If you are a San Diego business it is important to understand the nature of every item or ingredient you purchase in order to assemble the products you sell, and the ramifications of how the nature of the supplier acquisition affects the nature of how goods, products and services may be sold and the resulting tax liabilities. One example was a local client who had a large government contract to provide specific support to government job sites. His business would purchase a main packaging ingredient locally, and they paid sales tax on that item at the time of purchase. They were included as a “consumable” on the invoice to the governmental client, and we were not required to collect tax on that item as our client had already paid the tax at the time of acquisition.
No, not according the California Board of Equalization who kept asserting that tax was owed on the entire purchase by the customer. This would have amounted to a serious cost to our client, and would have made a substantial impact on profitability. The BOE clearly stated that the way other businesses were doing this was to bury the item in “labor”. But this was not labor. To do so would have been asking my client to provide false information on business financial reports and tax returns. We stood up to the BOE on behalf of our client saving him a substantial sum, as well potential penalties, and interest. You need an experienced and expert tax attorney with accounting expertise who can help you to stand up to taxation authorities and protect your interests. California is looking for every potential source of revenue. My job is to make sure you do not become one of those sources.