A sales tax is a tax on transactions, or sales. In the Knox County, sales are taxed at 9.25%, so if you buy something worth $100, you pay an additional $9.25 that's added to the revenue of Knox County and the state of Tennessee. Sales tax isn't just something that customers have to pay though; businesses pay sales tax too, every single time they make a transaction. If a good is bought by a business from a business, and then that good is sold to a customer, it's been taxed twice. For cheap goods, this isn't really a big issue, but for more expensive things like computers it can drive up prices by hundreds of dollars.
At Knox PC Builders, we don't have special relationships with component manufacturers, so when we order components, we pay the normal price anyone else would if they ordered the parts on their own. This means we also pay sales tax on those components, just like everyone else. Sales tax only becomes a problem when we're asked to buy parts and assemble a PC on our own. When you order a PC through us, we're not just doing a service for you, we're also selling you a PC, and that means you have to pay sales tax on both the computer and the labor.
Let's say you order a PC from us that's made up of components that cost $1,000 before sales tax. Once we order the parts, the price is $1,092.50. To build your PC, we charge 10% of the pre-tax price of the components, so $100, bringing the price up to $1,192.50. However, when you pick up your PC and pay for both the parts and the labor, sales tax has to be collected again, so that's 9.25% on $1,192.50. This adds $110.31, bringing the final cost to $1302.81.
Obviously, we're not going to commit tax fraud or skip out on paying our fair share to Knox County and Tennessee. But at the same time, we want to offer our services for the lowest possible price. Thankfully, there's a way to sidestep the problem of double sales tax. As long as you bring the parts and just have us do the labor and nothing else, you won't be charged any sales tax on the components for a second time since the components are only involved in a single transaction. This way, you can save tens or even hundreds of dollars.