Resale license

[Fe-Wood]

Its the new year and I'm on the road to change from a service to a manufacturing company (crazy huh). Over the years as a General Contractor, I have never found the need for a resale license, now however, I'm wondering if it is worth the extra paperwork and accounting involved. Any tips I should know and black holes I should look out for?

Thanks All!

[David Einhorn]

Its the new year and I'm on the road to change from a service to a manufacturing company (crazy huh). Over the years as a General Contractor, I have never found the need for a resale license, now however, I'm wondering if it is worth the extra paperwork and accounting involved. Any tips I should know and black holes I should look out for? Thanks All!

This web site has some good advice, including checking with your local Chamber of Commerce for information, because the jargon used and rules are different from location to location: http://www.entrepreneur.com/homebasedbiz/legalissues/article75248.html

The bottom line seems to be that regardless of whether your locale calls something a resale license or a sales tax permit/number the governmental authorities in your area are going to want to make sure that you collect and give them sales taxes on anything you sell, thus requiring some sort of registration and/or permit.

Disclaimer: I am not a lawyer, nor do I claim *any* expertise on the law or legal system.

Now is time for the experts to tell me I am wrong. Hurray! :D

[BIGGUNDOCTOR]

Well, I would suggest moving to a more business friendly state, but that probably isn't in the cards

When I had my shop the resale card was a way to keep some cash in the business, by being able to buy material tax free. The tax was later collected from the final consumer/customer. That is one of the first questions a supplier will ask you, what is your resale number.

My former business partner recently closed his motorcycle parts shop due to the hassles he had with the state of CA. Came down to what they thought he owed in estimated taxes ($9,000) and what he actually owed ($2,500). They had threatened to shut him down if he didn't pay what they thought he owed. He got a lawyer, and eventually just got sick of the whole deal, and said fine, you are not getting any more sales tax from my business, and closed up.

The resale card is just the tip of the iceberg. Wait till the city, and county get into the act. OSHA (if you have employees), permit to have an air compressor,permit for compressed gas cylinders, hazmat compliance, fire dept, and everyone else that can, and will come to you with their hand out for payment. Especially now with the economy the way it is in CA. I wish you luck my friend.

The compressor permit is the one that burned me. I worked at a shop that had to get one, mine missed having this done to it. The inspector comes out to see the compressor, and all he did was look for the ASTME tag on the tank. Never opened it up, didn't look for cracks, nothing else. Then he proceeds to hammer a long permit number into the pressure head with a center punch, not a round tip punch, or multi-dot number stamps made for the purpose, but a regular sharp tip center punch. The compressor now had a nice stress riser all along the pressure head. He didn't even try to make it look nice. BTW the permit is something like $250.

California is a great state, with lots of great scenery, and fantastic farmland, but the politicians have ruined it for me. There are only 2 things I miss from CA. Trees, and fresh produce.

Best thing to do is get a hold of your local chamber of commerce, and small business administration, as they usually have some info available for business start ups.

Grass Valley isn't that far from America, just head east up I-80, and in a short time you'll be in Nevada. Love to have you come aboard anytime. :D

[Fe-Wood]

Funny you should say all that about Cali biggundoctor. The politicians definitely have had there way here... and they are on there way to Nevada... better duck!

A couple years ago, I tried to get my Contractor License in Nevada. 26 page application followed by CPA verified Financials and 6 pages of Notary stamped referrals. After about $5000 in expenses and running around the block getting everything together, on the day I had my CPA finally get my revised financials turned in, they withdrew my application because it took me to long to turn in additional and updated information.

Hmmm, Back to resale lic. Does having one automatically bring the herd?

[monstermetal]

Ive had one in Washington and not had any problems... My feeling is in this state anyway they pretty much leave you alone as long as you keep sending them money..

Im registered with the state as a "Other Construction Material Merchant/Wholesaler" Which is not what I am, but im not complaining because most of the guys like me get lumped in to a contractor category which does not provide near the lead way I have on making tax free purchases..

Its in there best interest not to hassle guys like me, Because in this state labor is taxable I make them a ridiculous amount of money. If I buy $500 worth of materials tax free and turn it into $20,000 dollars worth of ironwork, They get the taxes on $20K, I mean truth be told here in the land of 9.8% sales tax the State darn near makes more money on my ironwork than I do.... Anyway I do every thing on the up and up, I pay all my taxes... There is no motivation for me to cheat... Cash, under the table or hand shake deals only help if your making money.... I hardly pay any income tax... You have to have an income before they can come after you.. My crippling overhead makes sure I dont have to worry much about income...

[Fe-Wood]

Thanks monster-
As a G.C. I have found the same thing on the tax bit. We're only 8.75% here in Nevada County but the bay area is 9.75% and that seems to be the location of most of the wholesale houses for the parts I use. I have also seen that having resale moves one into a better price bracket with wholesalers and opens wholesale house doors that wouldn't otherwise be open.

What kind of time for tracking do you spend. I know we're comparing apples and oranges here as far as states go but do you have to track EVERY part you buy or do you simply add sales tax to the finished product and include supplies as a "cost of goods sold"? Someone once told me that the tracking is a nightmare.

