How to Verify Tax Exempt Resale Certificate by State
Sales taxes are usually paid by every person when they purchase goods or services. The buyers of goods and services may include individuals, businesses, and organizations. However, buyers that purchase goods for the purpose of reselling to their clients are eligible for a sale tax exemption certificate. Therefore, an individual or a business that purchases certain goods for the sole purpose of selling to customers can apply for a tax-exempt resale certificate. Before the tax-exempt resale certificate process can be discussed, it is crucial to understand what sales tax and what tax-exempt resale certificates are all about.
What is Sales Tax
Sales tax is a compulsory levy that a buyer pays when purchasing a good or service from a seller. The levy is usually a percentage of the total cost of a good or service. The sales tax that a seller collects from buyers is usually coalited and remitted to the federal or state government. Nonetheless, there are about five states within the country that do not collect sales tax for goods and services purchased.
Tax-Exempt Resale Certificate
A tax-exempt resale certificate is a form of documentation that permits a buyer that owns it the liberty to not pay sales for the purchase of specific goods from sellers. In most cases, tax-exempt resale certificates are given to businesses and organizations that purchase goods with the prospect of reselling or using them for the creation of goods or services to be sold to clients. However, goods or services that are created or resold to the final consumers must be purchased with the inclusion of sales tax. A tax-exempt resale certificate that a business holds only allows it to withhold sales tax on eligible goods and services. However, when such a business with a tax-exempt resale certificate purchases goods or services for the purpose of its use, then sales tax must be paid on such items.
Requirements for a Tax-Exempt Resale Certificate
A tax-exempt resale certificate can usually be obtained by a business from the state or local tax office. More information can be obtained from the individual state tax office website. However, a business requires a federal Employer Identification Number (EIN) first before applying for a tax-exempt resale certificate. The processes of obtaining a tax-exempt resale certificate are highlighted below.
- Deciding on the specific state for which a business requires a tax-exempt resale certificate is very important. The reason is that certificates from some states are not eligible for use in other states. There are nine states and the District of Columbia that do not accept the tax-exempt resale certificates from other jurisdictions.
- Having the necessary documentation is also key to getting a tax-exempt certificate. The personal identifications of the relevant staff of a business are required. This information includes a state identity card, social security number, and much more. Additionally, the business's banking information and business plan that captures perspective transactions must also be included. The state from which the tax-exempt resale certificate application is carried out determines the nature of the documentation required.
- Next, it is important to complete the application via the state tax office website. If a business operates within multiple states, it needs to obtain an individual state tax-exempt resale certificate to take full advantage of the tax break.
Verifying a Tax-Exempt Resale Certificate
In many cases, a tax-exempt resale certificate is not actually a physical paper, which a business presents whenever they are purchasing a sale tax-exempted good. Rather, it is mostly a set of information that allows for verification of a business’s tax-exempt status. Nonetheless, there are still states that issue physical or electronic tax-exempt resale certificates to eligible organizations. In general, the information that a sale tax-exempt business presents to a seller includes the following.
- Business details,
- Contact person’s details,
- Business operation details,
- Details of prospective frequently purchased tax-exempt goods,
- A declaration that purchased goods is intended for resale.
Any seller that fails to collect the complete required information from a business with a tax-exempt restate status may have to bear the entire cost of the sales tax. A seller must ensure they collect all the required information from the buyer so as to prevent liability through the following ways.
- A seller must ensure that a tax-exempt resale form is completely filled out by the holder of the certificate. All forms must be properly signed to ensure the validity of the completed form.
- Before the buyer pays, the seller usually has the ability to quickly verify the validity of the tax-exempt resale certificate provided by the seller. Most states have an online verification platform that allows a seller to verify the provided information.
- A seller should endeavor to keep a copy of the tax-exempt resale certification information as long as possible. Doing this helps to prevent liability especially when a scheduled audit occurs.
State-by-State Resource for Verifying Resale Certificate
The state-by-state website for verifying a resale certificate is given below.
Verification of tax-exempt resale certificate can be carried out through the official Alabama State website. The required information is Taxpayer ID Type, Taxpayer ID, and Exempt Sales Account Number.
You can get those details from the tax exemption certificate the buyer will provide you, and its details must match their invoice details. Moreover, you must have an account on My Alabama Taxes (MAT) platform. You can then log into your MAT account and verify a tax exemption status.
The Arizona Government website allows a user to search for the resale certificate using the 8-digit tax license number. However, you need to have an account with the Arizona Department of Revenue to access the verification form.
Once you enter the eight-digit transaction privilege tax license number, click on the verify button. The form will output a confirmation or denial immediately.
Verification of the certificate can be done under the tab of the state website. You can do the verification using the reseller’s permit ID number or their Streamlined Sales Tax number. And you do not need to have an account with the Arkansas Taxpayer Access Point (ATAP).
Once on the ATAP homepage, click on the Inquiries Tab, and then click on Validate Sales Tax Permit link. On the next page, choose the type of the Permit ID Type you want to use. Finally enter the Permit ID and click the Submit button.
