USA Invoicing reimbursement and service fees

[Joe Young]

Good Evening,

This question has been answered by many accountants in my area as well as corporate tax attorneys with different results. Maybe I can get a fresh set of eyes on this issue and get some positive feedback. Here's my issue.

I own a fuel company in Florida. We deliver fuel to jobsites all over the Tampa area. Occasionally one of my customers leaves the state or needs fuel delivered to a jobsite outside of my service area. Instead of reffering them to another fuel company, I now "broker" the fuel by calling the closest fuel supplier and arranging the delivery. Currently I am setting up a credit account with the nearest fuel supplier, billing my customer for "FUEL SERVICE PROVIDED" and hopefully getting paid by my customer before paying the supplier. It's a nice way for me to add some additional revenue so I need to figure out how to do this legally.

I always make sure the supplier in the other state bills me for all applicable fuel taxes, sales taxes etc so I don't have that obligaton. But my question is, am I allowed to pay a bill for $2000 for fuel on behalf of my customer, then bill my customer for $2100 for a "SERVICE"? My ultimate goal is to have the customer and suppliers sign a contract that states I am simply a bill paying service and eventually order fuel "in care of" of the customer or whatever legal way I need to do it to ensure 1. I am not in possession nor ever owned the fuel, 2. I am not reselling the fuel, simply billing the customer for an amount they owe someone else and my service fee. In a perfect world I would like to bill in one line item so the customer doesn't see my "fee" separate, or worst case scenario maybe send the customer one invoice, and keep an itemized invoice in my records for audit/accounting purposes.

In summary, can I bill my customer for "fuel service provided" (tax free) and use the money to pay a bill for product on behalf of the customer, keeping the extra money as my fee? At no point RESELLING the product.

My goal would be to separate this "brokering company" from my current fuel delivery business if that matters.

Sorry if this is confusing, any help would be greatly appreciated.

 

[kirby]

Depends on your contract with customer. if contract says you will only bill them for the cost of what you buy then that's what you have to do.
Usually it is a given that the seller sells for more than they bought it for - else how would they ever make a profit?

 

[Joe Young]

What I've been doing is billing an amount higher than the bill they owe. If I get billed $1 per gallon on 500 gallons, I owe the supplier $500. I send a bill to my customer for "FUEL SERVICE PROVIDED: $550".

 

[Joe Young]

The supplier charges me all applicable taxes in that state. If I can't do one line item, is it possible to invoice;
"FUEL SERVICE REIMBURSEMENT - $500"
"FUEL SERVICE FEE - $50"
TOTAL $550

If so, can I give the customer a summarized invoice, and keep an itemized invoice on record for myself/IRS?

 

[Fidget]

But my question is, am I allowed to pay a bill for $2000 for fuel on behalf of my customer, then bill my customer for $2100 for a "SERVICE"?

Yes, it's absolutely fine. Although, it can get complicated depending upon the agreement you have with your customers. Fuel is tricky due to the price of it being volatile, so you need to look to your agreements with customers to see what you can/can't do.

Here, in the UK, and I'm sure Becky will correct me if I'm wrong about this, VAT would be added as well. Not sure how that works in the U.S.