Seth Breidbart wrote, in part:

- quote -

Very true. However it works both ways. Should the installer
disappear with one -- or several -- unit(s) for which he has
not paid the distributor in his possession, the latter is
SOL. For the distributor, the system in force is a prudent
way to cover his posterior.

Of course, as mutual trust builds, the deposit -- as I would
classify it -- paid to the distributor, might become less
necessary. Much the same as open credit is established.

Bill

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

William Brenner wrote:

- quote -

If the transaction is as you describe it (I didn't read it
that way, but you may be right), the OP needs to clarify who
has title to the equipment at each point in the process. If
the OP obtains title to the equipment, and then sells it
back to the distributor, the OP needs to obtain and keep a
resale certificate from the distributor, as Seth suggests.

If the OP does not obtain and then give back title to the
equipment, who does have title to it? The question here
would be who has the risk of loss or damage. If the OP
bears that risk during the time that the property is in his
possession, then it probably is a purchase and sell-back, so
to speak, between him and the distributor. Both of those
sales are for resale and should be documented with resale
certificates. And yes, the OP does need a seller's permit in
order to do that.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I read the OP as follows:

The reseller sells the equipment with installation to the
customer. Presumably, sales tax is collected along with the
sale proceeds.

The installer buys the equipment from his distributor,
installs it and is reimbursed for the equipment and paid for
the installation. He does not have any financial dealing
with the end customer.

The distributor has asked the installer for what appears to
be a resale certificate -- the same as that required of all
resellers. It exempts the (installer) purchaser from having
to pay sales tax. Absent this certificate, the state
presumes that the purchaser is the end user and will charge
the distributor for the"unpaid" sales tax.

Theoretically (I say that having dealt with state sales tax
auditors) there should be no problem. The installer has not
made a sale, and sales tax has presumably been collected
from the end customer. If sales tax was not collected, the
problem belongs to to the reseller, not the installer.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

- quote -

At this point, the customer has paid DirecWay for the
equipment, right? So the customer owns it? Does the
customer pay sales tax on the $600 (or part of it)?

- quote -

So you buy, from the distributor, equipment that the
customer has already paid for. That seems strange. (If the
distributor disappears at this point, he's been paid twice
for the equipment.)

- quote -

Is that "reimbursement" a refund of the price you paid, or
are you selling the equipment back to the distributor? If
it's a refund, it would include any sales tax you paid; if
it's a resale, you need the distributor's statement that the
purchase is for resale.

- quote -

Selling you equipment that he's already sold the end
customer seems strange, at best.

- quote -

And then have resold it at cost, for further resale? Or had
all those sales refunded? I'd say an audit is a definite
possibility.

- quote -

My take is that the $600 pays for both equipment and
installation, and the customer has already paid that.

- quote -

Is a "purchase for refund" (rather than resale) exempt?

Seth

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Nathan951[at]gmail.com wrote:

- quote -

So, in other words, the distributor "sells" the equipment to
you, and then you "sell it back" after you install it? Since
these transactions are both "for resale," I'd think that
BOTH you and the distributor need to maintain records of the
"wholesale" nature of these transactions. So, YOU need to
obtain resale permit information from the distributor as
well.

In my state (Washington), I believe there is some verbiage
in the regulations about "accommodation sales," and that
~might~ provide additional guidance on this type of
transaction.

MTW

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

<Nathan951[at]gmail.com> wrote:

- quote -

I cannot speak for the state that Nate is working in.
Washington requires a statement to the distributor that the
purchase is for resale. When the goods or service purchased
for resale is sold to a final consumer then sales tax is
required to be collected and paid over to the state. There
is not a "permit number" or standard form. You can use a
gerneric statement of resale purchased in an office supply
store or copy the statement in the State's adminisatrative
code on your own letterhead. The distributor could also
supply a form. The supplier needs that statement in it's
files in case of audit.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Nathan...[at]gmail.com wrote:

- quote -

It's impossible to answer the question definitively without
knowing what state or states are involved. However, in
general, retail sales of tangible personal property (e.g.,
the equipment) are subject to sales tax unless specifically
exempt; sales of services (e.g., installation) are not
taxable unless specifically enumerated.

If I have this straight, you buy the equipment from the
distributor, install it, and bill the customer for both the
retail price of the equipment and the $600 installaton
charge. When you buy the equipment from the distributor,
you are making a purchase for resale, which is specifically
exempt from sales tax. You will charge sales tax on your
sale of the equipment to the customer. In order to purchase
the equipment without paying sales tax on it, you must give
the distributor a resale certificate, which must have your
seller's permit number on it. So you need the seller's
permit both in order to purchase the equipment ex-tax, and
to report and pay over the sales tax on your sale to the
customer.

Whether the installation charge is also subject to sales tax
depends on the state and the way the sale transaction is
structured. In most states the installation will not be
taxable as long as it is separately stated on the sale
invoice.

It is generally the seller who is responsible for collecting
and paying over the sales tax on the sale. (In most states,
if the seller fails to collect the tax from the purchaser,
the purchaser is also liable to the state for it.) The
distributor is the seller to you, and you are the seller to
the customer. The distributor must charge you sales tax
unless it gets a resale certificate from you. If it fails
to do that, it will be responsible for the uncollected sales
tax. So the distributor is protecting itself by requiring
you to obtain a seller's permit.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

<Nathan951[at]gmail.com> wrote

- quote -

I would think that they are charging the customer a sales
tax on the "purchase" of the equipment. After all, that's
who the customer is dealing with.

But it looks like they are possibly not charging the
customer any sales tax on the equipment, and expecting you
(the installers) to pick up the tax.

Sounds strange to me.

You don't have any method to recoup the tax.

--
Paul A. Thomas, CPA
Athens, Georgia
taxman at negia.net

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

<Nathan951[at]gmail.com> wrote

- quote -

This one is easy. The distibutor sold the system to the
the customer and is obligated to collect the tax from the
customer. But they want to collect the tax from you even
though you didn't sell anything.

IMRHO: A State Tax Auditor on their very first audit will
see right through the facade of the transaction and jump
all over the distributor.

Dick

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

Ok here's my situation, I install satellite internet
(DirecWay), just fulfillment work. Here's the way
"fulfillment work" works; DirecWay or someone else sells the
customer the equipment with installation at $600. DirecWay
assigns that job to us. In order to install the equipment we
need to buy it from our distributor first. After the system
is installed our distributor reimburses us for the equipment
and pays us for the installation.

Now, our distributor is requiring us to have a seller's permit in
order to buy a system or we will be taxed on the system. Now what
happens when I give them our sellers permit number, how do I claim that
the items are non taxable? Should these items even be put on our
sellers permit number?

I just want to make sure that my distributor is not doing
anything wrong. I also don't want to be audited over
something like this. At the end of the year we will spend
over $300,000 just on equipment.

Thanks for your help!
-Nate

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->