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Are business to business sales taxed at the same rate as retail sales?
I mean this: When we as consumers buy something in the store, we have to pay a sales tax, governed by state and local rules. When businesses buy items from other businesses (for example, car manufacturers buying tires from tire manufacturers), do they have to pay the same sales tax rate that the rest of us do? Or is there some sort of corporate sales tax rate that they have to pay?
What if the transaction is across state boundaries?
Whatever the answer is, doesn't the cost just get passed on to consumers? If so, how much of the cost my car is just from all these taxes?
Okay. Thanks for the answers.
Wanted to add another couple of questions. Can I just pretend to buy stuff for resale, or are there checks in place to make sure I'm not cheating the system?
Also, going back to the car/tire example, tire companies are taxed on their gains, so in effect, aren't we the consumer still footing the bill (indirectly) for the taxes?
2 Answers
- jmorgeLv 61 decade agoFavorite Answer
if a business buys something for resale, then they do not pay taxes. If they buy it for their own use, then yes they pay the same rate you pay.
so if a car mfg. buys tires from a tire company, they are buying it for "resale". They resell the car (and tires) to their dealers. The dealers don't pay taxes either because they are also buying it for resale. But when the dealer sells it to you, you pay taxes on it because you are the final/end user of those tires. Thus the gov't only gets taxes on the last sale, not on every sale inbetween the factory and you.
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yes, there are "checks" in the system. When you buy something from a company and tell them it's for "resale" (so they don't charge sales tax), you have to provide them with a resale certificate. Then occassionally the State will audit a company and request to see the resale certificates of their customers. If they can't provide them, the State makes the company pay the sales tax. So companies are very careful about it. And if you had a company, you in turn will get audited and must prove that the items you purchased for resale were in fact resold. Otherwise you get with a bill for sales taxes.
as far as companies getting taxed on their gains, yes but that's different than a "sales tax".
