How to get a Sales Tax Certificate of Exemption in Georgia
A Georgia Sales Tax Exemption Certificate is a document that allows a business to purchase goods and services tax-free from suppliers for the purpose of reselling those goods and services. The certificate is also sometimes referred to as a “seller’s permit,” “resale permit,” or a “reseller permit.”
Learn more about the Certificate of Exemption, how to get one, and more.
What is a Sales Tax Certificate of Exemption?
When retailers purchase products to resell, the small business owner don’t often pay sales tax to the supplier on the purchase. The sales tax will still be paid, but instead of the retailer paying the state 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 Georgia Department of Revenue.
For instance, when a bookstore in Georgia purchases books from a distributor to sell in their store, by having a resale certificate, the bookstore owner won’t pay sales tax on this transaction. When a customer purchases a book, the retailer will charge sales tax to the customer based on the full price of the book.
Throughout the day, the bookstore will accumulate sales tax from all their transactions with customers. Periodically, typically at the end of the month, the bookstore owner will collect all the sales tax that has been charged to the customers and send it to the state of Georgia. In this way, the sales tax is effectively paid by the final consumer, not by the businesses involved in the supply chain.
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 Georgia Sales Tax Number from the Georgia Department of Revenue. The sales tax number is sometimes referred to as a seller’s permit, sales tax permit, or sales tax license.
Is a Sales Tax Certificate of Exemption the same as a Sales Tax Number?
The sales tax number and resale certificate are commonly thought of as the same thing, but they are actually two separate documents. The sales tax number 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.
After registering, a sales tax number will be provided by the Department of Revenue. This number will be listed on the resale certificate, which is created by filling out Form ST-5, Georgia Sales Tax Certificate of Exemption.
Steps for filling out the ST-5 Georgia Sales Tax Certificate of Exemption
The Georgia Department of Revenue created a Sales Tax Certificate of Exemption (Form ST-5) to make things easier for documenting tax-free transactions.
Filling out the ST-5 is pretty straightforward but it is critical for the seller to gather all the information.
If audited, the Georgia Department of Revenue requires the seller to have a correctly filled out ST-5 Sales Tax Certificate of Exemption. 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.
Step 1: Download Form ST-5
Begin by downloading the Georgia Sales Tax Certificate of Exemption Form ST-5
Step 2: Certify the exemption being claimed
Certify the type of exemption being claimed (Most resellers are going to select the first checkbox (Purchases or leases of tangible personal property or services for resale only under O.C.G.A. § 48-8-30)
Step 3: Identify the seller’s information
Fill out the seller’s name and address.
Step 4: Identify the buyer’s information
The information needed from the buyer includes:
– Business Name (Refers to the legal name of the business)
– Sales tax number
– Type of business
– Printed name and signature
– Telephone number
Georgia Sales Tax Certificate of Exemption FAQs
How much does a Sales Tax Certificate of Exemption cost in Georgia?
There is no cost for a Certificate of Exemption in Georgia.
Does a Georgia Sales Tax Certificate of Exemption expire?
The Georgia exemption certificate is valid until revoked in writing.
How often is Georgia sales tax due?
Most new businesses are set up to file and pay sales and use tax monthly, but depending on the amount of tax collected, your business may have a different filing frequency.
Where do I file the Georgia sales tax exemption 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. 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 Georgia sales tax return.
What steps should a business take to accept a resale certificate?
When a business is presented with a resale certificate, it is the seller’s responsibility to verify the buyer’s information is correct and maintain records to demonstrate the seller’s due diligence. Failing to verify this information may put the liability of paying Georgia 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 Georgia Sales Tax ID with the Department of Revenue’s Verification Tool.
– Sellers are also responsible for considering whether the goods and services sold are consistent with their type of business. For example, if the buyer’s business is a car dealership, but they want to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates.
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