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We are a Minority Business Entity (MBE). What is best way to manage sales tax on purchases, per our example?

Full Question: To meet Minority Business Entity (MBE) contracting requirements we buy waterline pipe from a wholesaler but we pay a certified MBE for the pipe plus a 1% markup fee for the cost from the wholesaler plus the fee. The MBE then pays the wholesaler. We pay sales tax on the cost of the pipe but not the MBE's fee. Is this correct or should we pay sales tax on the full amount invoiced by the MBE.

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Answer:

Diane Yetter photoThe basis on which sales tax is due is typically the purchase or sale price. Maryland specifies the following in regard to the price. "Taxable price" means the value in money of the consideration that is paid, delivered, payable, or deliverable by a buyer to a vendor in the consummation and complete performance of a sale, without deduction for any expense or cost, including the cost of any labor or service rendered, any material used, or any property sold. The consideration may take the form of money, rights, property, promises, or anything else of value, or by exchange or barter. So, even though this fee is separately stated, it is deemed part of the price you are paying for the purchase of the pipe and I'm assuming this is a mandatory fee. Therefore the full price is taxable. If you need further assistance with this matter, please feel free to contact us directly.

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