How to get an Arizona Resale Certificate
A resale certificate allows a business to purchase goods or services for resale without paying the Arizona Transaction Privilege Tax (TPT), which is the equivalent of sales tax.
In order to qualify for a resale certificate, businesses must have a valid state-issued license or permit.
Learn more about what a Resale Certificate is, how to get one, and more.
What is a Resale Certificate?
When retailers purchase products to resell, they often don’t pay tax to the supplier on the purchase of those items. Taxes will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise. The collected tax is then sent by the retailer to the Arizona Department of Revenue.
For instance, consider a bookstore in Phoenix, Arizona. When the bookstore purchases books from publishers or distributors for resale, they can avoid paying sales tax on these transactions by presenting their resale certificate. This is because the tax isn’t due on items purchased for resale – the tax applies when the final customer makes the purchase.
So when a customer comes into the bookstore and buys a book, the bookstore will add Arizona’s TPT tax to the price of the book. The customer pays this state tax at the point of sale. The bookstore then keeps track of all the sales tax it has collected over a given period, often a month.
In Arizona, businesses are required to pay the Arizona Transaction Privilege Tax either monthly, quarterly or annually depending on their tax liability. The sales tax returns are due on the 20th of the subsequent month or the following business day for monthly filing, and on the 20th of the following month or the following business day for quarterly filing. For annual filing, returns are due on January 20th or the following business day.
At the end of this period, the bookstore totals up all the TPT tax it has collected and sends it to the Arizona Department of Revenue. The bookstore acts as a collector of state tax, gathering it from the final consumers and then remitting it to the state.
The purpose of the certificate is to provide evidence of why sales tax was not collected on a transaction. Similar names for a resale certificate include reseller number, seller’s permit, exemption certificate, wholesale license, or reseller’s license. In order for the supplier to allow the tax-exempt purchase, the seller needs proof the buyer intends to resell the product by providing a valid resale certificate.
The sales tax exemption is only intended to be used for inventory that will be resold and not intended for the tax-free purchase of items used in normal business operations such as paper, pens, etc.
How To Get Started
Before a business starts selling products or providing taxable services, they must first get an Arizona Transaction Privilege Tax License from the Arizona Department of Revenue.
Is a Resale Certificate the same as a Transaction Privilege Tax License?
The Transaction Privilege Tax License and resale certificate are commonly thought of as the same thing, but they are actually two separate documents. The Transaction Privilege Tax License allows a business to sell and collect the Transaction Privilege Tax from taxable products and services in the state, while the Resale Certificate allows the retailer to make tax-exempt purchases only for products they intend to resell.
After registering, a Transaction Privilege Tax number will be provided by the Department of Revenue. This number will be listed on the Resale Certificate.
Steps to get an Arizona Resale Certificate
Filling out the Arizona Resale Certificate (Form 5000A) is pretty straightforward but is critical for the seller to gather the correct information.
If audited, the Arizona Department of Revenue requires the seller to have a correctly filled out 5000A Resale Certificate. Without it correctly filled out, the seller could end up owing Transaction Privilege Taxes that should have been collected from the buyer in addition to penalties and interest.
Step 1: Get the form
A Resale Certificate can be generated by the buyer or by the seller, provided the certificate contains the required information as outlined in A.R.S. § 42-5009(A). To make things easier, Form 5000A was created by the Department of Revenue to document tax-free transactions.
Begin by either logging into your Arizona Department of Revenue account and fill in the form or download the Arizona Resale Certificate Form 5000A.
Step 2: Enter the buyer’s information
Identify the name, business address, and TPT License number of the buyer.
Step 3: Indicate whether the certificate covers a single transaction or a blanket date range
If the buyer is expected to be purchasing items frequently from the seller, they can indicate a period of time the certificate is valid.
Step 4: Business description
Describe the nature of the purchaser’s business.
Step 5: Describe the property being purchased
Briefly explan what is being purchased from the vendor. This should roughly be in line with what the purchaser’s business sells.
Step 6: Entity selection
Some entities are not required to provide a TPT or Sales Tax License, including sales to the U.S. government, Arizona school district, or charitable organizations. If the buyer falls into any of the exempt categories, check the corresponding box in section E.
Step 7: Certification
The purchaser will certify the property being purchased is for resale and the information on the certificate is correct, then sign and date the certificate.
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Arizona Resale Certificate FAQs
How much does a Resale Certificate cost in Arizona?
There is no cost for a Resale Certificate in Arizona.
Does an Arizona Resale Certificate Expire?
To ensure the buyer’s information is up-to-date, the Department of Revenue strongly encourages updating certificates each year, however, they will accept certificates for up to four years provided the TPT number is verified each calendar year.
What does a 5000A Resale Certificate form look like?
Download the Arizona Resale Certificate from the Arizona Department of Revenue.
Where do I file the Arizona Resale Certificate?
The resale certificate is kept on file by the seller and is not filed with the state.
Are sellers required to accept resale certificates?
Sellers are not required to accept resale certificates, however, most do. In this case, the buyer will have to pay tax on the items being purchased. In most cases, they will be able to get a credit for the Transaction Privilege Taxes paid.
What steps should a business take to accept a Resale Certificate?
When a business is presented with a resale certificate, the burden of proof is on the seller to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may put the liability of paying Arizona Transaction Privilege Taxes on the seller.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out. A missing signature is a common mistake.
– Indicate on the invoice that the gross proceeds of sales or gross income are tax-exempt.
– Verify the purchaser’s Arizona account ID or Arizona resale number is valid and active by logging into the Arizona Department of Revenue and entering the 8-digit TPT number of the buyer.
– Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership, but they want to purchase office supplies tax-free, the seller may want to investigate further.
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