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H
HH82_2
December 5, 2017

Client sent me Resale Certificate only after they had already paid 2x invoices including Sales Tax

  • December 5, 2017
  • 2 replies
  • 0 views

Hello community,

 

I just started my LLC a few months ago and things have been running smoothly so far.

 

My business is renting out goods and I have had three jobs through the same client so far.

 

I have charged this client sales tax twice already and now for the third invoice they told me they have a resale certificate and also sent it to me. 

 

They have not asked me to pay the collected sales tax from the first 2x invoices back but I am wondering what I should do in this case. I am sure they won't ask me to pay it back but for example they would give me a budget of $5,000 for the first job, which I charged like this: $441 in Sales Tax + $4559 for the rental. 

 

I am sure if I ask them to revise the invoice from the past to $5,000 without sales tax then they might do that for me.

 

Would that be smart to do though?

 

Thank you kindly in advance for the help.

 

Best

    2 replies

    Adam_Fenner
    Adam_Fenner
    December 5, 2017

    @HH82_2

    If you are going to err, I would err on the side of paying taxes. If they request that their prior sales tax be reimbursed. I would grant them a credit for the amount, otherwise, I would pay that sales tax out and make it right going forward. 

    Unless you want to do it to build goodwill with the client, the money is going to leave your pocket anyway, so credit them for it. Unless the date range of the purchase is outside of the date on the tax exempt form.

    Bottom line, it is kind of up to you, just make sure if you don't give it back to them in some way, you pay it to the appropriate gov't agency.

    Best of luck

    Adam

      A
      Anonymous
      December 5, 2017

      Hi!

      In my opinion for the sake of client relations and how you are billing, you might want to just leave it as is.  The only way I would alter the first invoices was if I had significantly reduced my fees due to them pleading poverty and a very limited budget.  And only if it felt a bit like a bait and switch.

       

      That all being said, logistically they will still be paying sales tax on the latest invoice themselves.  And can also take the credit that they've already paid on the first two.

      So they don't end up paying twice anyway.  But it will fall on them to remember to take the credit, not you.

      You should forward along the sales tax you've collected.

       

       

        H
        HH82_2Author
        December 5, 2017

        Thank you so much for your reply!

         

        My client is also a friend of mine so if I would ask them to turn a two month old '$441 in Sales Tax + $4559 rental invoice' into a '$5000 rental invoice' without Sales Tax then they would do it. 

         

        Would that not mean $441 extra income for me which would be reimbursed sales tax otherwise? 

         

        Thank you kindly! 

          A
          Anonymous
          December 6, 2017

          Hi HH,

          Yes, if I understand you correctly.

          Here are the three scenarios as I see them:

          1.   You change your invoice to reflect a $5000 rental, letting your client know (in writing!) that the invoice has been changed to reflect a re-sale tax status at the original all in price and that *they* will be responsible for paying any sales tax on the item in full on their end.  Also, having them acknowledge that they have heard and agree to that in writing.  I would think via an email response is fine.

          2.  You change your invoice to reflect a subtraction of the $441 in sales tax, and only a remainder of the original lease total of $4559.  Then again follow the steps above letting them know etc.etc.  In this case you refund the $441 to *them*.

          3.  You leave your invoice as is.  You let your customer know that the sales tax collected by you will be forwarded to the appropriate agency, and that they should reflect a credit for themselves as such when they do their own sales tax reporting -- typically sales tax reporters have the option of taking a credit of sales tax paid on resale items against the sales tax they owe for turning around and selling those items.  You pass along the $441 to the tax agencies as part of your own sales tax reporting.

           

          Of course, you should check in with the particular laws of your state!  But basically, in all cases, the state / sales tax agency is eventually going to get their money.  What you are really deciding is if you are going to get an extra $441 or if your customer is going to get it.  Your client letting you keep the $441 as a rental fee will most likely result in them paying that $441 or so again in sales tax somewhere else.  

           

           

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