Tax exemption certificate: the legal way to make tax-free purchases for resale
When you buy goods or services from a distributor, but intend to resell them to your customers, you can buy those goods without paying a sales tax. Simply fill out an exemption certificate and provide it to the distributor. This way, you will certify that you intend to resell the items you purchased.
What is a tax exemption certificate?
A sales tax exemption certificate is a legal form that can be filled out online. It’s important to provide the properly completed certificate at or around the time of the sale. If you fail to do it, both you and the seller could be held liable for the sales tax.
A purchaser does not need an exemption certificate to make purchases of certain items or services.
Remember, you cannot use a resale exemption certificate if you plan to use the supplies yourself. In this case, your distributor must collect sales tax from you.
Who may use a tax exemption certificate?
Each state has its own set of exemption certificates, as well as rules and regulations covering their use. For example, exemption certificates from other states are not valid in the state of New York. The documents are very specific about what type of purchaser may use the certificate.
Generally, you may use an exemption certificate if, as a purchaser:
- you intend to resell the property or service;
- you intend to use the property or service for a purpose that is exempt from sales tax;
- you buy as an agent or employee of a tax-exempt nonprofit organization or a government entity.
How to use a tax exemption certificate?
Purchase the correct exemption certificate form and give it to a distributor. The distributor must accept the certificate in good faith. This means that they had no prior knowledge that would lead them to believe the certificate was false or fraudulent.
The good news is that you don’t need to leave your home to fill out and send the form to your seller. Use PDFfiller, a handy digital workflow solution, to do it all online.
Find your form in PDFfiller’s online IRS Tax Forms Catalog. Once you click on the name of the form, it will open on your screen. A smart wizard will guide you through the fields you should fill out. When you finish, you can either download the document on your computer or email it to your distributor straight away.
What information do I need to provide on a tax exemption certificate?
When you complete an exemption certificate, you must include the date of completion, the purchaser and the seller’s name and address. You must also provide the identification number on your purchaser’s Certificate of Authority and e-sign the form.
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