Replace All Federal Taxes on Income with the Fair Tax Act , HR 25

New house then addition few years after purchase

I had lunch with a challenger for Congress today to explain the FairTax. His campaign manager asked where is the tax for lumber purchased on a house you have bought then add on to a few years later. There is no intention to sell the house, just make it a little bigger.

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Permalink Reply by Steve Curtis on February 26, 2010 at 1:35pm

Unless you are a business, and the lumber is purchased pursuant to producing a product for sale, then the lumber is taxed as a retail purchase.

Permalink Reply by John Pierce on February 26, 2010 at 1:42pm

So the store store should ask the customer?

Permalink Reply by Bob Martin on February 26, 2010 at 7:04pm

Karen Walby just sent an explanation dealing in part with this issue and it is explained very well at FairTax.org. Here is an excerpt from that explanation. If you buy it and build it for personal use you pay the tax on the product.

The FairTax has several features that make it difficult and very risky for persons to have a scam business in order to purchase items tax-free. First, in order for any person to purchase items tax-free for business purposes, the business has to be a registered business and possess a registered business certificate issued by the state sales tax authority. Registered businesses will be expected to file monthly or quarterly sales tax returns with the state if retail sales are made. The registered business certificate will enable the business to purchase tax-free from wholesale vendors, but the wholesale vendor must retain a copy of the registration certificate to justify not having collected tax on the sale. When a business purchases items for business use from a retail vendor, it will have to pay the tax on the purchase and take a credit against the tax due on their monthly sales tax return. If the business has no retail sales it will receive a cash refund. The business must keep invoices/receipts to document what it purchased, the amount of the purchase, and the business purpose.