# Materials- do I tax the GC on MY cost or marked up price?



## Glass01 (Jul 17, 2013)

I'm a subcontractor in VA. My material purchases are tax exempt. When submitting bids to contractors do I pass on the material tax based on MY cost for the materials? Or do I add my markup and THEN calculate the tax?


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## TLHWindows (Jan 5, 2012)

Unless they are tax exempt, you have to charge them taxes on cost.


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## Glass01 (Jul 17, 2013)

Yes, but when you say "cost" do you mean MY cost or the cost I am charging them? For example, let's say I order materials and the cost to me is $10,000. I am tax exempt so I do not pay the sales tax until the following month to the state. Do I then pay 6% of $10,000 to the state or do I pay 6% of say $12,000, which is what I'd charge the contractor for the materials?


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## mike717 (Dec 30, 2011)

You would charge on marked up prices. If you go to Wal-Mart and buy something you pay sales tax on cost plus markup AKA retail price. If they are tax exempt ask for a copy of their tax cert.


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## GO Remodeling (Apr 5, 2005)

Just curious. Why are you tax exempt?


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## Red Adobe (Jul 26, 2008)

You have to check with whatever state your in. A call will tell it all


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## Tinstaafl (Jan 6, 2008)

olzo55 said:


> Just curious. Why are you tax exempt?


I am. As a business, I have a tax ID number that I can give to vendors so they don't collect sales tax from me. But since that obligates me to keep all the records, charge my clients that tax and remit it to the state periodically, I don't bother with using it. I just pay the tax at time of purchase and pass it on to the customer.

If you mark up your purchases, technically sales tax should be collected on that. In PA, anyway.


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## Leo G (May 12, 2005)

I never understood people who use the tax exempt. It basically makes you do the record keeping and the heavy. Why bother, you aren't getting anything for it. Just let the retailer deal with the burden.

You charge the tax on what you charge him.


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## Calidecks (Nov 19, 2011)

Tinstaafl said:


> I am. As a business, I have a tax ID number that I can give to vendors so they don't collect sales tax from me. But since that obligates me to keep all the records, charge my clients that tax and remit it to the state periodically, I don't bother with using it. I just pay the tax at time of purchase and pass it on to the customer.
> 
> If you mark up your purchases, technically sales tax should be collected on that. In PA, anyway.


I had a load of fencing come across state line from Utah on a semi trailer, they got my info from my load as the truck was coming through a fruit inspection station. I got a nasty letter from The board of equalization, they tried to say I was a retail salesman and needed to file all the proper paperwork. In the end I had to send them a check and it was settled. The point is they are very desperate for revenue and will take extraordinary measures to collect.


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## Leo G (May 12, 2005)

I would have told them to pound sand


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## Seven-Delta-FortyOne (Mar 5, 2011)

Californiadecks said:


> I had a load of fencing come across state line from Utah on a semi trailer, they got my info from my load as the truck was coming through a fruit inspection station. I got a nasty letter from The board of equalization, they tried to say I was a retail salesman and needed to file all the proper paperwork. In the end I had to send them a check and it was settled. The point is they are very desperate for revenue and will take extraordinary measures to collect.


Holy Crap! 

They have snoopers in the fruit stations now?


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## Calidecks (Nov 19, 2011)

A.T.C. said:


> Holy Crap!
> 
> They have snoopers in the fruit stations now?


I couldn't believe it. Because Utah didn't charge me California sales tax. The letter went something like this: we have reason to believe sales tax was not paid for items coming from abc supplies. You need to go through your records and pay all taxes for all out of state purchases. So I called them because I knew they were fishing. I asked the case worker how they found the load. That's when she told me it was from the fruit inspection. She had to tell me by law I believe.


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## pinwheel (Dec 7, 2009)

To the OP, when you buy something at Walmarts, do they charge you tax on their cost, or the sale price?





Californiadecks said:


> I couldn't believe it. Because Utah didn't charge me California sales tax. The letter went something like this: we have reason to believe sales tax was not paid for items coming from abc supplies. You need to go through your records and pay all taxes for all out of state purchases. So I called them because I knew they were fishing. I asked the case worker how they found the load. That's when she told me it was from the fruit inspection. She had to tell me by law I believe.


Dude, you need to move out of that communist country & back into the United States.


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## TxElectrician (May 21, 2008)

To the OP - Your best bet is a phone call to your state's comptrollers office. They can answer your question as it pertains to your state. I can tell you what I am required to do in Texas - and it varies according to whether the job is residential, new commercial, service, or commercial remodel- but I doubt the info will be of any benefit to you.


