What is a sales tax exemption?
Sales Tax Exemption, by definition, is a deduction allowable by law from paying certain taxes. Here at RJM, we help clients become exempt from paying any Sales Tax on products purchased with the intention of selling in the process of reselling. When you purchase a product from a supplier as a reseller, you will not pay Sales Tax on that transaction.
How does being sales tax exempt work?
When it comes to the process of Sales Tax Exemption, it can be seen in a relatively simple way: You, the reseller, would purchase a product from a supplier; You, as the customer of said supplier would not pay the Sales Tax on this purchase due to your Sales Tax Exempt status; You would sell the product on your business’ marketplace (Walmart, Amazon, Home Depot, etc) and the individual who purchases your product would pay Sales Tax on this transaction. The Sales Tax paid to you is then given back to the state by your business’ marketplace (Walmart, Amazon, Home Depot, etc). This process is then repeated.
Why do I need Tax Exemption?
States around the US currently charge on average between 7-10% Sales Tax on purchases made; this averages out between 3-7% of your annual net profit. As our clients are businesses that engage in resale, this 7-10% Sales Tax does not need to be paid if the necessary resale certificates and permits have been provided.
How much money can I save when tax-exempt?
Our clients save an average of 7% on all gross purchases and can expect to increase their net profits by 25%. For example, if you purchased $20,000 of products in one month, you could save an average of $1400 during that month alone.
Are there any other benefits of being tax-exempt?
The avoidance of paying sales tax is not the only benefit of this process, as there is also money to be saved and made. Suppose you were to purchase $10,000 worth of products in a month; without paying for Sales Tax, you would be saving $700 that month. This saving could see your gross net profits increase by a huge 15-30%; this also means that your store is ensured to be competitive in a very fierce market.
For example, if you are purchasing a product for $100 and reselling said product for $110, without holding a Sales Tax Exempt status; you are only making a $3 profit, as the 7% Sales Tax would result in a $7 deduction of your profit to the state.
If an individual who holds a Sales Tax Exempt status purchases the same product for $100 and sells said product for $105; this individual will undercut you AND make a $5 profit on top of the said product rather than the $3 profit which you have made.
What is RJM’s exemption process?
Upon purchase of an RJM exemption package, an RJM consultant will be assigned to your account and will submit sales and use tax account applications to a number of states on your behalf. Once these applications are processed and approved by these states, you will receive seller permits at your mailing address. We ask that you send us a copy of all seller permits you receive. We will then create a resale certificate for all your seller permits and submit all paperwork alongside a tax exemption application request to your supplier. Once your supplier approves this application, you will be fully sales tax-exempt.
What is I am working with an automation company - how will this affect the process?
We have various packages tailored to the individual automation company’s needs and these can be found in our plans and prices section or by contacting your automation team directly.
How long will the process take overall?
The sales tax exemption process can take approximately 3 to 4 weeks to complete.
Can I get multiple stores tax-exempt?
Yes, we can get you a number of stores sales tax exempt, as long as all stores are under the same LLC registered within the states/seller permits.
Can I become exempt as a Sole proprietor?
Yes- you can become sales tax exempt within all U.S. states as a sole proprietor just the same as with an LLC or Corporation.
Can you make me/my company sales tax exempt with any supplier?
Yes, as long as your chosen supplier allows sales tax exemption. Examples of some well-known suppliers that allow tax exemption are Amazon, Walmart, eBay, Home Depot, Zoro and Sportsman’s Guide.
Do I need an active store with my chosen online platform (Walmart / Amazon) set up before I start my exemptions?
Not Necessarily - You can work on your Tax Exemption alongside setting up your store: As the sales tax exemption process can take 3-4 weeks to complete, you may be already exempt by the time your store is active.
What if I don’t have an LLC yet?
We are happy to assist you with an LLC & EIN formation if that is the case. We are able to process this whether you are a US resident or non-US resident- you can find further information on our LLC & EIN formation services here. (link to LLC services)