Tax Resale Certificates
A tax resale certificate allows you to not pay sales tax on items that you simply decide to resell. This will also apply to supplies that are getting to be utilized in products that you simply will resell, like wood for a cupboard.
It is critical that you simply understand that tax resale certificates also can only be used on items that will be resold. Office supplies, like new computers for your employees, wouldn’t fall into the category of retail. It can be considered fraud to not pay sales tax on these things.
If this is confusing for you, just consider tax resale certificates as state tax exemption certificates. Some states actually call them exemption certificates or reseller’s permits.
Georgia
A tax resale certificate is called a Georgia Sales Tax Certificate of Exemption. It is critical that you understand that tax resale certificates can also be used on items that will be resold. Here is a list of common items that are not eligible for the resale exemption:
- Goods you or your employees purchase for private use.
- Goods your business gives away for free of charge or as gifts.
- Goods your business uses to conduct business, like office supplies, equipment, etc.
- Goods your business rents to be used and not for re-leasing.
How Do I Know If I Need To Pay Sales Tax Georgia?
In order to establish whether or not a state can impose a sales tax upon your business there first needs to be nexus. Nexus relating to state sales tax is established by a connection between the state and your business. How this connection is defined has been subject to fairly recent changes that reflect changes the way business is conducted in modern times.
Traditionally, nexus has been established by the business actually having a physical presence in the state. However, due to the explosion of e-commerce, physical presence within a state is no longer a requirement for sales tax nexus. In the case of South Dakota v. Wayfair, the courts actually eliminated physical presence as the major requirement for creating nexus. It still should be noted that physical presence is considered an important requirement to allow a state to collect sales tax and is still one of the first considerations for sales tax.
What Are The Different Methods In Which The States Establish Sales Tax Nexus?
The definition of sales nexus can vary greatly from state to state. Here is a list of the different ways in which states can determine sales tax nexus:
- Click-Through Nexus legislation
- Affiliate Nexus legislation
- Marketplace Nexus legislation
- Notice and Reporting Requirements
- Economic Nexus
Click-Through Nexus legislation- This usually requires a remote seller to meet a minimum sales requirement in the state resulting from an in-state referral agent who is a resident of the state. The agent must be making commission payments to the referral agent for any sales that are the result of the click-through referrals from the agent’s website.
Affiliate Nexus legislation– A remote retailer holds a substantial interest or is owned by a retailer that is located within the state and sells a similar type of product under a similar business name. Instate retailers can also be used to promote or market the product to in-state customers. Affiliate nexus does not require common ownership and may not include services such as sales and delivery.
Marketplace Nexus legislation– This definition applies to marketplace facilitators who operate a business in the state and provides e-commerce infrastructure, customer service, payment processing, and marketing services to individual sellers. The facilitator is the one that is required to register with the state and collect the sales tax rather than the individual sellers.
Notice and Reporting Requirements– This legislation requires that a retailer does not collect the state sales tax themselves but notify their buyers that they must report state use tax on all their purchases. The retailer might be required to send the purchaser a statement of all their purchases.
Economic Nexus- An out-of-state retailer generally is required to collect and remit sales tax once the retailer meets a set level of sales transactions or gross receipts activity (a threshold) within the state. No physical presence is required.
To find out more about state sales tax please visit the sales tax institute.
Remember To Verify Any Tax Resale Certificate Presented To You
In the first part of our series, we mentioned that a vendor can refuse a tax resale certificate. This is because the vendor will be the one liable to the state government should anything be remiss. That is why you should always take the following steps to assure that anything presented to you is valid.
- Goods you or your employees purchase for private use.
- Goods your business gives away for free of charge or as gifts.
- Goods your business uses to conduct business, like office supplies, equipment, etc.
- Goods your business rents to be used and not for re-leasing.
Tax Resale Certificate Is Here To Help
Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemptions status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else.
On the other hand, misunderstanding and not paying the correct sales tax to a state government could very much hurt a business’s standing and reputation. At Tax Resale Certificate, we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate. This way you can completely focus on the great opportunities presented by your amazing business.