[Fe-Wood]

Thanks for the link Dave-
Sounds like my local Chamber should be my first call.

[monstermetal]

Thanks monster-
As a G.C. I have found the same thing on the tax bit. We're only 8.75% here in Nevada County but the bay area is 9.75% and that seems to be the location of most of the wholesale houses for the parts I use. I have also seen that having resale moves one into a better price bracket with wholesalers and opens wholesale house doors that wouldn't otherwise be open.

What kind of time for tracking do you spend. I know we're comparing apples and oranges here as far as states go but do you have to track EVERY part you buy or do you simply add sales tax to the finished product and include supplies as a "cost of goods sold"? Someone once told me that the tracking is a nightmare.

I track nothing... zero zip nada... And have pretty much no fear of anything bad coming down on me... The fact is I spend maybe $50K a year that I buy tax free.. I show 200K plus gross.... I think any bean counter at the state that is keeping tabs on me would think that a 400% tax value increase is acceptable

My wife and accountant hate me... My invoices say "Railing - $5000" I dont itemize or break anything down... I Buy materials, I buy them and a bit extra if I got money in the bank... have an inventory and collect for the finished product.... I know a lot of guys who spend lots of time on the bookwork end of things... Not me... I wing pretty much everything... Once in a while it bites me when I totally blow a bid.. but when I do I suck it up and move on... I know pretty much what things cost... I bid things based on how many days work it is... 7 days work is $5000 ( 7 days work is about 90 hours ) Actually when I bid a job I figure $5000 for 5 days knowing it almost always takes 90 hours to do 5 days work, If I can get it done in 5 days I'll spend a day with my wife and one working on my projects... that almost never happens

My theory is life is to short to worry about those things.. My wife is a great help in keeping things sort of in line... I also have a great accountant If I didnt I would be a total mess... I just want to build stuff

Regardless in Washington and at my scale there is no need to have proof of how the things where used and where they went. Now if I was buying 200K a year worth of stuff tax free and telling the state I sold 50K a year worth of stuff? diffrent story.... Keep things on the up and up... Pay tax on things your suppose to pay tax on and dont cheat the state out of there cut... And my feeling is you'll never have to explain anything to anyone

[monstermetal]

I should also say that I am licensed with the state as a manufacture.. Monster Metal LLC is not only a licensed contractor, and wholesaler... but a manufacture as well.... And as such in Washington... any thing that a manufacture uses to make something that tax is directly collected on is non taxable.... That includes all machinery used to produce the item... You can only do this though if your a manufacture... If I wanted to suffer though the paper work I could actually deduct any sales tax I payed on equipment out of taxes I collected on sold goods... This is a bit tricky and Ive had some people give me grief... But its legit and a big help when your spending $10,000 on a new machine.....

Again the states goal is to make money... they figured out that guys like me make them lots and lots of it for zero work on there part.. Depending on how much "wholesale" work I do I send them $10 to $20 grand a year... thats tax value that I created, not from hard goods, but labor... Compared to a retail store that that is buying an item for $3 and selling it for $5... Hard goods create very little added tax value for the state...

and I dont know how it is in other places... but I dont know anyone here doing metal work that has been hassled by the state...

[Fe-Wood]

So for the "railing, $5000.00" do you add sales tax to that, in addition to the $5000 or deduct the tax out of the $5000 so the client only sees one number? The latter is usually what I do for construction work.

Reading through some business resource info they reminded me that the state and fed have there hand out for almost 50% of profit. I think it was 28% fed, 15% state and 1 to 9% for self employed. Of course this didn't include depresiation and all the other "stuff" it takes to make a sale


Thanks Monter M

[monstermetal]

So for the "railing, $5000.00" do you add sales tax to that, in addition to the $5000 or deduct the tax out of the $5000 so the client only sees one number? The latter is usually what I do for construction work.

Reading through some business resource info they reminded me that the state and fed have there hand out for almost 50% of profit. I think it was 28% fed, 15% state and 1 to 9% for self employed. Of course this didn't include depresiation and all the other "stuff" it takes to make a sale


Thanks Monter M

Nope its $5000 plus Tax... I make an effort to let people know even at the bid stage that its "plus tax" so there is no shock come bill time... It amazes me how many people think that if you dont have a store front then they dont have to pay the tax... I have had people refuse to pay the tax or think that I put it in my pocket.... I got a deal right now, a railing that my friend Joe basically built in my shop, his job that I helped just a bit on... he delivered it but the customer wrote the check out to me.... Joe got the money but did not collect the tax.. Since Monster Metal is on the check Joe either has to pay the tax out of his pocket or go back to the client and collect it... to keep me on the good side of the state its got to be paid by someone and its sure not going to be me on on someone elses deal... I dont want anything out there that is questionable... Thats the other side of my "no fear" approach... Dont ever give the state any reason to mess with you and chances are they wont...

[David Einhorn]

.....Hmmm, Back to resale lic. Does having one automatically bring the herd?

In Pennsylvania, apparently yes.

