Tax Notes — Purchasing & Deductions¶

Research notes from formation planning. Not legal/tax advice — verify with a CPA before relying on this for filings, but this is the accurate starting picture.

Myth: "LLC = no sales tax on business purchases"¶

False for equipment/supplies bought for the business's own use. A resale certificate only exempts purchases of goods that will be resold to a customer, or raw materials that become physically part of something sold. Equipment purchased to use internally (laptops, monitors, dev hardware) is taxed the same whether bought as an individual or as an LLC.

Resale/exemption certificates require:

Being registered with the state tax authority and holding a sales tax permit/seller's permit
Actually reselling the goods (or incorporating them into something sold) — auditors reclassify purchases as taxable if there's no resale trail (no sales records, no inventory movement, no customer invoices) to back up the certificate

Not applicable here unless/until the business is actually selling something.

What an LLC does provide¶

Liability protection — separates personal assets from business liabilities. Independent of tax treatment.
Access to business-only purchasing accounts — Amazon Business, wholesale/business-tier pricing at hardware vendors, NET-30 vendor trade lines. Some of these only require an EIN + business name (available to sole props too); the LLC mainly adds credibility/credit-building.
Expense deductibility — available to sole props and single-member LLCs identically (both flow to Schedule C by default). The LLC doesn't create new deductions by itself — being a legitimate for-profit business does.

Hobby-loss risk (IRC §183) — relevant given purchases-only, no sales yet¶

The IRS presumes profit motive if the activity is profitable in 3 of the last 5 years. Multiple years of expenses with zero revenue is the exact pattern that draws scrutiny. Factors the IRS weighs (from the §183 nine-factor test):

Whether books/records are kept like a real business
Whether there's an actual business plan and effort toward profitability
Time and effort invested
Expertise/skill in the field

Useful tool for a pre-revenue startup phase: IRS Form 5213 can be filed to postpone the profit-motive determination during the startup phase, rather than risk an early hobby classification.

Action items¶

[ ] Keep dated receipts for all business purchases, tied to a written business plan
[ ] Consider Form 5213 if multiple years pass with purchases but no revenue
[ ] Revisit Section 179 / bonus depreciation for equipment once there's business income to offset (get CPA input — these have income-based limitations)

Kentucky Vocational Rehabilitation — Self-Employment Services¶

State program that can fund startup equipment and business plan development for residents with disabilities pursuing self-employment.

Field	Value
Program	Kentucky Office of Vocational Rehabilitation (KYOVR), Self-Employment Services
Coordinator	Betty Whitaker, Self-Employment Services Coordinator
Address	Mayo-Underwood Building, 500 Mero Street, 1st Floor SE, Frankfort, KY 40601
Direct phone	502-782-3435
Central office	502-564-4440
TTY/V	800-372-7172
Process	Intake assessment → eligibility determination → jointly-developed Individualized Plan for Employment → funded services

Caveat as of this writing: KYOVR implemented an Order of Selection effective May 14, 2025, temporarily closing all four priority intake categories — there may be a waitlist depending on assessed priority. Status changes over time; worth calling to check current standing rather than assuming it's closed.

Action items¶

[ ] Call KYOVR to check current Order of Selection status
[ ] If open, schedule intake assessment