How To Get A Massachusetts Resale Certificate [2023 Guide]
When a business purchases inventory to resell, it can do so without paying sales tax. In order to do so, the retailer will need to provide a Massachusetts Resale Certificate to their vendor.
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 state 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 retailer then sends the collected sales tax to the Massachusetts Department of Revenue.
For instance, when a furniture store in Massachusetts orders a new line of dining sets to sell in their store. By holding a resale certificate, the furniture store owner won’t be obliged to pay sales tax on this procurement. This is because these dining sets are not an end purchase but are inventory meant to be sold to the ultimate consumer.
Later on, when a customer chooses to buy one of these dining sets from the store, the retailer will charge sales tax to the customer based on the full price of the dining set. This added charge is the sales tax that Massachusetts levies on retail transactions.
The furniture store, in its role as the retailer, has the responsibility of collecting this sales tax from all its transactions. Then, typically at the end of each month, the furniture store sends the compiled sales tax to the state’s tax authority.
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.
Getting Started
Before a business starts selling products or providing taxable services, they must first register as a vendor and get a Sales Tax Permit from the Massachusetts Department of Revenue. The Sales Tax Permit is sometimes referred to as a seller’s permit, sales tax number, sales tax exemption certificate, 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 register for a Massachusetts Sales Tax Permit
After registering, a sales tax number will be provided by the Department of Revenue. This number will be listed on the Resale Certificate.
ST-4 Resale Certificate Fillable Form
Filling out the Massachusetts Resale Certificate (Form ST-4) is pretty straightforward, but it is critical for the seller to gather all the information.
If audited, the Massachusetts Department of Revenue requires the seller to have a correctly filled out ST-4 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 ST-4 Massachusetts Resale Certificate
Step 1 – Begin by logging into your MassTaxConnect account or downloading the Massachusetts Resale Certificate Form ST-4
Step 2 – Identify the name and business address of the purchaser
Step 3 – Include the Account ID number or Federal ID number (FEIN)
Step 4 – Describe the purchaser’s business
Step 5 – List what tangible personal property or services are being purchased
Step 6 – Identify the name and business address of the buyer
Step 7 – The purchaser will certify they hold a valid Massachusetts Vendor Registration and are in the business of selling the property that is being purchased.
Massachusetts Resale Certificate FAQs
How much does a Resale Certificate cost in Massachusetts?
There is no cost for a Resale Certificate in Massachusetts.
Does a Massachusetts Resale Certificate Expire?
Resale Certificates don’t expire in Massachusetts.
How often is Massachusetts 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 Massachusetts 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. If the vendor doesn’t accept the certificate for a tax exempt purchase, the buyer will have to pay sales tax on the merchandise being purchased. In most cases, a credit is available when filing the Massachusetts 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 Massachusetts 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 Massachusetts Sales & Use Tax ID is valid and active by visiting MassTax Connect.
– 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 should investigate further.
– Keep a file of resale certificates.
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2 Responses
Please clarify, I, the vendor, provide the purchaser of my goods with the ST-4? I fill it out…with their tax ID or mine?
Thank you
Hi Jennifer – As a vendor, you would give this to a purchaser only if they are going to be reselling your goods. So, for example, if you were a clothing designer and a retail boutique wanted to sell your shirts, you would need to get a resale certificate from the boutique.
In this case, you need the boutique to their tax number. They will fill out the first 8 fields and then sign, include their title, and date the form. You as the vendor will keep this form on file in case you are ever audited by the state so you are able to document customers that were not charged sales tax.
Hope I explained this ok. Let me know if you have any other questions!
Greg