Sales Tax On Purchases

Today TaxMama hears from Sam in Texas who asks. “A construction company pays sales tax when it purchases items from places like Home Depot.
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Everything it buys is used in customer’s homes, like carpets that are installed and then billed to the customer.
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Does this qualify as re-sale/tax-exempt?”

Dear Sam,

In order to avoid paying sales taxes during the purchase, the company will need a sales tax identification number (often called a resale number) or a resale certificate. Here’s the application.
https://www.window.state.tx.us/taxinfo/taxforms/01-339.pdf

Put that number and/or a copy of the certificate on file with your regular vendors. Then you won’t be paying sales taxes on your purchases.
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When you sell these materials to the customer, you must charge them sales taxes on the materials.
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If your invoices don’t break out the cost of materials and include a charge for sales taxes, you can’t get away without paying sales tax when you make your purchases, either.

Now, if you’ve been buying materials and paying sales taxes, AND you’ve been charging your customers sales taxes on the same materials, you can get some of the money back.

Most state sales tax forms have a line for purchases on which you paid sales taxes. In Texas, there’s a Box J that allows you to take a credit for taxes paid on your purchases.
https://www.window.state.tx.us/taxinfo/taxforms/01-114.pdf

Just call the sales tax department and they’ll help you. The folks in Texas really are helpful.
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https://www.window.state.tx.us/contact.html

And remember, you can find answers to all kinds of questions about sales tax, and other tax issues, free. Where? Where else? At TaxMama.com

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