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Caveat: I am not a tax specialist or accountant. Do your own research for your own state and situation because everyone's business is different and different laws apply depending on where you live.
Also known as a sales tax license. Basically a sales tax license is for businesses or people who resell goods or do services. You collect from your customer whatever your state's sales tax is in addition to the cost of the item or service, then repay it to your state. You file paperwork with the state monthly, quarterly or yearly depending on what your gross sales are, and send them the tax money you've collected from your customers. Sometimes this will also include city tax too. Some places (like New York state, I believe) have several layers of taxes.
Usually a business does not pay sales tax on any items it resells or uses in the process of making something else to sell. That's why you can fill out a sales tax exemption form at
TSC, the feed mill, Sam's Club, or other business at which you purchase these items. Instead of
TSC (etc) collecting tax from you, they use the form as proof they're passing on to you the responsibility to collect tax from the customer and repay it to the state and/or local governments.
However, if you are the "end user" of something and you do not resell it or use it in the process of making something to sell, then you have to pay sales tax. For example: I sell eggs. Therefore, I have filled out a tax exemption form at the feed mill and
TSC and don't pay tax on anything I use for my chickens (feed, bedding, medications, etc). But if I bought a book about raising chickens , I'd have to pay the tax. Every state has slightly different laws about what counts for sales tax. Some make you pay tax on clothing you wear only for your business (like rubber boots and barn coveralls), and for tools like rakes or a pitchfork. It's very important to look into this because if you claim to be exempt on items you should be paying tax for you will be liable for tax and penalties.,
How to become tax exempt: You go online to your state's website (in Michigan it's michigan.gov) and look through the listings for sales tax license. Print out and fill in the form, send it in with the small fee, and whatever paperwork they require. They may ask for business incorporation papers, registration with the county as a d.b.a (doing business as), or other proof of being a business. They will issue you a sales tax license which you must display where your customers can see it. You use this tax number on the exemption forms at the stores you purchase items for resale or use in your business. Generally there's a nominal yearly fee to retain the license.
Also, if you purchase items online or through mail order, you may not have to pay tax anyway. If a business does not have a "brick and mortar" store in your state, it generally doesn't collect sales tax from there. Some states are tricky about this and have a line item on the tax form for internet or mail order purchases to collect tax they believe you should have paid to them even if you didn't buy the item from an in-state business.
It may or may not be worth it to obtain a sales tax license. If you have just a few chickens and only sell an occasional dozen eggs it might not worth having to do the paperwork. Remember, somebody eventually has to collect and pay the sales tax.