USA Packaging sales taxes and resale certificate

[Ale88]

Hello guys,

I recently moved to the US, California, to open a gelato (ice cream) shop and I noticed that packaging websites offer the possibility to submit a resale certificate to avoid paying sales taxes. I did some research to have a little knowledge about it and I found these infos:

1) The general rule is, sales or use tax should be collected once in the lifecycle of a product and the person paying the sales or use tax should be the end user of that product. This means that when something is purchased for resale, or a component of something that will resold is purchased, sales and use tax is not typically paid.
2) Bottling and Packaging Supplies: In general, packaging materials are not subject to sales and use tax as long as the person purchasing the items will resell the materials with their finished goods. Common items that are not subject to sales and use tax include: bottles, corks, labels, capsules, cartons, pallets, and even wrapping materials.
3) Sales tax does not apply to the sale of non-returnable containers when sold without the contents to persons who place the contents in the container and sell the contents together with the container.

So, if I understood correctly, I could require a resale certificate to avoid paying taxes for gelato cups, fruit bowls, plastic glasses and take-out containers? Am I right?

And what about spoons, straws and bags?

Thanks a lot!

 

[kirby]

As I understand your situation, you are the one who buys gelato cups and pays sales tax on the purchase then sells gelato with the cup and charges sales tax on the sale. You need to get a resale certificate which will allow you to buy your materials from a wholesaler without paying sales tax. Do an internet search for your state on "resale certificate".

 

[Ale88]

Thanks for the answer Kirby. I sent a resale certificate to a packaging supplier and they told me they're gonna set me up as taxes exempt, and is gonna be valid for the whole website, so for each product. Now my only concern is about what to do with the products I have to pay sales taxes for, such as gloves, bags etc, because my understanding is that I have to pay taxes for those since I'm not gonna resell them, they're for me, right?

 

[kirby]

Right.

 

[Ale88]

Mmm so basically I should create a second profile that isn't taxes exempt, I don't see any other solution.

 

[kirby]

Well let's go back as the items you said "they're for me" depend on the state. For example, in New York, bags for customers are not sales taxable to retailer but napkins are. So you need to look up the law in your state for each item you mentioned then most likely you would need two profiles.

 

[Ale88]

I'm in California (LA), I did some research at it looks like that all the packaging except the containers is subject to sales taxes (napkins, spoons, straws).

 

[kirby]

Publication 103, Sales for Resale

www.cdtfa.ca.gov

Above is from California , this says something different from what you found.

 

[Ale88]

Publication 103, Sales for Resale

www.cdtfa.ca.gov

Above is from California , this says something different from what you found.

The only problem is that at the bottom it says "These listings are intended as general guidelines and may not apply in every situation. Lists include examples only and are not complete."

This is why I'm confused, I don't understand how it's possible that a California Government's official page doesn't give a clear answer, at the end it's all up to the seller and if you make a mistake of course it's your fault, not theirs...

But in case I pay some taxes I shouldn't be paying, after the tax declaration is it possible that they notice it and give back the difference? Or if I pay some extra taxes it's my fault and that's it, no refund?

 

[kirby]

As you know by now, California is an extremely high tax state. So the odds that they will give back the difference are smaller than quarks. Sorry.

 

[AGH the CPA]

Here in VA, if you buy something and dont pay sales tax on it for whatever reason (out of state etc) and you are supposed to have done so, when you do your monthly sales tax reporting, there is a place on the form called USE tax. This is where you would report any transactions for which you SHOULD have paid sales tax but didnt.

It looks like California has the same thing...

Here's an article that explains it: https://www.latimes.com/archives/la-xpm-2007-mar-18-fi-perfin18-story.html

and here's the link on the ca.gov site https://www.cdtfa.ca.gov/taxes-and-fees/use-tax.htm#Business