Am i required to charge sales tax?

Question

I live in CA and own a silk screen shop. I recently bought some shirts which i was charged sales tax. If i decorate these and resell them, am i required to charge sales tax to my client after i already paid sales tax on them?

Answer 1

Something you could do would be to charge a little extra and then just give part of that to the government.  But I think you still have to pay up.

Answer 2

Yes you are.  And I would assume that you are charging more than you paid for them, by the time you add the silk screening.  But in any case, you should be charging sales tax.  When you get your sales tax ID from the state, you will be able to use that to NOT pay sales tax when you purchase items that you will resell.

Answer 3

Yes  you are required to collect sales tax from your customers and forward them to your state.

You should not be PAYING sales tax on the shirts you buy.  Only the end consumer of a product pays sales tax.  You are a business buying inventory and you should not pay sales tax on purchased inventory.  You need to tell your source of shirts that you are buying them for a resale from your business and that will exempt you.  You will probably have to prove that you are a business - an EIN number, your sales tax license, a business card, a letterhead, etc.

You will need to apply to your state for a license to collect sales tax.  You need to send the collected sales tax to them every week or every month or every quarter depending on the size of your business.

Answer 4

You are required to pay the tax on the selling price of the shirts. (You may collect this tax from your customers to reimburse yourself, but you don't have to)

Then you can take a deduction for tax paid purchases resold on your sales tax return. That way you only pay tax on the markup.