Wholesale Companies

Jewelry Discussion
1

Hi All… I am a Student in the Jewelry Design and Repair area, and I
have a question. I’m relatively new to the group, so if this question
is redundant, please accept my apologies.

I also produce custom and one of a kind items, and being an absolute
"newbie" to the confusing wourld of retail rules…well, basicaly,
I am looking for wholesale companies to provide bits and bobs.
Mostly, for the time being, I’m looking for beads, findings, et al.
I have been to a couple of trade shows, but when I inquire about
wholesale contacts, everyone suddenly gets real busy. I do shop with
Rio Grande frequently, but I have been told that “they aren’t
really a wholesale company”, and that there are other companies
that offer the same stuff at a much less expensive cost. Is this so?
I’ve searched the net, but it still seems like the costs of
components are still really high…suggestions, anyone? Thanks
much, Geni~

2

Dear Jillian,

You’ve managed to post right in the middle of the Great Stuller
Battle. I don’t know what kind of replies you’re going to get, so I’m
going to try to beat the competition on both sides.

As a “small time operator,” my advice is, give up your search for
"wholesale" deals. You can’t meet the criteria for most companies
that really do wholesale, for the simple reason stated over and over
here–those companies are set up to do business with other
substantial businesses, and you’re not one. Neither am I, and I
actually hope never to be more than “small time,” so I’ve accepted
this. I pay top dollar at Rio Grande because I order in small
amounts. if they didn’t charge us wee ones top dollar, they’d go out
of business. Plus, I do keep them on the phone for a very long
time…

On the other hand, many people think I have taken this all to an
extreme by not getting a resale license (so far, I haven’t sold in a
venue where I needed one). My local bead store gives me a hard time,
because they would give me a 10% discount and I wouldn’t have to pay
sales tax, if only…I were interested in having to keep track of and
complete more paperwork. I know that the process of getting a license
is simple and free in California, and it does open up those vendors
who define “wholesale only” as “resale license only” (which means
more variety for you). But most of these vendors still discount
according to how much you buy, so your chances of saving more than
10% are…less than 10%.

I finally made up my mind at the last bead show I attended. All the
larger vendors were charging the same price to everyone (no, there
wasn’t a “wholesale only” room). Almost all the discounts were based
on how much you were buying. Only one vendor I wanted to buy from
(glass bead artists) actually discounted 50% off “retail” if you had
a resale license. I sighed and moved on. So it goes–no glass orchids
for me. I’d rather give up glass orchids that do more paperwork.

Yes, the cost of doing “small business” in this business is high. I
make the most money on my copper, niobium (courtesy of Reactive
Metals, who you should definitely check out), and cheap glass
line–artists seem to love it, and I can afford to price it so they
can afford to buy it. No diamonds, probably for forever. (Unless I
get my hands on some “hothouse” ones that have flown in under the De
Beers radar.)

Good luck,
Lisa Orlando
Aphrodite’s Ornaments

3 
On the other hand, many people think I have taken this all to an
extreme by not getting a resale license (so far, I haven't sold in
a venue where I needed one).

Hi Lisa, If you’re selling your jewelry to retail customers without a
resale license and without collecting sales tax and paying it to the
state, then you are operating illegally. It doesn’t matter if the
venue requires you to declare a resale number or not. The #1 reason
for getting a resale license is to satisfy the state’s legal
requirements for charging and paying sales tax… Any other reason is
secondary. You’re taking a big chance!

Beth

4

This is in response to Lisa’s post indicating she sells her work,
but does not have a retail license. I don’t know what state or
country you are in, but in most states in the US this is illegal.
The reason is sales tax. If you sell a type of item on a regular
basis (in other words the odd yard sale doesn’t count) then you must
collect sales tax on the items, and turn this tax over to the state
on a regular (monthly or quarterly depending on the volume of your
sales) basis. Whether you wish to do paperwork is irrelevant.
Whether you wish to be in close angry contact with the state revenue
system is relevant! They do like to get their money!

In most states a retail license is a simple thing to get, and filing
the tax returns is not that big a deal. If you get stuck go to your
nearest state revenue office and they will help you out. Some
cities, particularly larger ones, also require that you have a retail
license with them, which may or may not include collecting and paying
local sales taxes. Always check with show promoters - they will know
what you need and where you need to go to get it. Many big shows
will have someone on hand during set up to get you enrolled for your
license.

Much safer to stay on the right side of the law, paperwork not
withstanding.

Just my two cents.
Beth in SC

5 
    Hi Lisa, If you're selling your jewelry to retail customers
without a resale license and without collecting sales tax and
paying it to the state, then you are operating illegally.  It
doesn't matter if the venue requires you to declare a resale number
or not.  The #1 reason for getting a resale license is to satisfy
the state's legal requirements for charging and paying sales tax..
Any other reason is secondary.  You're taking a big chance!

