A resale permit is the term used for a business sales tax license. You get one from the state and it allows you to purchase items that you resell, or the materials for things you re-sell, without paying state sales tax. You haver to give a copy of the permit to any wholesaler you deal with in order to not pay the tax. When you sell things, you have to collect the State sales tax and pay it to the state. You have to have a business license to do all of this, and of course you have to pay state and federal income tax on your business.
As far as I know, all states allow you to just pay the sales tax on the items/material you purchase if there is too much paperwork involved with a resale permit. You usually are also paying retail prices when you end up doing this. To get wholesale legally, you should be a business and have the proper papers. Some companies will only sell to dealers with proper paperwork. Many major jewelers suppliers and places like Restaurant Depot are this way - No business liscense...no sales to you. Furthermore, if you are a business in the same state as the wholesaler, they are required by law to get a copy of your sales tax exemption form....AKA resale permit. These types of businesses are usually called Wholesale Only companies, and don't have to do as much state paperwork because the don't sell to the public, and collect no sales tax at all.
I did not realize that Alpha was a wholesale only company. If they aren't , and Matt is just a individual who makes knives, then all Matt needs to do is pay the sales tax when he purchases items from them. If Matt is a business who sells knives he makes, then he needs the papers and Alpha has to have a copy to sell to him.
There may be more than appears in print here, so it is best taken off line and handled by email if the two need to discuss this further. A phone call to the Washington State tax office will clear up any other details. The last paragraph of my post deals with why Chuck may be adamant on this situation.
FWIW,
With the billions of dollars in internet and out of state sales being done today, the States are loosing millions of dollars in sales tax. This is why there is a push to make some sort of system to handle sales tax on internet sales. This isn't because the non-payment of the sales tax is a loophole that is a freebie to us consumers...it is because nearly every American out there is actually a tax cheat. I would be willing to bet that there is not one member of this forum who is not in violation of the tax laws. Read on -
The law in all states ( as far as I know) on out of state purchases is that you don't have to pay the sales tax to the state of origin, but you are supposed to pay the tax to your state. Now, I realize that no individual ,or even small company, actually does this, but it is the way the sales tax laws are written. This is called a Consumer Tax or Use Tax in most states. It isn't a new way to get your money, it has been the law for a very long time.
Here is the VA code on things you purchase online or order from out of state:
"What is Consumer's Use Tax?
Consumer's use tax is the "other half" of the Virginia retail sales and use tax requirements. Typically, you incur the consumer's use tax if you made more than $100 in purchases during the year for which you did not pay sales tax. Common instances of these types of transactions are purchases from the Internet, mail-order catalogs and cable television shopping channels. The tax also applies to tax-free purchases you make outside of Virginia, such as buying furniture at an outlet in another state and having it shipped to Virginia. The tax is 5% of the cost of regular non-food purchases and 4% on purchases of food for home consumption. Report the tax by filing Form CU-7 by May 1 each year, or by reporting it on Schedule ADJ, line 21."
I realize that nearly all the folks reading this post don't follow these rules..or collect/pay sales tax on knives they sell at shows and to friends, or things they buy online, but wanted to point out that businesses like Chuck at Alpha have to be cautious about following the laws. The state doesn't go after a guy who makes knives in his garage and sells a $100 fillet knife without paying the state its $4.00 share. It goes after big sellers , like Alpha, and will nail them hard if they catch a violation.
also george palagonia from amx.