The tool will output a verification status immediately.
Clicking on the verify a permit, license, or account now option on the California Government websites allows a user to verify the certificate. To get started, click on the Verify a Permit, License, or Account Now. On the next page, use the dropdown menu to select Sellers permit.
You can then enter the permit Identification Number you want to verify, and click the Search button. The tool will output the status of the resale certificate within a few seconds.
Clicking on the “Verify a License or Exemption Certificate” option under the sales tax option of the Colorado websites lets a user verify a resale certificate.
Once on the website scroll down to the Sales Tax License section, and click on “Verify a License or Exemption Certificate”. On the next page, choose whether you want to verify a single or multiple licenses.
A form will appear where you can enter the 8-digit Colorado Account Number (CAN), or a 12-digit Location ID. You should not include hyphens. Press the Enter key to start verifying. The tool will output the status of the Tax Exempt ID after a brief search.
The certificate number and business ID information of the business can be provided via the Connecticut State website.
As a seller, you can verify that the resale certificate number is legit on the Connecticut Department of Revenue Services, on the “Verify Legal Existence” page. You will need to enter the Business ID and Certificate Number, and then click on Verify Certificate.
The tool will output a status within seconds. Moreover, you need to keep the certificate in your records for the next three years, just in case auditors need it.
District of Columbia
The DC official website has an option at the bottom “Search for Certificate/License Exemptions”, which permits certificate verification.
To check if a business is registered for sales tax exemption, you will choose the Certificate/License Type, then enter the Account ID, and finally the Certificate/License ID. Once you are done, click the Submit button to get the status of that license number.
The link to the Florida tax website gives a user access to verifying the resale certificate of a business.
The Georgia website allows for verification of the resale certificate. A user can click on start over and then on licenses under search.
The “search tax licenses” page of the Hawaiian Government lets a user verify the resale certificate after clicking on the tart over option.
From the Idaho official website, clicking on the start over option leads to validate permit option under the businesses option allows for resale verification.
The page of the “Tax Registration Inquiry”– page on the Illinois websites allows for resale certificate verification.
A seller can collect information from a buyer using the ST-105 form from the Indiana Government website.
Verification can only be done via a phone call to the Iowa tax office.
The Kansas Exemption Certificate page allows for resale certificate verification.
Resale certificate verification is done manually using the form 51A105.
The Resale Certificate page of the Louisiana website allows for resale certificate verification.
The Sales Tax and Service Provider Tax Retailer, Resale & Exemption of the Maine page is used for resale verification.
The resale certificate verification process in Maryland can be carried out via the Online Verification of Maryland Tax Account Numbers official page.
The two main categories of buyers that are tax exempted in Maryland are resellers and customers who possess a tax-exempt certificate issued by the state Comptroller’s Office. The other category is the one that falls under the Diplomatic Tax Exemption Program.
Once you are on the website, you need to provide the Maryland Sales and Use Tax Number or the Exemption Certificate Number, if they are registered as a non-profit organization.
Once you enter those details in the form, click on “check Exempt Status”.
Selecting the start over option allows a user to select Verify Resale Certificate Form ST-4 option under the businesses section of the Massachusetts website after which the verification process can be performed.
The process of verification resale certificate in Michigan is done via a phone call.
After selecting the start over option, a user selects the verify a permit number option, which opens the page for the verification of resale certificate via the Mississippi official website.
Form 149 is used to collect information from the buyer for resale certificate verification in Missouri State.
Verification is done via the Nevada official website.
The New Jersey official website lets a user verify the tax-exempt resale certificate for a business.
The “Check CRS Status” option of the New Mexico official website allows for verification of the resale certificate.
The Sales tax identification number of a business is used to verify the resale certificate of a business on the New York State website.
The Registry of Sales and Use Tax Numbers page is used for resale validation in North Carolina.
Selecting the Sales & Use Permit Inquiry option opens the page that lets an individual verify resale certificates in North Dakota.
The verification process in Ohio is done using the Form STECB.
In Oklahoma, resale certificate verification is done via the official website of the state.
REV-1220 form is used in Pennsylvania to verify the resale certificate.
The call-in option is used in Rhode Island for a resale certificate.
The verification process for resale certificates is only done via a phone call to the South Dakota Tax office.
Within the official Tennessee website, a user can select verify sales and use the tax certificate option to validate resale certificates.
Verification can simply be done in Texas on the Sales Taxpayer Search page via the state’s official website.
A form is filled in Utah since there is no online verification process in the state.
Verification is done via the Washington State website by clicking on the Reseller Permit Verification option under reports and tools.
Form F0003 and the call-in option is utilized to verify the resale certificate in West Virginia.
The call-in option is the only way of verifying resale certificates in the state of Wyoming.
Other useful articles:
- Sales Tax by State in the United States
- How to Verify Tax Exempt Certificate
- Verify Tax Exempt Resale Certificate by State
- What is a Tax Exempt Status
- VAT Taxes in Europe
- Sales Tax Thresholds by State