Yes, that’s right. Slavery still exists. As a matter of fact, if
you were to calculate the crdit card discount into the equation, it
actually costs us to collect sales tax!

-Stan

6

Lisa, I read your posting with some alarm. Does doing without a
wholesale license, and avoiding paperwork, mean that you are also NOT
collecting and paying sales taxes ? That is illegal you know. The
license automatically puts you in the tax-paying category, and if you
are selling products and running even a small business without doing
that, and admitting to it, you’re at peril of some stiff fines and
problems ! Do rethink your position and be safe and legal.

Pat

7

As a citizen of the state of Oregon I run my business without a
resale license. In fact, you can’t even get that kind of license in
this state, since we have no sales tax. It does make it difficult
to get supplies from some wholesalers who don’t understand how I can
be inbusiness without a tax id number. It is possible to get a
"business" license and a federal tax number to go with it, but since
I fall below the income requirement I operate on a business license
exemption. This limits the number of true wholesalers who will do
business with me, but as I prefer to keep my money local I don’t
mind paying a little bit more for in-person sevice and the ability
to walk in and get what I need. Fortuneately what I need is seldom ,
if ever, a manufactured product.

brigid

8

Stan it’s part of the cost of living in the land of the free. Lisa,
I’ve heard stories, from reputable sources, of jewelers who do art
fairs who were fudging and were caught years later and made to pay
tax plus penalties. The tax people do not forget. Stan, over the
years I’ve been counting how much money I made for a number of states
by collecting taxes for them on my work and wondering what do I get
in return. I’ve resigned myself to the fact that it’s a business
expense. You diminish the meaning of the word slavery using it in
this context.

9 
Hi Lisa, If you're selling your jewelry to retail customers
without a resale license and without collecting sales tax and
paying it to the state, then you are operating illegally.  It
doesn't matter if the venue requires you to declare a resale number
or not.  The #1 reason for getting a resale license is to satisfy
the state's legal requirements for charging and paying sales tax..
Any other reason is secondary.  You're taking a big chance! Beth

The venues through which I sell pay the sales tax themselves. The
only time I might be “illegal” is when I sell to private clients. But
I understood that they can’t make you pay sales tax twice. in other
words, if I buy supplies retail, and then sell them with nothing but
“value added,” why should I have to pay sales tax again?

Lisa

10

I think this is a perspective issue–you see it as paying sales tax
twice. Even if you buy supplies at retail and pay the sales tax at
that point of purchase, you still must collect the sales tax from
your customer when you re-sell the item. BUT when you remit that
tax to your state DOR (or whomever), you are not PAYING the tax
again, but merely passing along the tax you collected from the
customer, on to the state. You’re merely the conduit between the
customer and the government at that point.

11

OK, I’ve got to jump in here on the tax statements.

Not every state has the same laws about sales tax. As was pointed
out, Oregon has none at all. I believe there is one other state as
well (New Hampshire? not sure.)

New Mexico does not have an actual “sales tax.” What we have here
is a “gross receipts tax.” It is entirely up to the vendor whether
they collect the tax from customers or not. We do have to pay the
tax based on the dollars collected in sales, but because it is not a
true sales tax, we can simply mark our prices as necessary and pay it
to the State without ever making a fuss about tax at the customer
end. Most vendors do itemize the tax in a sale, so the customer
knows that the price is competitive, however.

My point is, “cool your jets” folks. It is not always illegal to
skip the sales tax in a deal - depending on the laws of your locale.

Susan
Sun Country Gems
www.suncountrygems.com

12 
    As a citizen of the state of Oregon I run my business without
a resale license.  In fact, you can't even get that kind of license
in this state, since we have no sales tax.

For 20 bucks the state will provide you with a business registration
number which is the same as a resale license for purchasing
purposes. It is a good idea to have one, I understand. The exemption
you mention is for the city business tax.

Spike Cornelius
Portland, Or.
RC ArtMetal

13

Lisa, As a California business you are required to get a tax number
from the State and probably the City which you have your business
in. Even if you do not make any taxable sales you are required to
file a tax return. The Franchise Tax Board is not an entity to mess
with they can and will fine you for not filing a return, and you
really don’t want to face an audit to find out what they think you
owe them.

Jim

14

Hi Lisa,

The venues through which I sell pay the sales tax themselves.

In that case, you’re technically not selling to the end buyer (the
venue is). So you are correct: You don’t have to collect and pay
sales tax.

The only time I might be "illegal" is when I sell to private
clients. But I understood that they can't make you pay sales tax
twice. in other words, if I buy supplies retail, and then sell them
with nothing but "value added," why should I have to pay sales tax
again?

