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Thread: Sole Trader Tax Question

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    Sole Trader Tax Question

    Hi all

    I've recently started a small IT business as a sole trader, mainly selling products to small business and private individuals.
    My question is about VAT, I'm not registered for VAT at the moment and after sifting through the internet don't think I will ever have to as my income won't exceed R1 million in a 12month period, business is more of a side income as a full on moneymaker.

    Here goes the question : When I purchase something from my supplier, I pay the cost price + VAT to them, which I can understand.
    When I invoice/quote my client, do I quote them the product price + my added markup + 14% VAT again?? Or just the price + markup?
    I can't see that I can charge VAT because I'm not registered for VAT and if I do I don't pay it to SARS as Im not registered for VAT?

    I do apologize if the question seems a bit strange, I'm a total beginner to this type of thing

    Thanks in advance

    Andre

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    Moderator IanF's Avatar
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    Andre
    Take the cost to you, which includes the VAT and mark that up. As you can't recover the VAT it is part of your cost of goods.
    Only stress when you can change the outcome!

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    Dave A (05-Oct-10), NibbleIT (06-Oct-10)

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    Site Caretaker Dave A's Avatar
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    Just to expand on Ian's post - which is spot on

    You'll claim the full price including VAT as your cost of sale.

    You should also consider this from your customer's point of view.
    As long as your customer isn't registered for VAT themselves there isn't much of an issue.

    However, when supplying to registered VAT vendors the inefficiency of the handling of VAT this way is likely to put you at a disadvantage against competitors who are registered for VAT. So if a major portion of your business is going to be supplying VAT vendors, you will have to look closely at whether a voluntary registration for VAT might actually be to your advantage.
    The trouble with opportunity is it normally comes dressed up as work.

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    NibbleIT (06-Oct-10)

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    Hi guys

    Thanks very much for the replies, you've been a great help in clearing up this question for me. I really do appreciate it!
    Before I started with this I thought there might have been a guide or something to help people to start up a small business but I suspect the Forum might be the place to get your answers from.
    Thanks again for your time.

    Andre

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