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My friend teaches flower classes, a portion of the total amount charged goes for materials and a portion goes for the actual teaching of the class. If a typical class costs someone $100, $50 of that is materials. My questions are as follows.

What does she have to charge sales tax on, since the flowers are being purchases at wholesale, I'm assuming that she should only be charging sales tax on $50. As for the remaining $50, I'm assuming that she just pays income tax one that.

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    If this is in the US, in which state do these transactions occur? Different states have different laws regarding sales tax. – Dilip Sarwate Sep 6 '12 at 15:57
  • in New York State – user379468 Dec 9 '12 at 22:40
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In most jurisdictions, both the goods (raw materials) and the service (class) are being "sold" to the customer, who is the end user and thus the sale is subject to sales tax. So, when your friend charges for the class, that $100 is subject to all applicable sales taxes for the jurisdiction and all parent jurisdictions (usually city, county and state).

The teacher should not have to pay sales tax when they buy the flowers from the wholesaler; most jurisdictions charge sales tax on end-user purchases only. However, they are required to have some proof of sales tax exemption for the purchase, which normally comes part and parcel with the DBA or other business entity registration paperwork in most cities/states.

Wholesalers deal with non-end-user sales (exempt from sales tax) all the time, but your average Michael's or Hobby Lobby may not be able to deal with this and may have to charge your friend the sales tax at POS. Depending on the jurisdiction, if this happens, your friend may be able to reduce the amount the customer is paying that is subject to sales tax by the pre-tax value of the materials the customer has paid for, which your friend already paid the tax on.

  • In California, sales tax is only for tangibles... Not services, not electronic content... Buy software on CD: pay tax. Buy the same software as a download - no tax. – littleadv Sep 6 '12 at 23:19
  • Any idea what the statute is in NY, for some reason I was under the impression that services were not taxed either. – user379468 Sep 7 '12 at 14:04

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