The place to find business sales tax information

— as well as solutions, services and jobs!

I purchase and resell videos on-line. Do I pay tax on the full amount or just profit?

Full Question: I have set up a website in which I sell training videos. I have my taxes set up to automatically charge sales tax for the state of texas to people who purchase in texas. However, I purchase videos from a company and resell them. If I purchase a video for 40% of the retail price and then resell it to my customers at 100% what taxes do I have to pay to the government? Do I only pay sales tax for the people that purchase my products in Texas or do I still have to pay a tax to the government on all of my sales as an income tax. If so am I paying income tax on the full amount or 100% of what I sold it for or do I just pay a tax on the 60% profit that I made off each sale?

Brought to you by:

NOTE: This site does NOT provide client-specific tax advice. Information provided is general and may NOT apply to your particular situation. Do NOT take any action based upon any site content until you have received advice from an independent, qualified tax practitioner with whom you have a professional-client relationship. All content is subject to our disclaimer.

Answer:

Diane Yetter photoWhen you are reselling property and you are a licensed reseller, you are not required to pay sales tax on the purchase of the materials or items. So, you should issue a TX resale certificate to your supplier of the videos. Then when you make a sale, you are required to collect sales tax on the full selling price of the product you are selling. If your only presence is in Texas then you are correct that you should only charge TX sales tax to the TX customers where delivery is in TX. For the other states, the customer has the obligation to pay the use tax to their state. In regards to your income tax question, I can't answer that one. This is a sales tax question site. You should discuss the impact of Texas Franchise Tax obligations with your accountant or tax preparer.

(Not quite what you need? View SALES TAX QUESTIONS home page to access other topics or use site-wide SEARCH in upper right)

Disclaimer:

Access to any portion of SalesTaxSupport.com is contingent upon your acceptance of our Terms of Use. This Web Site and content provided by STS Publishing, LLC and its third party content providers, including, but not limited to information, documents, forms, comments, advice and opinions, is for informational purposes only, and is not a substitute for professional advice, nor does the use of this Web Site constitute a professional-client relationship. The Web-Site also includes advertisements, directory listings, job postings and links to third party web sites, all of which are provided for your convenience only and in no way constitute a referral, endorsement, or warranty by SalesTaxSupport.com of any product or service provided by such third parties. All content is provided “as is” with no guarantee regarding accuracy, suitability, or timeliness. Your reliance on any content accessed on or through the Web Site, or on any product or service provider is strictly at your own risk.