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I Forge Iron

Resale license


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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.


I would also like to add.... although not part of the original question..

My biggest jobs, One that was over $70,000 worth of iron in one house... Where for constructions company's that require your Contractors license, Bond and insurance info and State tax ID.... I had one job that was in the 20K neighborhood that was literally thrown in my lap.. they had been dealing with a metal guy who had done all the design work, built samples and landed the job.. When the contractor found out he didn't have his contractors license up to date the pulled the job from him and without even really asking me said, This bozo held up this project and now we are in a time crunch.. We want you to do it and if you can get it done in 3 weeks we will pay you anything you want....

Point is if you want to do big jobs, you have to have all your ducks in a row. I carry 2 million in umbrella liability insurance and keep my weld certs and contractors license up to date... even though I only do jobs that require it a couple times a year... When they come knockin wanting you to do some really cool project you best already be set up or they will pass you over for the next guy...
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Something I forgot to make it clear in my post above,was that for you to be able to buy parts or materials for a project from a vendor without paying sales tax, your business must have a valid resale certificate on file with that vendor. That is only for parts and material for a project you are going to turn around and resell to either a contractor [wholesale] or the client [retail] Only the retail purchaser pays the sales tax, but if they buy it directly from you, you have to collect it and pay it to the state. If you neglect to collect it and you get audited by the state , you have to pay it from your own pocket.

Make it clear up front if your bid or estimate does or does not include sales tax as part of the price. Some clients will try to talk you into giving them a "deal " by skipping the sales tax, but you will only end up paying it yourself plus a fine if you get caught. Giving such "deals" to clients is bad practice and usually ends up with you, the contractor, getting the short end. Few Artist-Blacksmiths need any additional opportunities to lose money.

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Thanks for going the extra distance with your comment SGropp, MonterMetal

I have worked in about 6 different cabinet and furniture shops in my career and only one had a resale lic. and charged sales tax. They all made "built in" and "set in" products. I was under the assumption that if you didn't have a resale lic. you were not required to charge sales tax on the labor used to modify the product. I have been a General Contractor for over 10 years and with all the bids I have received for "installed" products, I cant remember one that had a sales tax amount included in the bid.

From what I am hearing here, if you have a resale lic. you don't pay sales tax on materials directly related to the production of the product- but you do pay tax for support supplies, i.e.. sand paper, compressor oil, fuel and shield gases etc. Am I understanding this correctly?

I guess the modified version of my question would be "Is a Resale License required in California and is it worth it" Much to my wife's disappointment I have maintained a one man business and will continue to maintain a one man business because I hate bureaucracy and how few rights a business owner has toward employees. I have seen a few bad employees sink a couple good shops.

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At risk of getting flamed, You should ask your accountant not a bunch of faceless people on the internet about tax/business issues.

I ran my own Electrical Company 16 years before I sold it and joined the Union to work for someone else. I tracked everything in a simple database and the accountant knew what was allowed and what I had to pay taxes on. so if I got consumables for myself under the number I was still covered legally. I had all that licenses/tax/Insurance stuff and it was not that much of a pain, but the risk of going to jail for tax fraud, or losing my house for no insurance to cover an accident is a pain, my forge has its own tax number and is insured.

Remember Al Capone, Chicago mob boss... they finally got him ONLY on tax evasion.

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Good advise above, Steve Sells. Definitely worth it to get professional advise from a tax accountant, so you get set up correctly from the start. It seems every state is different in their rules.

Dealing with all the legal regulations and requirements is the downside of being self employed, so it's best to keep it simple , above board and working to your benefit.

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At risk of getting flamed, You should ask your accountant not a bunch of faceless people on the internet about tax/business issues.



Don't get me wrong-
I'm asking for "real" people's experience because I have found that when one seeks professional advice, it is sometimes given in a way to make the professional more money and not efficiently serve the client. Its kinda like "you need to know how to ask the question before you can ask the question". So, all the tips I can get that help me "understand" from a business owners prospective is way better than asking an accountant and prepares me for when I do ask. I feel the answers will be based more on "reality" than profitability for the accountant.

Thank you all for the insights into resale.

I hope there are others who are willing to share there experiences too.

