How to get a Resale Certificate in Connecticut
A resale certificate is an official document that allows businesses to buy goods and services for resale without paying sales tax.
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 sales tax to the supplier on the purchase. The sales tax 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 sales tax is then sent by the retailer to the Connecticut Department of Revenue Services.
For example, when a pet store purchases dog toys from their supplier to sell in the store, the pet store owner won’t typically have to pay sales tax to their supplier. When a customer (or end-user) purchases the dog toy, the retailer will charge sales tax to the customer based on the full price of the toy. The retailer will collect the sales tax from all their transactions and periodically (typically at the end of the month) send the sales tax 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.
Before a business starts selling products or providing taxable services, it must first get a Connecticut Sales Tax Permit from the Connecticut Department of Revenue Services. The Sales Tax Permit is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
Is a Resale Certificate the same as a Sales Tax Permit?
The Sales Tax Permit and Resale Certificate are commonly thought of as the same thing, but they are actually two separate documents. The Sales Tax Permit allows a business to sell and collect sales tax from taxable products and services in the state, while the Resale Certificate allows the retailer to make tax-exempt purchases for products they intend to resell.
Related: How to get a Connecticut Sales Tax Permit
After registering, a sales tax number will be provided by the Department of Revenue Services. This number will be listed on the Resale Certificate.
How to fill out the Connecticut Resale Certificate Fillable Form
To make things easier, the Department of Revenue Services has a pre-made form to document tax-free transactions. Filling out the resale certificate form is pretty straightforward but is critical for the seller to gather all the information.
If audited, the Connecticut Department of Revenue Services requires the seller to have a correctly filled out Resale Certificate. Without it correctly filled out, the seller could end up owing sales taxes that should have been collected from the buyer in addition to penalties and interest.
Steps for filling out the Connecticut Resale Certificate Form
Step 1 – Begin by downloading the Connecticut Resale Certificate Form
Step 2 – Identify the name and business address of the seller
Step 3 – Indicate whether the seller is a wholesaler, retailer, manufacturer, lessor, or other type of business
Step 4 – Provide a general description or itemized list of the products to be purchased from the seller.
Step 5 – Include the city and state where products will be shipped along with the sales tax permit number or state tax registration number if shipping to another state.
Step 6 – The purchaser will certify the property being purchased is for resale and sign and date the certificate.
A resale certificate may be used for a single purchase or continual purchases of the same type. If there will be ongoing purchases, the certificate “Blanket Certificate” must be written on the form.
State of Connecticut Resale Certificate Form
How much does a Resale Certificate cost in Connecticut?
There is no cost for a Resale Certificate in Connecticut.
Does a Connecticut Resale Certificate Expire?
Connecticut resale certificates are valid for three years from the issue date.
Where do I file the Connecticut Resale Certificate?
The resale certificate is kept on file by the seller and is not filed with the state of Connecticut.
Are sellers required to accept resale certificates?
Sellers are not required to accept resale certificates, however, most do. If the vendor doesn’t accept the certificate, the buyer will have to pay sales tax on the merchandise being purchased. In most cases, a credit is available when filing the Connecticut sales tax return.
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 Connecticut sales taxes on the seller.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
– Verify the purchaser’s sales tax permit is valid and active by visiting the Connecticut Secretary of State’s website and entering the Business ID and Certificate Number.
– 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.
– Keep a file of resale certificates.