Every business is looking for opportunities–sometimes even the quirkiest, most unassuming methods– to minimize spending. As time passes, the amount of money sales taxes take out of your wallet augments into money you wish you could have saved. Did you know, though, that your construction business can actually receive tax exemption for many of the items you purchase at the Home Depot®? There are just a few steps you need to take in order to stop paying sales tax and start saving money!
Which materials are exempt from taxes?
It can sometimes appear tricky to tell which materials are non-taxable, but there is actually quite an easy way to remember! First of all, your purchases must be for a job to be tax-exempt–but that is not all. If you are purchasing materials to use or resell for a specific job from which you and your business will earn revenue, then those materials are non-taxable. Virtually any raw materials you take and turn into a finished product for a job are exempt for taxes. For example, if you buy lumber and use it for a project, then that lumber is a non-taxable material. However, when you purchase tools you use for multiple project, those tools are taxable since they are not being used solely for one specific job.
Note: Not all states issue tax exemptions.
How do you get a state tax exemption certificate?
Applying for state tax exemption is a lot simpler than it seems. You need to go to your state authority’s website (typically your state’s Department of Revenue) and find out how to register. For most states, you normally only need to submit and form and wait for approval. The statutes differ from state to state, though, so you should look into the each state’s tax exemption rules and regulations.
What is the difference between a Resale Certificate and a Sales Tax Exempt Certificate?
A Resale Certificate applies to items that a company purchases as key components or ingredients of what they are selling to consumers (i.e. Flour is a key ingredient in the baked goods sold at a bakery.); it can also pertain to items that are resold in their original condition (i.e. Clothing bought from distributors can be resold at department stores.). On the other hand, a Sales Tax Exemption Certificate applies when the item being purchased is exempt from taxes or the use of the item qualifies for a tax exemption (i.e. Items used in hospitals typically qualify for sales tax exemption.).
How do you apply for a Home Depot® Tax ID?
This special Tax ID is similar to the state tax exemption, but it is specifically for Home Depot®’s stores. With it, the store grants you tax exemption on materials and products that you purchase for resale. To apply, you should go here. You need to provide your phone number, email, and state tax exemption certificate. You can receive a Tax ID only if you have tax-exemption certification from the state, so if you do not and you think you qualify, apply for state tax exemption first!
The types of businesses that qualify for special Tax IDs are:
- Federal Government
- Religious Organization
- Charitable Non-Profit
- Educational Institution
- State and Local Government
Once you are approved and receive your Tax ID, which comes in the form of a ten-digit code, you can begin using it at the check-out or online when you make purchases.
How do you link your Tax ID to your Pro Xtra® account?
If you have an account, you should first link a phone number and a credit card or checking account to your profile. You can learn how to do so here. Then, when you submit an application for a Tax ID, it is crucial that you input the same phone number you have linked to your Pro Xtra® account.
How does this make shopping easier?
Connecting your tax exemption ID with your loyalty account makes for a simpler shopping experience. Entering tax exemptions at the register versus on the Store Point of Sale Application (SPOS) are different and completely separate processes during checkout, so they can apply one or the other (or both) as needed. When you go to the register, all you have to do is say you are tax exempt and provide the phone number linked to your Tax ID number. However, if you make purchases online, you must input your ten-digit Tax ID instead of using a phone number.
When shopping, it is also smart to get separate receipts for your taxable and non-taxable items because it makes tracking your purchase information much easier.
What do you do if you got charged sales tax on purchases?
There may be instances when you forget to provide your Tax ID or you are accidentally charged sales tax, but there is no need to fret when this happens! The best course of action to take is calling Home Depot® or even going to the store! Provide your Tax ID or the phone number linked to it and, if necessary, bring the receipt of the purchase on which you were charged. If you do that, you should be refunded the sales tax charge!
How can you keep track of your purchase details?
When you use your account, your purchase details are automatically uploaded into the “Purchase Tracking” section of your profile. However, it can be difficult to manage all of your data, so you may want to upload it into Intuit’s QuickBooks. The best way to transfer your purchase data from Pro Xtra® to QuickBooks is through HammerZen, an Intuit-approved application that automates the import process. HammerZen helps you keep your data organized; if you have a receipt full of non-taxable items, then you can select that they are non-taxable, and if you have a receipt of taxable items, the sales tax on the receipt is appropriately distributed to each item purchased. Overall, using HammerZen in conjunction with your account, Tax ID, and QuickBooks makes managing your data much easier and more efficient.
Knowing you can save even more money is a great feeling. Now that you know how to receive tax exemption on most of the items you purchase, what is stopping you? Get out there and start saving your money!