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©2008 Charles Plesums
Austin Texas USA
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Before we get started, the disclaimer. Remember that I am not qualified to give tax or legal advice, but am only sharing my interpretation of the advice I have received, which (in this case) specifically relates to Texas.
Face it... you will have to collect sales tax from your customers. And before you do it, you have to have a Sales Tax Permit. Since this allows you to collect taxes for the governor, you can bet that getting the permit is easy!
You have to have a business name and address. It can be your given name and home address... this doesn't force you to invent and legally register a unique business name. In Texas you do have to pick an industry code - a NAICS code. I use 337122 "Manufacture of non-upholstered wood household furniture." I panicked when I got that code... what if I made something for an office? What if it had a cushion? What if I used some metal? The state explained that I was obligated to collect sales tax for any taxable business activity, no matter what code on my permit - even if I sold lemonade on the curb. The only thing that they use the code for is to advise you of tax changes that may impact you.
You have to keep separate record for each business location. Most of my sales are from my shop. But occasionally a deliver something to a nearby community, and collect payment there. That community wants their share of the sales tax, so I have to report sales separately by community. If I went to a craft fair, I may be required (by the fair organizers) to have a separate sales tax permit to collect sales tax there. If I sell at a craft fair in another state, I bet I will have to get a permit for that state.
If goods are shipped to another state, where you do not have a business operation of any sort, (at least under current federal interstate commerce rules) you do not have to collect sales tax. If the out of state customer (or a friend of that customer) picks up the item in state, it is an in-state sale. If you deliver to another state, the sale occurred in that state (yikes). The rule in Texas is that a common carrier must ship the goods out of state for the interstate tax exemption to apply.
There is a good side to collecting sales tax... I can now give my vendors a certificate that the "materials are used in manufacturing goods for resale," and thus I may purchase those materials without paying sales tax. If materials are purchased from out of state, you should have paid "use tax" (they get you one way or another) but the sales tax permit makes that tax exempt, too. Tools like hammers and screwdrivers are not exempt, nor are supplies required to operate the business, but the materials that are expended in making your product are exempt.
At some point you have to give the gov'nor the money. In Texas, your first report is due at the end of the first year. If the amount of tax you collected is over a limit, they congratulate you on your success and give you the privilege of filing quarterly (and presumably monthly or more). After the trauma of the first time, I now do the quarterly sales tax report, on line, in less than 10 minutes.
There is another good side. Years ago I wanted to take credit cards for on-line sales. The bankers were so afraid of a scam, that they made it complex and expensive. I didn't do it. As soon as the sales tax permit arrived, so did almost daily offers to provide the "merchant account" that would allow me to take credit cards. (I choose not to take credit cards, but that is another story).
This site (layout and contents) is ©2008-2018 by Charles A. Plesums. The material is free for personal use. Questions? contact us.