How to Become Tax Exempt?

[Abigail]

Being a large home care provider can I, and if so, is it worth it to become exempt from taxes when buying exclusively daycare items?

[Sunchimes]

Tax exempt only works if you are reselling something. Someone has to pay the taxes. You either pay when you buy it, or you collect it when you resell it.

For example, let's say that I decided to buy diaper wipes. If they are for daycare use, I would pay sales tax on them. However, if I bought them and had an arrangement with the parents to buy the wipes from me, then I could get them tax exempt and when the parents bought them, they would pay the sales tax to me, which I would send to the state with the appropriate documentation.

I really don't know of any other way to be tax exempt, but I'm sure Tom will be by soon and let us know if there is another way.

[Abigail]

That makes sense to me.

[TomCopeland]

tax exempt

Being a large home care provider can I, and if so, is it worth it to become exempt from taxes when buying exclusively daycare items?

The only way to become exempt from sales tax and state income taxes is to form a tax-exempt non-profit corporation. To become a tax exempt corporation you must file paperwork to be a non profit corporation with your state. Then you would file paperwork with the IRS to ask to be considered tax exempt. The IRS is unlikely to grant you tax exempt status because you wouldn't be able to show that you are operating for the public good. That is, you would have to show how your business purpose was to serve the community, not just a few parents. I don't know of any family child care providers who are tax exempt.

Having parents buy items from you doesn't change anything. You would still have to pay sales tax on the items you purchased.

[Sunchimes]

Tom, I learned something. I thought any time you re-sold something (once you were set up with the state comptrollers office) that you could purchase it tax exempt. Interesting.