[Senft]

In Pennsylvania, apparently yes.

What kind of herd did it bring?? I have a shop in PA which is operated only on a serious hobby level @the moment, If I turn business and apply for license what will happen?

[Fe-Wood]

What kind of herd did it bring?? I have a shop in PA which is operated only on a serious hobby level @the moment, If I turn business and apply for license what will happen?

Ya, I'm a little curious about that too.


I little update on my findings-
Turns out I don't need a "business License" in the unincorporated part of my county and I have looked at the requirements for a resale lic. and there is no mention on specifics business categories. However they do say they may ask for a deposit on future tax based on the "type" of business submitted and projected sales.

Ever have the feeling that you can't breath?

[Dragons lair]

In todays economy the town,county,state and irs is after every penny they can get. At 59yrs of age the Co I worked for went belly up. No jobs around so I opened a small welding/fab shop at home. Have used a tax service for 45+yrs.
Now state wants to audit cause I am showing a loss. DUH the economy is in the tank and I'm not suposed to be.
How come you spent all that money on equipment. Full welding/fab/CNC cutting/blacksmithing shop. Guess I need to just retire. Joint gross last few yrs under 30K go figure. Also I don't use my tax # pay tax on everything. Be careful my brothers.
Ken

[David Einhorn]

In todays economy the town,county,state and irs is after every penny they can get. ...Now state wants to audit cause....Be careful my brothers.Ken

Very correct. Government agencies seem to be depending on computer programs to guess who is not fitting their expected numerical pattern. If you get a sales tax number and then don't fit their expected pattern, then you can expect audits.

[Fe-Wood]

Well I guess I can suppose that either blacksmith are renegades or resale in NOT a good idea. The vote is one for resale, or at least not against it and 3 against getting a resale number. I'm going to have to ask some of the local boys...

So whats the difference between organized crime and the government?

[Fe-Wood]

THE NAME THEY USE :lol: :lol:

[monstermetal]

THE NAME THEY USE :lol:

Thats not true... there is a big difference... The government steals all your money under the pretense of helping you.... the crooks admit they are crooks... At least the crooks are honest....

[Fe-Wood]

Oh, I don't know about that! Some of the best crocks try to make you feel like they are doing you a favor :blink:

[monstermetal]

Oh, I don't know about that! Some of the best crocks try to make you feel like they are doing you a favor

Alright, you got me there!

[SGropp]

Go legit and above board all the way, licensed, bonded, insured , resale certificate , the whole thing. Charge fairly ,at the going rate, pay your taxes or get out.

[Fe-Wood]

Go legit and above board all the way, licensed, bonded, insured , resale certificate , the whole thing. Charge fairly ,at the going rate, pay your taxes or get out.

Those are some strong words S, care to elaborate? Sounds like you have a story worth hearing....... and I am interested

[SGropp]

I'm just saying that the people that can afford custom forged ironwork understand business first and foremost.

If you are trying to succeed in this as a business, you have to be both professional and legally above board in your dealings with clients and contractors. You can be an artist, but you have to come across as a professional. Otherwise you will be taken advantage of. In the short term, you will also undercut those of us that are doing it by the rules and actually making a living at it.

At least in this state, if you buy materials as a part or component of a finished product, you must collect and pay sales tax [ at the local rate ]to the state. The end user is the only one that pays sales tax . If you are dealing directly with the client you must charge them the tax and pay it quarterly to the state. If you are a subcontractor billing your work through a General Contractor you do not charge them sales tax if they have a current and valid resale certificate on file with your business that exempts them . They turn around, mark up your bill and collect the sales tax from the client [ the end user ] and pay it to the state. Labor is also taxed at the same rate.

Worth it ? More hassle and paperwork with money flowing through your books that's not not yours to keep. But that's the rules and for a small business it's not really worth the potential trouble and cost if you ignore or bend the legal issues.

Just my take on it, I've been self employed almost 30 years, all legit, no troubles and never ,ever a shortage of paying work.

[SGropp]

I'm just saying that the people that can afford custom forged ironwork understand business first and foremost.

If you are trying to succeed in this as a business, you have to be both professional and legally above board in your dealings with clients and contractors. You can be an artist, but you have to come across as a professional. Otherwise you will be taken advantage of. In the short term, you will also undercut those of us that are doing it by the rules and actually making a living at it.

At least in this state, if you buy materials as a part or component of a finished product, you must collect and pay sales tax [ at the local rate ]to the state. The end user is the only one that pays sales tax . If you are dealing directly with the client you must charge them the tax and pay it quarterly to the state. If you are a subcontractor billing your work through a General Contractor you do not charge them sales tax if they have a current and valid resale certificate on file with your business that exempts them . They turn around, mark up your bill and collect the sales tax from the client [ the end user ] and pay it to the state. Labor is also taxed at the same rate.

Worth it ? More hassle and paperwork with money flowing through your books that's not not yours to keep. But that's the rules and for a small business it's not really worth the potential trouble and cost if you ignore or bend the legal issues.

Just my take on it, I've been self employed almost 30 years, all legit, no troubles and never ,ever a shortage of paying work.