I’m honestly embarrassed that I don’t know this.
Let me use an example: I pay sales tax when I purchase my shoes.
Did the shoe store that sold me the shoes pay sales tax to purchase the shoes to sell to me?
Did the in-state factory that manufactured the shoes to sell to the shoe store also pay sales tax on the leather raw materials that made the shoes?
Does this differ state to state?
I don’t know about different states, but here in WV you have a certificate of exemption for purchasing materials to manufacture with, and for the resale of finished goods. when purchasing such items you give the vendor a copy of the certificate.
In most states, items purchased for resale are exempt from sales tax. For most stores, this means that their wholesalers apply and get a blanket exemption. It is, after all, the responsibility of the seller to pay the tax to the state, which makes administration easier.
From my previous life working for a manufacturer that sold to retailers (I don’t have a cite - I’ll try to find one after work):
Sales tax is paid by the ultimate consumer, not by the retailer when the goods are purchased from the manufacturer. This doesn’t mean that manufacturers never have to collect sales tax and pay it to the state, but it was not exceedingly common for the company I worked for.
This may vary from state to state - I worked for a Georgia company.
Checking in to join the consensus – I used to work retail in Tennessee, and from time to time someone would purchase items from us for sale in their own store – if they showed us a copy of their retail license we didn’t charge them sales tax. Note that sales tax is a big deal in Tennessee, where there is no income tax on wages.
–Cliffy
I’ll chime in just to say that everyone above is correct, and while this *is[/] an issue that “varies from state to state” in the sense that it’s a matter of state law, in reality every state I’ve ever come across (except Delaware) does things this way.
One exception: Louisiana. Unless certified as a wholesaler, retailers generally are required to pay the tax when the purchase their goods for resale, then deduct the tax paid when the product is sold, much like a European VAT or Canadian GST. Also, in Hawaii, 0.5% of the purchase price is paid by the retailer as a wholesale tax imposed on their suppliers.
Also, very few states accept a mere copy of a retailers license as proof of a tax exempt for resale (Colorado and Oklahoma come to mind). Most states want a resale certificate provided by the purchaser and maintained by the seller.