Forum Moderators: buckworks
I remember when I was setting up my wholesale/distributor accounts for each one of them I needed to show that I had a "reseller" certificate; so they wouldn't charge me sales tax when they sold the products to me. However, I know none of these wholesalers have a physical presence in my state.
My understanding with sales tax is that if you don't have a physical presence in a state that you don't have to charge your customer sales tax in that state. You only need to charge sales tax for states that you have a physical presence in.
So this brings me to the questions I have:
1. I will like to start selling my products at wholesale to small end retailers.
a. If the retailer is in another state where I don't have a physical presence do I have to charge them sales tax if they DON'T have a "reseller" certificate?
b. Or do they need to have a "reseller" certificate for me not to charge them sales tax when they are in another state that I don't have a physical presence?
c. Does selling wholesale instead of to an end retail customer have different laws when dealing with sales tax?
Thank you,
olimits7
If they are in your state, and they are using your widget to produce another widget they will sell (like if you were selling bottles and they were producing skin lotion) or they are simply reselling your widget, then they can be exempted from sales tax by showing the reseller's sales tax exemption cert or giving the number. The idea is that sales tax shouldn't be collected on the same item twice, and that down the line, when the widget is finally sold the last time, the sales tax will be collected at that point. IME, industrial-sized wholesalers in the same state do not ask for it, but small companies located in the same state do. You are supposed to keep track of these numbers in a file on the off chance your state revenuers ever decide they want to see why you did not collect sales tax.
I have sometimes been asked for my sales tax number by "wholesalers" who are in another state. In my experience, this kind of request comes exclusively from entitites that are not wholesalers but simply distributors who supply both retail and discount customers. Their idea of "wholesale" is, say, 50% off. This is not my idea of wholesale, and I don't think it's most wholesalers' idea of wholesale either. They use the reseller's cert basically as a way of sifting out ordinary retail customers. I have never understood this and refuse to do business with such companies, as it indicates to me their product is overpriced and that they don't know anything about wholesale.
This is my understanding of it anyway.
They use the reseller's cert basically as a way of sifting out ordinary retail customers. I have never understood this and refuse to do business with such companies, as it indicates to me their product is overpriced and that they don't know anything about wholesale.
How is this hard to understand? Having been a manufacturer and had the "I am the biggest guy in my city" phonecall a thousand times, we learned to weed out the true wholesale buyers from the retail customers blowing smoke. True wholesale buyers don't mind proving they are a business, retail customers looking for a deal won't submit the paperwork. It wasn't unusual for a large buyer to want to buy a sample first - which happened to be the same size order as a retail customer would buy. So how would you weed out the real wholesale from the fake?
As to the OP question, no you don't have to do anything about sales tax if the entity is in another state. As a technical matter they need to report their out of state purchases to the authorities, but it has nothing to do with you, the seller.
So how would you weed out the real wholesale from the fake?
Use a minimum. Re people asking for samples for free (with no intention of making a buy), I know people who do this, and I think it's despicable. You can go look at their site before you send out a sample and if they are bogus-seeming, well, you are out of it. Or just be out front and tell them that you require such-and-such minimum orders. A couple of widget wholesalers who are actually huge and who have been pestered by this kind of thing are doing that.
So how would you weed out the real wholesale from the fake?Use a minimum. Re people asking for samples for free (with no intention of making a buy), I know people who do this, and I think it's despicable. You can go look at their site before you send out a sample and if they are bogus-seeming, well, you are out of it. Or just be out front and tell them that you require such-and-such minimum orders. A couple of widget wholesalers who are actually huge and who have been pestered by this kind of thing are doing that.
I disagree, but this may be because we are different widget markets. With the products I was manufacturing the typical buy-in would be about $10,000 (individual widgets wholesaled for $100 or so each) and nobody was doing that sight unseen with the product. We did not give samples away for free either - but we would sell discounted if we could verify who the company was. One way was to see their reseller stuff. Believe it or not, there are plenty of businesses in my field selling millions of dollars annually that have no website, or such a crappy one that you could hardly believe they were real. Most of the sales of these widgets are done offline, and require technical expertise to install.
Of course, nobody who was a real player (website or not) expected a free sample anyway, but I think we have drifted a long way from the original post.
