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.
Like most states, NY permits resellers to get items tax-free if the products are to be resold. Such items must then be documented on a replacement York resale certificate. In order for your business to participate, you’ll need to register as a seller and acquire a Sales Tax Certificate of Authority, which provides you permission to gather sales tax. You can then apply for the NY resale certificate, also called a nuisance tax exemption certificate.
Obtaining a Certificate of Authority
In New York, if you have a connection to the state (see more on this below) and sell taxable services or tangible property—even from a home-based business or temporarily, such as at craft fairs—the state requires that you register with the state Department of Taxation and Finance using the Business Person and Responsible Contact Questionnaire (Form DTF-17.1) to obtain a Sales Tax Certificate of Authority before opening up shop.
Tangible property includes physical items, such as artwork, flowers, clothing, and motor vehicles. Many services that involve repairing or maintaining the tangible personal property and real property, such as car repair, dog grooming, and snow plowing, are also subject to sales tax.
The requirement to register as a vendor in New York also applies if you have “some additional connection with the state,” which includes maintaining a place of business, soliciting business in the state through employees or agents, or regularly delivering products to customers in the state using your own vehicle, even if you are an out-of-state vendor. Moreover, if you sell through catalogs but have such a connection with the state, operate a hotel, or receive amusement charges, you must also register your business in New York.
If you are an out-of-state vendor without ties that require you to register with the state, you do not need a Certificate of Authority to use a resale certificate. Instead, you may use a Resale Certificate (Form ST-120), but you must supply your registration number from the state in which you have registered your business to collect sales tax.
For more information about who must register as a vendor in New York, see the state’s Tax Bulletin (ST-175).
New York Resale Certificate (Form ST-120)
Once your business is registered with the state and features a Certificate of Authority, you’ll use a Resale Certificate to get items without paying sales tax, as long as you intend to resell them and collect sales tax from buyers.
Within 90 days of purchase, you want to provide the vendor with a resale tax certificate. You can use a “blanket certificate” if you make any purchases from the same seller. New York has several different kinds of exemption certificates, so you must be sure you’re using the correct one for the transaction type. All exemption certificates require specific information, including both the purchaser’s and seller’s names and addresses, date, and purchaser’s signature. Note that the state also accepts electronic nuisance tax exemption certificates.
There are no fees associated with obtaining a Certificate of Authority or using a resale certificate.
New York takes operating without a Certificate of Authority seriously: violations could result in a penalty of up to $10,000.
Expiration of a New York Resale Certificate
While a resale certificate itself doesn’t expire, a Certificate of Authority is valid for a maximum of three years and is “renewable at the discretion of the Department of Taxation and Finance.”
Determining whether you need to collect sales tax in New York and how to do it properly can be complicated, particularly as a reseller, so you may wish to consult an attorney or online service provider to help you through the process.
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.
- Make certain that the certificate is properly filled out and signed by the business owner
- You should be able to verify the certificate online by using the certificate
- You should also be able to verify online if the certificate has expired
- Be award of purchase that seem suspicious and do not relate to the customer’s business in a logical manner
- It is important that you keep the certificate on file for at least 5 years in case of a tax audit.
Make Sure You Understand The Specific Guidelines Of Your State
A tax resale certificate is a wonderful way a business can avoid unnecessary taxes. However, we understand that there are a lot of rules and regulations, which can be very confusing to any business owner.
That Is Why We Are Here To Help
It is understandable that all this information can be very daunting. 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.