Sales tax is part of life when you sell or buy online but there are always exceptions. Buyers that purchase items from you that they plan to resell often don’t have to pay sales tax online. Similarly, you may not have to pay sales tax when you buy items for resale. A multi-jurisdictional resale certificate acts as your ‘get out of sales tax-free’ card.
Here’s how it works and what you need to know about accepting and presenting it.
1. What Is a Multi-Jurisdictional Resale Certificate?
A multi-jurisdictional resale certificate, aka a uniform sales tax certificate, is a form that exempts a buyer from paying sales tax when they purchase items for resale. Two types of resale exemption certificates are available: the Streamlined Sales Tax Exemption Certificate and the Uniform Sales & Use Tax Exemption Certificate.
The Streamlined Sales Tax Exemption Certificate is valid for use in the 24 states that are members of the Streamlined Sales Tax Governing Board. The Uniform Sales & Use Tax Exemption Certificate is valid in 36 states.
Thanks to a multi-jurisdictional resale certificate, you only need to complete one form to get sales tax exemption in multiple states.
2. Which Resale Certificate Do You Need For Multi-Jurisdictional Sales Tax?
Which resale certificate you need depends on your state. You can use the Uniform Sales & Use Tax Exemption certificate in the 36 states that accept the form or the Streamlined Sales Tax Governing Board’s form in the 24 member states.
Some states may also have their own sales tax exemption forms, which you can use instead. Additionally, some states require you to register before using a resale certificate.
You need a resale certificate for each state in which you have nexus.
3. To Whom Do You Give a Multi-Jurisdictional Resale Certificate?
If you’re a buyer purchasing items for resale, you present your certificate to the vendor. The vendor won’t charge you sales tax if everything is in order.
If you’re a vendor who receives a resale certificate from a buyer, you must verify that the certificate is valid. Using sales tax software that includes automated compliance support helps you avoid accepting phony certificates (and the tax headache that can ensue).
4. How Do You Know If You’re Eligible?
A key way to know if you’re eligible for a resale certificate is to know why you’re buying certain items. Let’s say you run a business that sells custom-decorated notebooks. You buy a lot of 100 notebooks from an online seller. Since you plan on reselling them, you can use the resale certificate.
But let’s say you run a non-profit and want to buy 100 notebooks to give away at an upcoming fundraiser. Even though you may be exempt from paying sales tax, since you aren’t going to resell those notebooks, you can’t use the multi-jurisdictional resale certificate.
As a seller, how can you ensure a buyer uses the resale certificate for legitimate reasons? One thing to do is confirm that they’ll be reselling the items they buy. It also helps to read the fine print on the form since each state has its own unique rules and details concerning certificate acceptance.
Worried about using a multi-jurisdictional resale certificate incorrectly? TaxCloud has you covered. Talk to us today to learn more about our compliance support.