Virginia Is A Fine Place To Start A Business
As one of the nation’s oldest states, Virginia is home to many lucrative industries. This state can boast of being a great center for aerospace and technology. Virginia is also home to over 20 military bases and has great proximity to the nation’s capital. The area has also been traditionally known for mining as well.
It Is A Great Place For Entrepreneurs
A giant percentage of the world’s internet traffic flows through the data centers that are located in Virginia. These giant facilities are the foundation of some of the most valuable businesses on earth, including Amazon. This means that the state is a perfect spot for anyone trying to start a web or cloud-based business. Online retail businesses are particularly lucrative and Tax Resale Certificates help these types of businesses save money.
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.
The Sales Tax Permit
In Virginia, you need to register for a sales tax permit before you can receive a tax resale certificate. A business needs a sales tax permit if the following is true:
The Virginia Retail Sales and Use Act establishes a tax on the sale, lease, or rental of tangible personal property or the use or consumption of tangible personal property in Virginia, as well as taxable services in Virginia.
A seller is subject to the sales tax imposed on gross receipts from retail sales. “Retail sales” means sales made for any purpose other than for resale. The tax may also apply to the furnishing of transient accommodations and the lease or rental of personal property. Code of Virginia § 58.1-603.
The seller is responsible for collecting the tax from the customer on each taxable sale. The tax must be separately stated and added to the sales price or charge. The general sales tax rate for Virginia is 5.3 percent (4.3 percent state tax and 1 percent local tax). There is an additional 0.7 percent state tax imposed in the localities that make up Northern Virginia and Hampton Roads, making the rate in these areas 6 percent (5 percent state tax and 1 percent local tax).
Using A Virginia Tax Resale Certificate
Generally, resale certificates are used:
- When purchasing finished items that are for resale.
- When buying materials which will become a physical part of an item that will be held for resale.
- When purchasing items which will be solely for demonstration or display while holding them for sale in the regular course of business operations.
Purchasers can not use a resale certificate when buying a product they will:
- Use rather than sell*,
- Use in their business before they sell it,
- Use for a personal purpose, or
- Hold as an investment for appreciation in value and for sale in the future.
What If A Customer Presents Me With A Tax Resale Certificate?
A customer can also present a tax resale certificate to you as a retailer and it is your discretion of whether or not you want to exempt them from the required sales tax. It is always a good idea to check on the certificate because you will be held responsible, if the certificate is expired or fraudulent, for the unpaid state sales tax. Verification is key in making sure that the correct due diligence has been completed to authenticate the tax resale certificate.
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-Make sure the Virginia ST-10 form is filled out accurately and completely
- Online verification is not available at this time, so call 804-367-8037 to verify that the resale certificate is valid
- 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.