Hey guys, I want to start an LLC where I sell snacks and drinks to construction company’s and whatnot. I plan to do the buying at Costco (I work there) since it’s in bulk. I am not sure if I would need to get a business membership and then use our resale forms since to my understanding that is what makes your purchasing tax exempt. If I don’t use this would I then be taxed twice basically? I’m not really sure how it all works so if anyone has any insight to any of this I would greatly appreciate it.
How would taxes work reselling food and drinks?
byu/Kunovert intax
Posted by Kunovert
7 Comments
How would you be taxed twice?
https://customerservice.costco.com/app/answers/detail/a_id/693/~/how-do-i-purchase-for-tax-exempt-or-resale-on-costco.com%3F
Get your LLC registered with the state, and get a resale certificate. Your state WDOR should have a website with that process.
If you’re buying from a physical Costco, there should be someone there you can ask how they handle it. I would bring the resale cert with you.
Yes, you would provide Costco with a resale form (whatever your state uses) and then you don’t pay sales tax when you buy the supplies. You do, however, then collect sales tax when you sell the goods and file whatever sales tax reports is necessary in your area. If you don’t already have one I would think you would need to acquire a resellers licenses from your state in order to collect sales and remit sales tax.
Sales tax can be very complicated. You may have state, county and local taxes to deal with as well as special taxes on food and beverages. Make sure to review your state’s sales tax guide to understand how sales tax works in your state and know what is taxable and how to file sales tax returns. You may want to get help on this.
Think of sales tax as sales and use tax. If you use it you would pay sales tax. Think cleaning supplies, office supplies. But for the products you are reselling you would not, unless you use it.
For example you are buying food from Costco but you want to make a meal for your staff. You would then self asses the sales tax and add that into your income tax return on the self assessed tax line.
The sales tax certificate is you opening an account with the state and filing a tax return where you report your gross sales amount and receipts that are tax exempt. You are then collecting the use tax from your customer who will then use the item. You are then sending the money to the state (sales tax) but this money was never yours. You are being “trusted” to collect the tax and send it to the state. So really you don’t pay the sales tax the user of the item does. This is why sales tax is called a “trust” tax and why this debt cannot be written off in a bankruptcy.
You can also pay tax twice and get a refund, probably. Each state has different procedures. Easiest to get a reseller permit and not pay sales tax on the purchase.
Regardless of how your purchases are treated, you will be required to collect sales tax on taxable items and remit them to the state.
In Texas you would have to get a resellers number from the state comptroller. That would allow you to buy your inventory sales tax free. You would have to charge sales tax to your customers for each sale. At the end of each month you would have to file a report with the state and remit those taxes you collected to the state comptroller.