Taxable purchases

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Original Post

So I am working on my Sales and use tax return (Texas) for the first time and am a bit confused about taxable purchases. It says that taxable items are those purchased for personal or business use on which sales or use tax was not paid. They include purchases from in state and out of state sellers, items taken out of inventory for use, items given away, and items purchased for an exempt use but actually used in a taxable manner. Taxable purchases do not include inventory items being held exclusively for resale.
Based on that, are these considered taxable purchases?
1. Supplies from Etsy (out of state so i did not pay state tax) that were directly included in my work (ie. beads, earwire, etc).
2. Supplies purchased in state without tax that were directly included in my work (ie. beads, etc).
2. Business material from Vistaprint
3. Advertising space on a blog

Are all out of state Etsy purchases considered taxable since they are always either personal or business?

Posted at 6:16pm Oct 10, 2010 EDT

Responses

cypresssun says

my accountant has said no to all of the above. However, although she is popular, I'm worried that she isn't right about many things. I will talk to a new acct. this week, see what she says, and hopefully, remember to post.

Posted at 6:30pm Oct 10, 2010 EDT

That is great if its no to all of the above!

Just to clarify...purchases made with no sales tax that were USED to make my products (ie. tools) are taxable purchases right?

Posted at 6:34pm Oct 10, 2010 EDT

I'm from Texas, too so lets see if I can explain. I have my mind wrapped around it but I may not be able to explain well.

As to your last question, yes, tools are taxable. Anything that goes into something that is going to be resold is not taxable. Pliers are taxable, wire is not. Tweezers are taxable, beads are not, etc.

Keep in mind though, those are deductible expenses on end of year income tax so keep track of all of those things.

As to your first list, all of those are not taxable for Texas sales tax purposes. Anything purchased out of your state isn't.

Good luck! AND, since you said this was your first time (and I see your shop has been open since 2008) make sure you have everything documented for those years too. Even if you didn't make any sales, you need to report zero sales or they will assume you made sales and you may get a HUGE bill.

Good luck! Feel free to convo me with any questions. I'm not an accountant but I'm pretty good at the Texas sales tax thing.

Posted at 6:44pm Oct 10, 2010 EDT

cypresssun says

Very helpful, ThirtySixTen.

I also opened shop in 2008, but didn't sell much of anything since my child was born the same month, and I no idea that I wouldn't sleep for a year! :) It's ridiculous that I still don't understand tax laws. I've gotten a lot of advice, and it's all conflicting.

I think I bought most of my tools before I opened a business. There's no documentation requirement for these sorts of things, is there?

Posted at 10:40pm Oct 10, 2010 EDT

You only really need documentation for deductions you take if you are audited, and those are only for federal since Texas does not have state income tax.

Texas really is simple...not really conflicting. You collect 8.25% on any sales you make to Texas residents. You pay that to the state and it divides it up between the county, state, etc.

It really only gets complicated if you don't keep track of your purchases, don't use your tax id when you buy supplies, etc.

They have a really simple online way to file and pay. The only thing you have to know is that you need to pay quarterly unless you get the waiver to file annually. Even if you make zero sales you have to file zero or they'll estimate and send you a bill and penalties.

Posted at 11:25pm Oct 10, 2010 EDT

cypresssun says

How do you get the waiver to file annually?

How does this work for purchases that are made locally - where I pay sales tax?

I buy almost everything online & do not pay taxes. Therefore, I don't report it here.

Posted at 3:06pm Oct 18, 2010 EDT

advertising and stuff from vista print, it would depend on your state rules, are those items you get to by tax free or not? and as for the materials used to make items, those are exempt from sales taxes because your customer pays it when you sell.


some states dont allow supplies to be bought tax free, only raw materials. raw materials are items that actually become the product. whether you buy instate or out of state the same rules apply. for me, materials are tax free, but tools are not, so if i buy a tool online and dont pay sales tax, i have to pay use tax on my sales tax return for that

Posted at 3:11pm Oct 18, 2010 EDT

also, keep in mind- that any items you buy online for yourself personally, you likely report and pay the use tax for that on your business return too.

Posted at 3:14pm Oct 18, 2010 EDT

that is- if they are taxable items if you buy them locally

Posted at 3:14pm Oct 18, 2010 EDT