Company "A" (Client) issued a project to Company "B" (Contractor). Company A is tax exempt from a sales tax perspective. All materials purchased by the Contractor shall be tax exempt correct? How does the contractor purchase material tax exempt? Does the contractor need a "tax exempt number" from the client? Should the contractor have a tax exempt certificate? What about come tax time, is there any special forms or info the IRS needs for this?

ANSWER

The BIDaWIZ Team's Answer:

Even though you are doing contractor work for a nonprofit organization, they are still required to issue you a form 1099 if they paid you $600 or more during the year. As it relates to sales tax payments for the purchase of materials on behalf of the nonprofit, the Pennsylvania sales tax exemption is limited to purchases made on behalf of the institution’s charitable purpose. The purchase must be made in the name of the institution paid by funds from the organization. The institution must issue an exemption certificate (REV-1220) to the seller in lieu of the payment of tax.