Fe-Wood
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Yes we have all these tax laws. What happened to " NO laws shall be passed without the express consent of the people" The DOT creats laws we have no say. The IRS creats laws we have no say, State and local govt you guessed it we have no say. They say pay tax on what you buy then pay again when you sell. Who gave them the right to tax our labor? Sorry I am just tired of paying for fools lovers ect.
Ken

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When I had my shop in CA, labor was nontaxable. I had not heard of any labor being taxable. If we did a repair, and all that was involved was our labor, there was no tax charged.



Thats the way it was in Idaho when I left.... But not here in Washington... Taxing labor at 9.5% has got to be a huge boon for the state... But somehow they still managed to spend a billion (yes a Billion) dollars more than they collected....

I wish I could spend a billion dollars more than I brought in and then just pass the "deficit" on the the next guy in 6 years and claim I did a great job, ask for my pat on the back and my retirement check...
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Thats the way it was in Idaho when I left.... But not here in Washington... Taxing labor at 9.5% has got to be a huge boon for the state... But somehow they still managed to spend a billion (yes a Billion) dollars more than they collected....

I wish I could spend a billion dollars more than I brought in and then just pass the "deficit" on the the next guy in 6 years and claim I did a great job, ask for my pat on the back and my retirement check...

i think that is because its not theyre money its "goverment " money so its all free! its the same mentality that happens when you have a mob looting ... its all free!
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Thats the way it was in Idaho when I left.... But not here in Washington... Taxing labor at 9.5% has got to be a huge boon for the state... But somehow they still managed to spend a billion (yes a Billion) dollars more than they collected....

I wish I could spend a billion dollars more than I brought in and then just pass the "deficit" on the the next guy in 6 years and claim I did a great job, ask for my pat on the back and my retirement check...




i think that is because its not theyre money its "goverment " money so its all free! its the same mentality that happens when you have a mob looting ... its all free!



I don't know if labor is taxable as biggun descrided it, but I think not. Its "value added" labor to a product that is, such as taking a piece of steel and pounding it into your way of thinking....

I just read this mornig that California is projected to run out of money in March.... and that a $20 Billion deficit... Hey Monster- do you we can get washington to help cali figure out to only have a $1 billion defict?


I need to get a white caller and go into a diffeent line of work...
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... I have found that when one seeks professional advice, it is sometimes given in a way to make the professional more money and not efficiently serve the client. ....


IMHO Seriously if that is the case, get another accountant, if they cant be trusted, as ANY employee, fire them
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The labor only jobs were things like broken bolt removal, small weld repairs, machining customer supplied part (IE;cutting a keyway) etc these were nontaxable.

If we sold parts,material,built an item, etc then the parts,material, and the completed item were taxable.

As for the billion that Washington overspent. That is a drop in the bucket compared to what our current "leaders" in Washington D.C. are spending--TRILLIONS.
If you want to get an idea of what is being talked about look at this.

My link



After looking at this, and realizing how much they have spent,want to spend, and adding the pallets up it gets pretty mindboggling :blink: We all better get fully involved in the next elections, or the Chinese may end up foreclosing on us......

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The labor only jobs were things like broken bolt removal, small weld repairs, machining customer supplied part (IE;cutting a keyway) etc these were nontaxable.

If we sold parts,material,built an item, etc then the parts,material, and the completed item were taxable.

As for the billion that Washington overspent. That is a drop in the bucket compared to what our current "leaders" in Washington D.C. are spending--TRILLIONS.
If you want to get an idea of what is being talked about look at this.

My link



After looking at this, and realizing how much they have spent,want to spend, and adding the pallets up it gets pretty mindboggling :blink: We all better get fully involved in the next elections, or the Chinese may end up foreclosing on us......


linky not worky
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  • 4 months later...

Thanks Robert-
I hope it was happy laughter....

Yes it was very happy laughter because you are extremely correct about the government, irs and the state. They don't want to do crap for us but yet they want their money and if we don't give it to them we get pennilized for it 10 times over, more than what we supposed to have paid. Its like them going into our wallets without asking and taking one of our credit cards and going somewhere and running up charges on it and giving us the bill and demanding us to pay for the charges they ran up and then give us our credit card back.Then we get shot in the head if we don't. NOT FAIR by any means.
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  • 9 months later...

So how do you (the business owner), choose the correct "professional" that will look out for your (the business owners) best interest? Because the reality is a lot of good people get screwed for no good reason. I agree it is better to know the "reality" end, so you are not sitting there with your mouth open catching flies.

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