Early on, when we were just starting to offer our Rookie Season course, we had a student mention that she did not have to pay sales tax on her longarm machine because she had a business with an EIN already established when she bought it.
Cue the record scratch!
I don't remember ALL the details of buying my longarm machine (it had been nine years prior), but I definitely remember paying sales tax on it. I would have had a sales tax permit at the time, too, I just didn't realize I could've used it to get an exemption on paying sales tax in my state. I bought my machine used without a computer, so this would have "only" been a savings of ~$700, but STILL! That money could have been put to good use applied to other start-up costs.
The more I started asking around within the Longarm League community, the more I realized that this is a legitimate thing and available to more of us than I realized! I even called a machine manufacturer to discuss, just to make sure it was valid and legal. :)
It does not help that every state has different sales tax rules and exemptions. Not helpful at all. But what I hope is helpful is that this knowledge may come in handy if you have not purchased a machine yet. Sales tax depending on your purchase amount AND sales tax percentage in your area could easily exceed $2,000!
It's worth getting your sales tax permit or EIN set up before you buy your machine (and computer/robotics) with the intent of using it for business. You'll have to find out what is required to produce proof of exemption - maybe it's a state-specific certificate or form you'll need to submit. It could even be worth a call to a tax professional in your state to help you navigate the process.
From what I understand, the state exemptions have to do with machinery or equipment used in direct manufacturing or production of a taxable product or service. It's not as though your machine is exempt because you'll be reselling it - as with other items you can use your reseller's permit to buy tax-free, like thread and batting. Likely, the form you submit will be kept on file with the longarm manufacturer to prove they did not have to charge sales tax on the sale in the case of an audit, it's not a form that will be filed with the state.
Based upon the wide variety of answers I got from recent longarm purchasers, it seems pretty clear that it is not the dealer or sales representative's responsibility to give you tax advice about this. They may not tell you what you need to get a sales tax exemption unless you ask about it. It's not because they are trying to be tricky, but because it will not apply in all cases. For example, people commonly buy longarm machines for their own personal use and therefore wouldn't qualify for an exemption.
As we've had the occasion to look into different states to assist various students and members, we've noticed that some states will also refund the sales tax during a certain "grace period", if it was applied at purchase and you qualify for the exemption. You'll want to check with your state-specific taxing authority to see if this could apply to you. For example, the state of New Jersey will allow a person to file for a refund up to 4 years after the sale if it was paid in error initially. This was so surprising to me! And another member from New York found that she could still submit an exemption form up to 90 days after the delivery of her longarm.
Take a deeper dive on your state's department of revenue website and search for sales tax exemptions or forms for an exemption certificate to find out which purchases qualify. If it's after the sale, search for sales tax refund forms.
I'd love to see you save some money—I'm sure you'd put it to good use!
We'd love to share a little bit about how we support longarm quilters through education and community. Updates typically go out on Wednesdays - we'd love to stay in touch with you!