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We are a consulting company that buys and resells some products. On resale items, it seems as though tax is being paid twice?

Full Question: We are a fairly new NC consulting company that occasionally buys products and resells to our customers, also located in NC. I am unclear about what sales and use tax to pay. On products that we purchase for resell, do we pay use tax only if we were not charged sales tax on the product? When we resell the item, do we charge our customer sales tax, regardless of whether or not we were charged sales tax when we purchased the product? Or is this a separate tax? How are these taxes reported? Why does it seem as though tax is being paid twice?

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Answer:

Diane Yetter photoIf you are selling taxable property and purchase items that you are reselling, you should be registered with the NC Department of Revenue and should have received a sales tax registration number. When you purchase items that you resell as a registered seller, you are qualified to issue a resale certificate to your suppliers and this will permit them to not charge you sales tax on your purchases. You can obtain the resale certificate at http://www.dor.state.nc.us/downloads/fillin/E595E_webfill.pdf. When you then sell the items to customers in NC, you are required to collect NC sales tax on the selling price of the taxable goods. You should not issue the resale certificate to suppliers of items you consume in your business or use in providing a service as for these items you are considered the end user and are subject to tax on those purchases. Once you are registered, you will file the sales tax you collect on a sales tax return. If you purchase items for your own use and the supplier did not charge you sales tax, you owe use tax directly to NC. If you are not registered, you can register online at http://www.dor.state.nc.us/electronic/registration/index.html

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