So this raises a few more questions.This is a perfect example of why you normally would invoice the customers for both materials and labor, one price, no breakdown. The minute your invoice shows a value for materials and a separate value for labor your are opening up a can of worms
So if I'm buying something, not tax exempt, then I am paying taxes at the time of purchase. But then since I'm reselling for a profit, say 20%, how do I report this and pay this tax? Is this something you do when you file your taxes or is there some other special procedure?If your buying it & paying tax & re-selling items at profit you still need to charge tax and report to FTB.
Good gosh.So this raises a few more questions.
1) If you get audited, don't they look at your bank statement also to see that you aren't buying materials for jobs?
2) Do you have to have a separate bank account for your business, even if you are just a sole proprietor doing business as?
3) Don't they reward you for buying materials, ie: write-offs? I did my 2013 taxes (on turbotax) and almost finished without entering any of the stuff I purchased for customers, I owed back over $1000. I went in and entered my write-offs and actually got a few hundred back at the end, instead of owing. Mostly from fed and some from state. Am I missing something?
Good gosh.
You are not "rewarded" for buying materials. It is considered a cost of doing business. How you could complete your tax return without your write offs is beyond my comprehension.
Where did you include these items on your tax return?Well as I said, I did include my write-offs and I was rewarded, over $1000. So why wouldn't anyone include that stuff in an invoice? Otherwise you get taxed on it as though it were labor! Again, am I missing something?
In either case, you need to be a registered business in your state, with a tax ID. Normally you would purchase materials tax exempt (since you are a reseller), sell them with your markup and collect sales tax on the entire price.So if I'm buying something, not tax exempt, then I am paying taxes at the time of purchase. But then since I'm reselling for a profit, say 20%, how do I report this and pay this tax? Is this something you do when you file your taxes or is there some other special procedure?
Those weren't writeoffs; they were Cost of Goods Sold. That gets subtracted from the income you're paying taxes on.Well as I said, I did include my write-offs and I was rewarded, over $1000.
Line 4: Cost of goods sold.Where did you include these items on your tax return?
Is there a new line that says REWARDS?
Just because it's not line item'd on the invoice doesn't mean you don't get to deduct it.Line 4: Cost of goods sold.
I'm just saying I WAS rewarded, rather than taxed for these purchases that were resold. Semantics. But my question remains unanswered:
Why would anyone suggest not including materials on customer invoices, since in the end I end up getting money back instead of paying the government? Was this because of the resell license? I'm looking at you Chris Johnson.
Correct, it was costs of goods sold. But I still made more profit than the amount of the goods sold, so when they were subtracted by turbotax I would have still had a net gain, and been taxed on them. I'm just wondering why I got a refund.Those weren't writeoffs; they were Cost of Goods Sold. That gets subtracted from the income you're paying taxes on.
You got a refund because the COGS reduced your declared income enough to do so.Correct, it was costs of goods sold. But I still made more profit than the amount of the goods sold, so when they were subtracted by turbotax I would have still had a net gain, and been taxed on them. I'm just wondering why I got a refund.
Tin, in the state of TN contractors are considered end users of the materials and we don't get the sales tax ID instead paying sales tax to our suppliers - doesn't matter if we mark up materials or not. Per Chris though, separating in invoices could open up a can of worms.In either case, you need to be a registered business in your state, with a tax ID. Normally you would purchase materials tax exempt (since you are a reseller), sell them with your markup and collect sales tax on the entire price.
Details vary from state to state, but you would most likely be required to send those sales tax monies in at least quarterly.
Are you not required to collect and submit sales tax on the markup portion of materials billed for? Hard to picture the gummint missing that one.Tin, in the state of TN contractors are considered end users of the materials and we don't get the sales tax ID instead paying sales tax to our suppliers - doesn't matter if we mark up materials or not.
If that's the case I'l move to TNAre you not required to collect and submit sales tax on the markup portion of materials billed for? Hard to picture the gummint missing that one.
Your missing an accountant doing your books and taxesjwatts said:So this raises a few more questions. 1) If you get audited, don't they look at your bank statement also to see that you aren't buying materials for jobs? 2) Do you have to have a separate bank account for your business, even if you are just a sole proprietor doing business as? 3) Don't they reward you for buying materials, ie: write-offs? I did my 2013 taxes (on turbotax) and almost finished without entering any of the stuff I purchased for customers, I owed back over $1000. I went in and entered my write-offs and actually got a few hundred back at the end, instead of owing. Mostly from fed and some from state. Am I missing something?
Same here in IL. The one decent thing about doing business here.Are you not required to collect and submit sales tax on the markup portion of materials billed for? Hard to picture the gummint missing that one.