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Future Texas decorators: help on setting up - Page 6

post #76 of 86
Be aware that there are different types of tax ID's. Wholesalers will either require a FEIN or a sales tax permit. Check with the wholesaler you want to do business with and see what they require.
post #77 of 86
yellobutterfly,
djBookeeper is correct there are different types of tax ids. There is a the Federal Tax Id known as a FEIN. You can get this online and it's free from what I've read so far. You should do this because it keeps you from having to give out your social security number when you register your business for your DBA and for wholesalers. There is also a state sales tax id which is the one I was mentioning. The state tax id is the one you need so that you do not pay sales tax on supplies and ingredients.

Different wholesalers will have different rules about what they require. So just check based with the wholesalers you want to order from. Hope that helps a little.
Visit me at www.keeponcaking.com for tutorials and other cake stuff.
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Visit me at www.keeponcaking.com for tutorials and other cake stuff.
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post #78 of 86
Quote:
Originally Posted by djbookkeeper

Be aware that there are different types of tax ID's. Wholesalers will either require a FEIN or a sales tax permit. Check with the wholesaler you want to do business with and see what they require.


thank you for explaining icon_smile.gif
post #79 of 86
Quote:
Originally Posted by sillywabbitz

yellobutterfly,
djBookeeper is correct there are different types of tax ids. There is a the Federal Tax Id known as a FEIN. You can get this online and it's free from what I've read so far. You should do this because it keeps you from having to give out your social security number when you register your business for your DBA and for wholesalers. There is also a state sales tax id which is the one I was mentioning. The state tax id is the one you need so that you do not pay sales tax on supplies and ingredients.

Different wholesalers will have different rules about what they require. So just check based with the wholesalers you want to order from. Hope that helps a little.


thanks so much!
post #80 of 86
So Excited!!
post #81 of 86
Another tax question...
Can someone explain the use tax? Filing for the tax exemption includes "sales and use tax." I get sales tax, I do not get use tax. I've found several definitions.

Here's the first part:
A purchase may be subject to use tax for a number of reasons. The most common reasons are:
- You used property purchased with a resale certificate. If you use a resale certificate to purchase merchandise that you intend to resell, your supplier will not collect sales tax. However, if you use the merchandise for another purpose before you resell it, you are liable for use tax. (Using merchandise for display or demonstration purposes before the property is sold is not subject to use tax. But, providing free samples to customers is a use and you would owe tax on the amount you paid for the samples.)
- You used property purchased with an exemption certificate. If you use an exemption certificate to purchase taxable items, your supplier will not collect sales tax. However, if you use the merchandise or service for a non-exempt purpose, you are liable for use tax. (Purchasing manufacturing equipment but using it to perform contractor work is a non-exempt use.

I wonder if the second part applies because we can purchase taxable things like decorating bags but then we use them to make the cake. Is that contractor type work or is it exempt because it's for food?

Part 2: Do I owe tax on goods purchased via mail-order catalogs or Internet merchandise?
Yes. A seller who uses catalogs or the Internet to sell goods is treated the same as any other seller of taxable items. If you purchase merchandise through a catalog or the Internet from a seller located in Texas, you owe Texas sales tax on the purchase. If you purchase merchandise through a catalog or the Internet from a seller located outside of Texas and use the taxable item in Texas, then you owe Texas use tax on the purchase.

I found this at http://www.window.state.tx.us/taxinfo/sales/faq_use.html. There are some other websites the Texas Tax site links to, but none of the laws are very clear to me...
post #82 of 86
Keep in mind the big picture - home bakers won't need to charge sales tax on baked goods. My understanding is sales tax is only charged upon immediate consumption, i.e. a restaurant.
Ideally, I would suggest just using the sales tax ID to gain access to a wholesaler. When you do purchase, pay sales tax if you can. If the wholesaler won't collect sales tax, you do need to pay the Comptroller for whatever sales tax you should have paid.
You need to pay sales tax on whatever you purchase. The purpose of the sales tax re-sale certificate is to avoid sales tax being charged on one item when it is purchased several times. You aren't re-selling anything so you need to pay the sales tax. Pay the sales tax and avoid worrying about the use tax.
Just a word of warning - I have seen an increase in sales tax audits this year! 2 of my clients were randomly audited this year and in my previous 15 years, I had never encountered a sales tax audit. I learned from the audits that once the auditors quickly established that sales tax was being charged correctly, what they were really looking for was internet purchases. Anything you purchase over the internet and are not charged sales tax for should be reported as a use tax.
Hope that helps a little and doesn't confuse the issue!
post #83 of 86
So if we buy supplies over the internet, we have to pay taxes on them? And if I buy things that I don't intend to sell, like decorating tools, I have to pay tax on those too? I would have thought it would benefit me to buy those things online, but it looks like either way I have to pay tax.
post #84 of 86
Yes, either way you should pay sales tax on the materials you purchase to make your baked goods as a home baker.
post #85 of 86
All this made me think of another question. If I buy something online that wouldn't be taxable as part of the cake, like a cake board, do I have to pay tax on it because it was purchased online?

Is there some way to show on the tax returns that I already paid taxes on items if I choose to pay it when I purchase it instead of paying it later as a use tax? I just wonder if I send in forms with $0 owed in taxes, even though I did it legally and already paid the taxes, if that won't alert the IRS and make it more likely to get audited which is really not what I want even though I'm following all the rules!
post #86 of 86
I know this is all very confusing. I really recommend you get someone to help you with your books.
IRS has absolutely nothing to do with sales tax. If you ever have any sales tax to pay, you'll pay the TX State Comptroller. The Comptroller will the one doing any sales tax audits which are different than income tax audits.
If you purchase a cake board online and don't pay sales tax, you should report it to the Comptroller on your quarterly sales tax report and pay a use tax. The only time anything is tax-exempt is if you are going to sell it to someone else.
Pretty much anything you buy for your cakes should have sales tax charged to you. You won't be collecting sales tax for your cakes.
Hope that helps!
You're welcome to email or call if that would help in understanding all this.
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