Legal Question in Business Law in California
We own a smoothie/juice shop. It�s a franchisee. The franchisor wants us to buy certain juices from a vendor. The vendor wants us to fill out a W9, otherwise, they won�t ship product to us. The vendor says that since we will collect sales tax from customers (which we won�t because it is food item), they want to make sure we pay the sales tax to FTB (Not IRS)!!! My concerns/questions are:
� I normally give W9 to entities I provide services to. In this case, a vendor is asking us to fill out a 1099 for product. No vendor(s) has ever asked us to provide them a 1099.
� We will be buying products and not services from this business. I though W9 is not needed for services. It is only needed for products?
� Can a vendor refuse to provide me products/merchandise if I don�t provide them a W9?
Please advise.
1 Answer from Attorneys
This makes absolutely zero sense. A W-9 is provided FROM the entity that will RECEIVE payment TO the entity that MAKES the payment. You will be paying the vendor. They have no reason to ask for a W-9 from you. Also, the TIN provided on a W-9 is irrelevant to sales tax. W-9s and 1099s are income tax forms, not sales tax.
It is possible that you have a miscommunication with the vendor and/or you or the vendor is confused. It would make sense for them to want you to provide your FTB resale license number. Otherwise they have to charge YOU sales tax. If you don't have a resale license, then they are supposed to collect sales tax from you. They may be asking for your resale license or they may think that if you don't have a resale license number they need to ask for your TIN for some reason.
What SHOULD happen, however, is you SHOULD have a resale license and collect sales tax from your customers on taxable items. Not all food is exempt. For example, prepared foods consumed on or adjacent to your premises, such as on your sidewalk or in your parking lot, are taxable. Therefore the vendor SHOULD want your FTB reseller's license number, NOT a W-9. Then YOU need to remit sales tax on taxable items, and pay sales tax on consumables that you do not collect sales tax on. Lastly a 1099 SHOULD have nothing whatsoever to do with a business relationship between a juice shop and a juice vendor.
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