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## woodchuck2 (Feb 27, 2008)

Tinstaafl said:


> I am. As a business, I have a tax ID number that I can give to vendors so they don't collect sales tax from me. But since that obligates me to keep all the records, charge my clients that tax and remit it to the state periodically, I don't bother with using it. I just pay the tax at time of purchase and pass it on to the customer.
> 
> If you mark up your purchases, technically sales tax should be collected on that. In PA, anyway.


From what my accountant has told me this is the way it works in NY except now you must pay the tax on the profit you made "selling" the product to the customer. This way good ole NY gets their tax twice on the same product. So, i have had to start billing differently. NYS has contacted me of why i no longer pay in to them, i told them i sell my labor which i claim at the end of the yr, i am not a hardware store! After some arguing with them over several calls i told them to consider me closed for business and i have not been bothered since. I pay all my tax up front upon purchase and i claim my labor at yrs end, thats all they get from me! I hate this State!!!!

Example according to my accountant: If i buy a product for $1 with NYS sales tax i pay total of $1.07, i mark it up 20% and sell to customer for $1.28 but with NYS sales tax they now pay $1.36. According to my accountant i must now pay another .09 cents after charging sales tax on the sale of product and my 20% profit so in the end NYS makes .16 cents total on that $1 item. And NYS is broke! They also charge tax on a quart of oil as well as a .10cent oil tax per quart. We buy tires for our vehicles we pay sales tax plus a $5 tire fee per tire upon purchase. This is not a disposal fee, you pay $2-$3 disposal fee depending on facility when you get rid of them. Then there is the tax applied to gas/fuels!! The State rakes in Millions of dollars per day on just gas/fuel costs, but their broke!!!


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## Dustincoc (Sep 14, 2011)

woodchuck2 said:


> From what my accountant has told me this is the way it works in NY except now you must pay the tax on the profit you made "selling" the product to the customer. This way good ole NY gets their tax twice on the same product. So, i have had to start billing differently. NYS has contacted me of why i no longer pay in to them, i told them i sell my labor which i claim at the end of the yr, i am not a hardware store! After some arguing with them over several calls i told them to consider me closed for business and i have not been bothered since. I pay all my tax up front upon purchase and i claim my labor at yrs end, thats all they get from me! I hate this State!!!!
> 
> Example according to my accountant: If i buy a product for $1 with NYS sales tax i pay total of $1.07, i mark it up 20% and sell to customer for $1.28 but with NYS sales tax they now pay $1.36. According to my accountant i must now pay another .09 cents after charging sales tax on the sale of product and my 20% profit so in the end NYS makes .16 cents total on that $1 item. And NYS is broke! They also charge tax on a quart of oil as well as a .10cent oil tax per quart. We buy tires for our vehicles we pay sales tax plus a $5 tire fee per tire upon purchase. This is not a disposal fee, you pay $2-$3 disposal fee depending on facility when you get rid of them. Then there is the tax applied to gas/fuels!! The State rakes in Millions of dollars per day on just gas/fuel costs, but their broke!!!


And this is why I plan on heading either to New Hampshire or South Dakota.:clap:


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## ttech (May 18, 2010)

In Pennsylvania if I buy a product for resale I give the store a copy of my sales tax ID certificate and I don't pay sales tax, and they keep a copy on file in case they are asked by the state prove we are reselling it.

When I sell the item to the customer I collect the tax and send it in. 

When I do sub cantract work. I get a copy of the contractors Tax ID then sell the items / services to them Tax free. They would then collect the sales tax from the end customer and file it with their Tax ID. If they do not provide me with a tax certificate I charge them tax. I need proof they have the ability to collect tax legitimately. 

It is tax free until the last person buys it, or it gets to someone without a tax ID. 

There has to be a trail of Tax Id's

If I sell to a Tax exempt organization, they have to provide a copy of their exemption certificate or the 501c3 or they get taxed, I need the proof to stay legit.


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## Theloxmyth (Jun 9, 2013)

ttech said:


> In Pennsylvania if I buy a product for resale I give the store a copy of my sales tax ID certificate and I don't pay sales tax, and they keep a copy on file in case they are asked by the state prove we are reselling it.
> 
> When I sell the item to the customer I collect the tax and send it in.
> 
> ...


Yep. :thumbsup:


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## pinwheel (Dec 7, 2009)

ttech said:


> In Pennsylvania if I buy a product for resale I give the store a copy of my sales tax ID certificate and I don't pay sales tax, and they keep a copy on file in case they are asked by the state prove we are reselling it.
> 
> When I sell the item to the customer I collect the tax and send it in.
> 
> ...



That's exactly how we handle it as well.:thumbsup:


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## Marven (Jul 15, 2013)

In Illinois, we pay tax to the supplier like Home depot and then build the house. When the house is sold no sales tax is due because it is real estate.


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