Most IRS rules within the 50 United States require sales tax be charged by sellers to buyers within the same state. Local taxes apply within the same local jurisdiction. You can avoid paying these taxes if you apply to your state Internal Revenue for a Resale Tax License. You can search the web for 'your state'.IRS.gov and look for Resale License. Print off the forms as required, fill them out and mail them in. Once you have received your Resale license, you can then avoid paying sales tax on items you purchase within your state. There is a fee for this license, depending on your state. In Colorado, it's $16 each 2 years. You pay the $16 up front, and every 2 years, you apply to renew your license. You must also provide your total sales to the State Revenue Board every year. The intention is that you are going to buy in order to re-sell the item, so therefore, when you sell it, then you pay the sales tax. Obviously, you charge the buyer that sales tax.
When you have a Re-Sale Tax License, you can avoid paying the sales tax on items you purchase within your state. This not only applies to items purchased on eBay, but also any purchases you make at retail outlets within your state. Supplies you buy to ship items you sell on eBay for example, you can use your Tax Number to avoid paying sales tax on those items. Goodwill Thrift Stores in most states will accept a copy your tax license certificate and allow you to avoid the sales taxes. Also, identifying yourself as re-seller to lots of other places, such as Outlet Stores, will also give you a discount on the purchase price, sometimes as much as 50%. While not that costly, saving the tax amount can really add up over time.
When you purchase an item on eBay that ships within your state, you must provide the seller with your tax identification in order to avoid the sales tax. This includes your resale tax number, your business name and address, and the expiration date of your tax number. You can scan your resale tax number certificate, and then email a copy to the seller. By state law, the seller must retain a copy of all resale tax licenses for which they have not charged the state sales tax. The seller may be audited by their state Internal Revenue Services Department, and must have a copy of the resale license in order to support the claims of non-tax. The seller may be fined or even imprisoned without this documentation, depending on the state laws.
In order to advise eBay sellers of your tax identification, if you pay with PayPal, you can include all the necessary information in the "NOTES" section on PayPal. Then type in the tax charged amount in the 'Seller Discount' section. Then separately email a copy of your license to the seller. It's always a nice gesture to include your telephone number. My telephone number always goes out on my eBay invoices to buyers, and all of my PayPal payments to sellers; and I'll say less than 1% of people ever actually call me. If you pay by check or money order, include a copy of the your tax license and deduct the tax charges shown on your invoice from the seller.
Yes, this does involve more paperwork in the long run - at tax time, but if you are truly running a business, then you need to have the tax license registration; and it can potentially save you a bunch of money!
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