Death and Taxes
In 1789, Benjamin Franklin wrote, “In this world nothing can be said to be certain, except death and taxes.” (Of course this quote originates from a politician!) In 2013 this still remains true. Taxes are a necessary evil if your storage auction hobby has turned into a full time business.
Seller’s Permits and Resale Certificates are integral to your business for tax purposes. Here’s where it gets a little tricky. Some states use one term over the other, and some states may combine the two documents together as a single document. Some states may have other names for this as well. For example, in North Carolina, the Seller’s Permit is called a State Sales Tax Certificate and the Resale Permit is called a Tax Resale Certificate. However, each document serves a unique purpose. I’ve broken down the two terms for the purpose of this blog but you'll need to find out exactly how things are done in your state. The Sales Tax Clearing House is a great site that shows you each state’s sales tax rate as well as the Department of Revenue website for each state. For most states you should be able to apply for your permits online, or find out exactly where you need to go to do this otherwise. Don’t get frustrated, get informed!
A seller’s permit is the building block for you to begin reselling the contents of your auction purchases.
This is a permit that you have to acquire to resell goods. If you have an Ebay Shop or a brick and mortar store, this is something you’ll need.
A seller’s permit allows you to collect sales tax from customers and report those amounts to the state on a regular reporting period (either monthly, quarterly, or annual).1
The Permit is required for individuals, partnerships, corporations, or other organizations to make retail sales or rentals of tangible personal property or retail sales of taxable services unless the seller is exempt from taxation.2
Most states require you to have a Seller’s Permit if you’re going to sell the contents of your storage locker purchases as a full time business. Many states require you to get the permit once you’ve made a certain amount of money (it varies state to state.) If you’re doing this as a hobby and only attending the occasional auction every few months you may want to hold off on all the paperwork, but be sure to find out the law in your state! Better to be safe than sorry!
Resale certificates identify a business as having the right to make certain nontaxable purchases. These include wholesale items for resale and items that are purchased for use in the manufacture of products for resale. Resale certificates prevent the double collection of sales tax on products. Sales tax is collected further down the road when the item is purchased by the final customer.3
What this means for you is that once you have your Resale Permit you can bring this with you to auctions and your locker purchases will be tax exempt. When you resell those items you will include a sales tax and you’ll need to report all these purchases monthly, quarterly or annually and will be paying taxes directly to the tax board in your state instead of paying it at the time of the auction.
Once you have these documents you’ll want to make sure that you keep receipts on everything you buy and sell so that you’ll have all your information organized when it comes time to complete your taxes!