Sales Tax Paid on item to be resold? HELP!

You should talk to your accountant about this.

I'd go back to the store with the receipt & my sales tax exemption certificate & get a refund from them for the sales tax you paid.

I believe you have to create an expense account for sales tax paid and code your sales tax to that account.

When I file my quarterly sales taxes the state asks if I inadvertently paid any sales tax. They will take this off of the amount you owe in sales tax when you file. The state is not getting the tax twice if you file your taxes correctly. 

How do I invoice these items?  Do I invoice for the full amount I paid for resale plus the sales tax I paid?  Do I uncheck the box to tax the customer for the amount I invoice?

Thanks!

Almost every timestamp in this thread is 12/10/18 6:43pm, so I don't know how old this is and I can't follow the flow of the discussion ... but I'm facing a similar issue.

I know how to deduct "Tax-paid purchases resold prior to use" from my annual California sales tax return. Here's what I've worked out for entering it in QuickBooks.

I sell computer stuff. Let's say I buy a $100 hard drive and pay 8% tax. Maybe I resell it for more, or even less. Regardless, I don't owe the tax I paid, just the tax I collect from my customer.

I enter the purchase as a $108 credit card charge with two accounts:

5120 COGS $100 - Hard drive

2290 Sales Tax Payable $8 - 8% tax on $134 resold prior to use

This immediately _reduces_ my sales tax liability account. There is no adjustment to make to the sales tax at year end. The only trick is that I have to run reports and manually add up values in this category to complete the tax return, but I already do something similar for use tax.

Make sense? Am I missing anything?

> How do I invoice these items?  Do I invoice for the full amount I paid for resale plus the sales tax I paid?  Do I uncheck the box to tax the customer for the amount I invoice?

This one I know, at least for California:  you invoice them the same way you invoice anything else. What you paid for an item has no bearing on what you charge for it. You could buy for $100 and sell it for $90 or $110. Charge tax on the $90 or $110.

This is only about a special situation where, if you sell an item before you use it, you can get the tax that YOU paid back by deducting the tax from your sales tax return. 

I talked to my state's division of taxation (New Jersey) and they stated you can submit a form to get a refund for the sales tax that you paid. Just show them proof that tax was paid on an item that wasn't supposed to be taxed and get the refund for that. Otherwise the state is charging tax twice and you're paying extra (the additional sales tax) on your purchases.

But wouldn’t that method possibly increase your income bracket as I believe certain itemized expenses don’t lower AGI. The “income” from the sales tax you pay may increase your taxes regardless if they push you into a new tax bracket.

This advice is Assuming you’re operating a single member LLC or  a solepriotor ship.

I don’t know much about S or corporations.

I’d just send a quick email to your accountant to clarify if the combination of income from sales tax along with their respective deduction  could still raise your income tax.

I am so glad to learn about this. Let us know what the accountant says!