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The laws regarding wholesalers and distributors are fairly consistent between the states. As defined by state's statue, a sales tax is imposed on the " retail" sales of tangible personal property. Thus a sale for "resale" is not included as a taxable event. The major issues that distributors or wholesalers face is the issue of how to establish and support a resale transaction. When distributors or wholesalers make purchases of tangible personal property which they intend to resell to a retailer, or sell directly to a final end user, the purchase of the tangible personal property is not taxable to the distributor or wholesaler. The distributor or wholesaler provides a resale certificate to their supplier. In turn, the supplier is relieved of its tax obligations on the transaction. 

If the distributor or wholesaler sells the tangible personal property to another reseller, he/she must obtain a valid resale certificate from them. The transaction can be considered non-taxable only when the certificate is received. If a distributor or wholesaler makes a sale to a final end user, then he/she must collect the applicable sales and/or use tax on the transaction.

Watch out for samples, promotions, and giveaways. Have you ever heard, "He/she who gives away pays the tax"? When a distributor or wholesaler has purchased the tangible personal property with the intent to resell to others, and the distributor or wholesaler pulls such property from their inventory to giveaway as a sample or promotion, then a use tax liability occurs. Most states view a reseller giving away free of charge as "selling to themselves". Thus the distributor or wholesaler becomes the final end user of the tangible personal property, creating a taxable event. Remember to self assess the use tax when you pull something from stock and use it rather than a resell it.

 

 

Feel free to call or e-mail us to discuss any tax issues you may have.

1.785.876.2426

Sales Tax Advisors, Inc.
9168 Village Lane
Ozawkie, KS 66070-6102

Last modified on Thu Nov 01 2012 18:46:24 MST.
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