Why Must I Pay Sales Tax?

MEMBER QUESTION:
Some suppliers add sales tax to invoices for material
that I purchased and the added tax increases the amount
of the order. How do I know if these taxes are legitimate?
ANSWER:
A good question. Buyers should be aware of the tax
laws in the state where they work because the laws vary
from state to state. That doesn't mean a buyer must be a
tax expert, but he or she should be familiar with the general
regulations. For example, most states tax tangible goods,
but not services; however, there are many exceptions. Usually,
items purchased for resale are exempt. Products purchased
as components for items to be manufactured and
resold are exempt. Companies must apply to their particular
state to obtain a tax number and approval for exemptions.
This is something that should not be neglected as tax
rates can be as high as ten percent of the purchase price.
Items sold out of the buyer's state are normally exempt
from taxes by the seller who is obligated to collect
the sales or use tax, but that is only if the seller has no
presence in the customer's state. Depending on the state
of the buyer, if purchases are made from a supplier in a
different state, his or her company is usually responsible to
pay the tax even though the seller did not charge for it.
Detailed rules and regulations can be obtained for your
particular state by contacting your state government. Often,
but not always, company accounting or legal departments
have necessary tax information for purchasing.