Bookkeeping

Is a fashion design company providing service to customer excluded from sales tax in California?

I have a customer with fashion design company who provides consultancy and some time products such as samples to the clients. The owner pays for some COGS and pays sales tax while purchasing the items. Then the business use those items in preparing cloth sample to the clients but do not charge sales tax. Is this correct? The client are using these samples to produce in mass somewhere else and then sell the items. But I am not sure if these clients are considered as end users or retailers.

in progress 2 Answer

Answer

  1. 74 Answers

    Good morning, it sounds like based on your description these would be considered wholesalers and not retailers. “Then the business use those items in preparing cloth sample to the clients but do not charge sales tax” in this statement you are saying that the items prepared are samples. Samples are not intended for resale (in most cases) so there would not be sales tax charged for the sample items. If the client is then using the sample to reproduce in mass for sale, this still does not necessarily mean sales tax should be charged or collected. As you mentioned sales tax is based on the “end-user”. If the sales are direct to the end-user then sales tax should be collected at that time.

Leave an answer