales Tax is paid by the end consumer. And in this case this transaction is exempt from sales tax. And you have provided me with no law that says in a case where the final transaction is exempt we move down the line and charge sales tax on the previous transaction in the supply chain.

[Smiley]

Was unable to find the page on the NBVA page but it seems that some blogger copied it:

http://bulkvending.blogspot.com/2007/06/bulk-vending-and-sales-tax.html

[alyssamma]

Smiley, I think you are misunderstanding what I am saying.

First, look at the link I posted: http://www.nysava.org/. This is the the NYS vending assoc. Just read the first para on their page. It says $0.75.

Or, look at this article from vending times. It is 2 days old and talk about how NY just tried to raise the exemption from $0.75 to $1: http://www.vendingtimes.com/ME2/dirmod.asp?sid=EB79A487112B48A296B38C81345C8C7F&nm=Vending+Features&type=Publishing&mod=Publications%3A%3AArticle&mid=8F3A7027421841978F18BE895F87F791&tier=4&id=4EE850A37BD341CBAB73C43B121E4266

Or, look at the link you posted The first para talks about candy and states $0.75. Please, even if you don't read what I posted, just read the first para from what you posted

Section 13-a in that doc applies to non-food items. This would mean things like toys or stickers. If this is what you are selling, then yes, it is $0.50. But for candy, it is $0.75.

As for the sales tax being paid, you said: " And you have provided me with no law that says in a case where the final transaction is exempt we move down the line and charge sales tax on the next transaction in the supply chain."

This is because I never said that What I said is this:

1) Sales tax is paid when you purchase, or...

2) You pay no sales tax, charge your customers, and then pay the gov.

Of course this doesn't apply to non-tax items. But for things like candy, a bulk vendor will pay sales tax when they purchase because they are (usually) exempt.

The fact you *didn't* pay sales tax doesn't mean it *shouldn't* have been paid. People purchase items all the time from Amazon and don't pay sales tax. However, they are supposed to report those sales on their state tax returns and pay sales tax there. I'm sure all of them do

Furthermore, most vendors just take an "tax exempt" form and don't charge tax. They don't take the time to figure out if it applies in a particular case or not.

Anyway, the bottom line is that you don't pay sales tax...this makes your costs lower

But read the above links...it is $0.75 in NYS

[alyssamma]

What you posted is a blog entry from 2002. No offense, but a) it is a blog and it isn't true

Take a look at my links - not blogs

Kevin

[Smiley]

The blogger simply copied and pasted it from the NBVA website. The information, as near as I can tell, is accurate. Do you believe he just made up random numbers?

Or you could just believe me. My company has been doing business in NY since 1965. I've been in the business since 1987.

There is really no difference between gum and candy at 75 or 50 since I doubt any of us are selling it for 75.

But, unto the main point and the OP's question. How can you draw any distinction between non-tax and tax exempt? There is none. If I have to pay sales tax for my gumballs then the supermarket should have to pay sales tax when it buys milk from it's supplier under your nonsensical logic that someone's got to pay the sales tax.

[alyssamma]

Smiley,

First, did you read any of the links I provided? Did you go back and read your own link?

Yes, I think much of what is in blogs is made up. But even assuming it isn't, it is from 2002...8 years ago.

Non-tax and Tax-Exempt are 2 totally different concepts. There are many items that are not taxable. Most food items in a grocery store fall into this category. No one pays tax on them.

Tax-Exempt is a different concept all together. That means that you are exempt, i.e., not required to pay, taxes. In other words, normally you would pay taxes, but you don't have to because you are exempt.

As for the grocery store, since any taxable items they sell they collect sales tax on, they do not need to pay sales tax. Please don't call logic you don't understand non-sensical. The bottom line is that for taxable goods, ignore the "tax exempt" issue, one person pays the sales tax. If you are purchasing for your consumption then you pay it. If you are purchasing for resale, then you don't.

This is why sales tax is also called use tax. Whoever uses it pays the tax on it.

Not non-sensical at all. And very clear.

Kevin

[Smiley]

could you please provide an example in any state's tax law where a middleman pays sales tax on a tax exempt item he resells. thank you