When a business purchases inventory to resell, they can do so without paying sales tax. In order to do so, the retailer will need to provide a Sales Tax Certificate of Exemption (commonly referred to as a Resale Certificate) to their vendor.
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, 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 Georgia Department of Revenue.
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, they 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.
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.
ST-5 Sales Tax Certificate of Exemption Fillable Form
How to fill out the Georgia Sales Tax Certificate of Exemption – Form ST-5
The Georgia Department of Revenue created a Sales Tax Certificate of Exemption to make things easier for documenting tax-free transactions.
Filling out the ST-5 is pretty straightforward, but 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.
Steps for filling out the ST-5 Georgia Sales Tax Certificate of Exemption
Step 1 – Begin by downloading the Georgia Sales Tax Certificate of Exemption Form ST-5
Step 2 – 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 name and business address of the seller
Step 4 – Identify the buyer’s information:
- Name (Refers to the legal name of the business)
- Sales tax number
- Type of business
- Printed name and signature
- Telephone number
The resale certificate is kept on file by the seller and is not filed with the state.
Does a Georgia Resale Certificate Expire?
The Georgia exemption certificate is valid until revoked in writing.
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, they will be able to get a credit for the sales taxes paid later on their sales tax filing.
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 are wanting to purchase office supplies tax-free, the seller should investigate further.
- Keep a file of resale certificates.