A purchasing or procurement company takes the burden of making purchases off of the companies it serves. Purchasing companies can buy in bulk to reduce costs for many companies, and they can use their buying power to get better deals or better service. When they get you lower prices, they can also help your company lower your use or sales tax burden. But there’s another benefit purchasing companies can offer you that you can’t get just from lower prices: asset trading. Let’s use the example of a purchasing company that deals with photocopiers as an example. This company buys brand new photocopiers from the manufacturer for a low price because they buy so many of them. They have the lowest prices around for new photocopiers. Your company is in need of a new photocopier that prints in color to replace your old black and white model.
While it still works perfectly well, the black and white model is old and slow and doesn’t suit your needs anymore. You decide to buy a new photocopier from this purchasing company because of their low prices. But this purchasing company also offers a trade-in value for your old model, further reducing the price you pay for a new photocopier and your sales tax. Instead of paying $2,000 for your new copier with all the bells and whistles, you only have to pay $1,400 because your old copier was still worth $600. In the end, you end up only paying sales tax on the $1,400 even though the photocopier is worth $2,000. Manufacturers and ordinary retailers rarely offer this kind of trade-in credit, so it can be well worth your while to talk with a procurement company any time you’re buying equipment.
While it’s easy to see the applications when you’re upgrading equipment, purchasing companies use this practice regularly to reduce tax burdens. Discuss your needs with a purchasing company and you may find that they can help reduce the amount of sales or use tax you have to pay on goods and the increase in cost you pass through to your customers.