On this point, I’m not sure. If you bought an item at retail and
paid sales tax on it and then resold it for the exact price you paid,
then you’re probably right. But that’s not what you’re doing and I
have a feeling the “value added” makes a difference.

Here’s what I recommend: Call the State Board of Equalization!
Find out from the horse’s mouth exactly what the requirements are.
Then you’ll know for sure and not have to worry about whether or not
you’re doing something illegal that might carry a hefty financial
penalty if/when you get caught. Good luck.

Beth

15 
I understood that they can't make you pay sales <tax twice. in
other words, if I buy supplies retail, and then <sell them with
nothing but "value added," why should I have to pay sales tax
again?

It seems to me that, to a certain extent, you might have a valid
point. While I would not want to count on a loophole to get me out of
trouble without first consulting a tax attorney, it seems that you
should at most be liable for the “value added” part.

For example, if you do not have a resale tax number, then you are
probably paying taxes on the raw materials, if you then sell the raw
materials in finished form for a profit, I would think that
technically you should not have to pay taxes again on the
materials…but I think you would on the profit. OTOH, if you buy
materials from out of state and they don’t charge your state sales
tax I could see the local tax man completely missing the humor:)

I would consider a consultation from a tax attorney,
to my mind it would be insurance well spent.

16

To the person who said there is no sales tax in NM: when I go to
the grocery store in Santa Fe and purchase items, there follows the
total an amount below the total labeled sales tax. Perhaps this is not
the case in Albuquerque? And in the case of gold purchases I am
required to submit a form stating I have a resellers permit. K Kelly

17

Hi Susan,

  My point is, "cool your jets" folks.  It is not always illegal
to skip the sales tax in a deal - depending on the laws of your
locale.

You’re absolutely correct, but Lisa had stated that she lives in
California, as do I. The laws are quite strict here and the
Franchise Tax Board can be rigorous about enforcing them. You may
slip by them for a year or even several years, but eventually they
catch up with you.

Beth

18

Hi Lisa, In California, at least, your “value added” is taxable – it
is taxable labor (the only labor non-taxable in California is very
particular types of repair work).

There is a common misconception that labor is not taxable.

A sculptor friend of mine (a commercial sculptor, like me) claimed
that because most of the value in a commercial wax or clay is in the
labor and not in the material, that he could collect sales tax on
the material only and save a mint in sales tax payments (in my
industry, we bid by job and sales tax is to be considered within the
bid and not charged on top of the bid. This way he could underbid
competitors by almost up to 7.75% without sacrificing anything) Of
course, he also argued that sales tax is to be collected on
end-product only, and since he was producing models to be used for
manufacture, they were not end-product.

He kept nice, neat documentation showing what material actually
changed hands, and “charged” sales tax on the materials that were
used in his sculpt.

The State caught up with him about a year after his
quarter-of-a-million-dollar year (his studio produced a lot of Star
Wars toy sculpts that year). He hired an attorney (I guess the
attourney was kind of a goober, too) and tried to fight it in court.
He lost. It cost him back-taxes in the tens of thousands of
dollars, plus interest, plus penalties. Then they audited his other
years of business, and he had to pay more and more and more.

The thing that I never understood was – in the l
paperwork given out by the State Board of Equalization – they are
VERY clear that VERY few types of labor are non-taxable. Didn’t he
ever read the paperwork?

I realize that small enterprises think that maybe they will “slip
through the cracks”, and that does happen (usually when it is a
question of wanting something good to happen); but the tax board is
tenacious once angered, and according to my friend it is NOT
something that you want to have happen.

Maybe you should get the infomation from your state’s Board of
Equalization (or whatever they call the sales tax entity in your
state). It could clear up for you whether you are breaking the law
or not (and, unfortunatelly, you probably are…).

–Terri

19

The venues through which I sell pay the sales tax themselves. The
only time I might be “illegal” is when I sell to private clients.
But I understood that they can’t make you pay sales tax twice. in
other words, if I buy supplies retail, and then sell them with
nothing but “value added,” why should I have to pay sales tax again?

Lisa, in that instance the ‘value added’ is what is taxable, if an
area collects sales tax. But you have to keep VERY good records of
what percentage of the piece you sold has already had the tax paid in
case of an audit. Also, If you are properly reporting this income at
the Federal Level, I believe the States have some sort of way of
cross referencing now…

If you are not reporting this income on the Federal level (even as
hobby income), whew! BIG can’o’worms!

Donna Hawk
Dallas, TX

20

Actually, while New Mexico does not have a “sales tax,” it does have
a “gross receipts tax.” Same taxation complexity, nearly the same
requirements as a sales tax . . . just a different name.

Andrea M. Hill
Director
The Bell Group
7500 Bluewater Road NW
Albuquerque, NM  87121
(505) 839-3033 - ph
(505) 839-3032 - fx