The clean cut situation occurs when a seller gets a permit to resell a product.  I went this route and was very dissatisfied with the large percentage of junk I received on pallets.

When I discovered that I could make a profit off items I purchased in discount outlets and high end department store clearance sales, I began to have a sales tax issue.  In most cases, it is not possible to use a reseller's permit at a discount or high end store.  You can't pass up the deals because, even with the sales tax, the product will bring a nice profit.  So.....pay for the item, including the sales tax, and keep your receipts.  Since I make purchases like this on an average of twice a day, one can imagine how many receipts I have to manage. 

At the end of the quarter, California requires that businesses complete a quarterly sales tax return and pay up.  Because 99% of my sales are outside of California, I owe very little in sales tax.  I import my Ebay sales into Quickbooks and then print out a quarterly taxes payable report.

Many people get their CPA to complete their quarterly tax reports.  Since my liability is always under $10, it would be ridiculous for me to pay a CPA $200 an hour to prepare a quarterly sales tax return. 

I knew I would be able to get credit for the sales tax I paid but I called the State Board of Equalization and verified with one of their gurus.  The quarterly return provides a place to enter sales for which sales taxes were paid.  My receipts support the sales taxes I paid and, therefore, I never have to write a check to the State Board of Equalization.

If one has a high volume of sales, it would be wise to consult with a CPA to develop accounting policies.  The sales tax could be treated as a) a cost of the product sold OR b) a period expense which means that the sales taxes is charged against current year income.

This article is not for those who sell one or two items a year.  It might, however, be for Power Sellers who have not established a business accounting procedure.  Sales tax is a legitimate business write off.  The only issue is how and where it is written off.