Bernard S wrote:
- quote -


- quote -

No doubt the OP paid sales tax when he purchased the
computer, and was reimbursed by his client for the total
cost including the sales tax. I don't think that would have
any further sales tax consequence. As you suggest, it would
be a real pain to register as a seller for this kind of
occasional transaction. In fact, the state might not want
to issue a seller's permit number to the OP if this is a
rare occurrence. He is not really in the business of
selling tangible personal property or taxable services.

Lanny was talking about Hawaii, which is a different kettle
of fish because they have a gross receipts tax rather than a
traditional sales and use tax. All gross receipts are
subject to the tax, not just gross receipts from sales of
TPP or specified services. Fortunately Hawaii has a special
rule that allows a deduction from the gross receipts tax
base for this kind of even-steven transaction, so that it
doesn't get taxed twice (once on the purchase and again on
the sale to the client). If the OP charged the client more
for the computer than he paid for it, the only way to avoid
the double tax would be for the OP to register as a seller
and buy the computer ex-tax.

Katie in San Diego

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"L K Williams" <lanny[at]loxinfo.co.th> wrote:
- quote -

He avoids sales tax only by declaring to the seller that the
purchase is for resale. He then has to collect the sales tax
from the client and file a return with state. I do not think
he would want to do that for a casual purchase for the
convenient of the client.

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"Cardinal24" <david.flaschen[at]gmail.com> wrote:

- quote -

Depending upon which state where the OP lives, this could
involve a sales tax. By including the reimbursement in
income, he may incur a sales tax; by treating it as a
reimbursement, not in income, he may avoid that tax.

In Hawaii, for example, if the client reimburses an advisor
for the exact cost, the transaction is not subject to the
state excise tax. Since this tax is extremely comprehensive,
any other treatment is probably taxable.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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Cardinal24 wrote:

- quote -

Another approach would be to debit the purchase to a "Due
From (Client)" account, and credit the reimbursement to that
account. Doesn't hit the income statement, and in my mind
reflects the reality of the situation.

An advantage over Harlan's solution (debit and credit to an
expense account) is that if the transaction should happen to
fall over the end of a tax year, so that the purchase
occurred in Year 1 and the reimbursement in Year 2, it still
wouldn't hit the income statement in either year.

Katie in San Diego

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Cardinal24 wrote:

- quote -

Another approach would be to debit the purchase to a "Due
From (Client)" account, and credit the reimbursement to that
account. Doesn't hit the income statement, and in my mind
reflects the reality of the situation.

An advantage over Harlan's solution (debit and credit to an
expense account) is that if the transaction should happen to
fall over the end of a tax year, so that the purchase
occurred in Year 1 and the reimbursement in Year 2, it still
wouldn't hit the income statement in either year.

Katie in San Diego

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Cardinal24 wrote:

- quote -

I've done that before. Bought a computer for a client, he
reimbursed me cost, a wash out. Except of course, I earned
dollar for dollar Ford rebates on my credit card.

So I recorded it as "supplies", (a debit for those twisted
accounting minds! grin), and when reimbursed, by separate
check mind you, credit the same account. Had nothing to
do with Cost of Goods sold.

ChEAr$,
Harlan Lunsford, EA n LA
Sun 29 Jan 2006

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I am a sole proprieter. I do my own bookkeeping using Excel
spreadsheets. I attempt to do my own taxes. I'm committing
to learning.

I am a programmer and technical support provide. I am not
in the business of reselling hardware or other computer
equipment. In the course of supporting my clients, I will
buy a piece of hardware (like a disk drive) for them. I
will provide it to them AT MY COST- zero mark up.

Accounting:
I am currently listing the expenditure as Schedule-C,
Line-4, Cost of Goods, and declaring (what I call) the
reimbursement as income. Do I have to do it this way? I
don't like bloating my "gross income" with what I consider
to be reimbursements.

THANK YOU,
Cardinal24, aka, David

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