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How does sales tax work? As a VAT-registered business, if I were buying something for work (such as a laptop) I would pay 20% VAT but then I claim it back at t

How does sales tax work? As a VAT-registered business, if I were buying something for work (such as a laptop) I would pay 20% VAT but then I claim it back at the next quarter - as VAT is actually a tax on profit, not on spending. Does the same apply to sales tax or does everyone pay it regardless?

Broken_Hippo 7y ago
Sales tax is similar. Basically, the end consumer pays it on top of the sticker price. Businesses and non-profits often don't have to pay it at all, and if they do, they can get a refund later.
bluedino 7y ago
Everyone pays it on almost all goods, some labor, and usually not groceries (depends on jurisdiction) You can have state, city, and local tax applied (or item specific like Chicago charge tax on soda for a short while)
- Broken_Hippo 7y ago
  Not everyone pays sales tax - though this might vary depending on the state. I know in Indiana, businesses do not pay it on most of the things they buy. So if an accounting firm buys printer paper, they pay no sales tax. But if I buy paper for my home, I pay it. Companies generally had a tax ID they used to get out of paying. Non-profit organisations did not pay either in many cases. In situations where this tax was paid, they could get a refund at tax time.
  - bluedino 7y ago
    Isn’t that exemption for resale?
  - Stratoscope 7y ago
    > I know in Indiana, businesses do not pay it on most of the things they buy. So if an accounting firm buys printer paper, they pay no sales tax. Actually the accounting firm would typically pay sales tax on all of their equipment and supplies like printer paper. Each state has some different rules and exemptions, but the general principle is that items bought for resale are not taxed when the business buys them. This is both for items that are simply bought and sold (like a retailer) or materials that go into a finished product (like gold and gems that a jeweler will turn into jewelry). Instead, the business will collect sales tax (and forward it to the state) when the end user buys the product. Indiana also has an exemption for equipment used in direct production. So taking that jewelry example further: 1. Jeweler visits a trade show and buys materials and tools to be used in making jewelry. No tax. 2. Jeweler sells finished goods to a retail store for later resale. No tax. 3. Retail store sells the jewelry to a customer. Sales tax. There are a few other exemptions, such as certain non-profit activities. Here are the relevant parts of the Indiana sales tax exemption certificate: [ ] Sales to a retailer, wholesaler, or manufacturer for resale only. [ ] Sale of manufacturing machinery, tools, and equipment to be used directly in direct production. https://forms.in.gov/Download.aspx?id=2717 https://forms.in.gov/Download.aspx?id=2717 https://www.in.gov/dor/5761.htm https://www.in.gov/dor/5761.htm https://www.in.gov/dor/reference/files/sib10.pdf https://www.in.gov/dor/reference/files/sib10.pdf

Broken_Hippo 7y ago

Sales tax is similar. Basically, the end consumer pays it on top of the sticker price. Businesses and non-profits often don't have to pay it at all, and if they do, they can get a refund later.

bluedino 7y ago

Everyone pays it on almost all goods, some labor, and usually not groceries (depends on jurisdiction) You can have state, city, and local tax applied (or item specific like Chicago charge tax on soda for a short while)

Broken_Hippo 7y ago
Not everyone pays sales tax - though this might vary depending on the state. I know in Indiana, businesses do not pay it on most of the things they buy. So if an accounting firm buys printer paper, they pay no sales tax. But if I buy paper for my home, I pay it. Companies generally had a tax ID they used to get out of paying. Non-profit organisations did not pay either in many cases. In situations where this tax was paid, they could get a refund at tax time.
- bluedino 7y ago
  Isn’t that exemption for resale?
- Stratoscope 7y ago
  > I know in Indiana, businesses do not pay it on most of the things they buy. So if an accounting firm buys printer paper, they pay no sales tax. Actually the accounting firm would typically pay sales tax on all of their equipment and supplies like printer paper. Each state has some different rules and exemptions, but the general principle is that items bought for resale are not taxed when the business buys them. This is both for items that are simply bought and sold (like a retailer) or materials that go into a finished product (like gold and gems that a jeweler will turn into jewelry). Instead, the business will collect sales tax (and forward it to the state) when the end user buys the product. Indiana also has an exemption for equipment used in direct production. So taking that jewelry example further: 1. Jeweler visits a trade show and buys materials and tools to be used in making jewelry. No tax. 2. Jeweler sells finished goods to a retail store for later resale. No tax. 3. Retail store sells the jewelry to a customer. Sales tax. There are a few other exemptions, such as certain non-profit activities. Here are the relevant parts of the Indiana sales tax exemption certificate: [ ] Sales to a retailer, wholesaler, or manufacturer for resale only. [ ] Sale of manufacturing machinery, tools, and equipment to be used directly in direct production. https://forms.in.gov/Download.aspx?id=2717 https://forms.in.gov/Download.aspx?id=2717 https://www.in.gov/dor/5761.htm https://www.in.gov/dor/5761.htm https://www.in.gov/dor/reference/files/sib10.pdf https://www.in.gov/dor/reference/files/sib10.pdf