In order to purchase inventory without paying sales tax, a Missouri Sales and Use Tax Exemption Certificate is needed. Learn more about the certificate and how to get one!
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 Missouri Sales and Use Tax Exemption Certificate (more commonly known as a Resale Certificate) to their vendor.
Learn more about what the certificate is, how to get one, and more.
What is a Sales Tax Exemption 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 Missouri 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 Missouri Sales Tax License from the Missouri Department of Revenue. The Sales Tax License is sometimes referred to as a seller’s permit, sales tax number, or sales tax permit.
The Sales Tax License and Sales and Use Tax Exemption Certificate are commonly thought of as the same thing but they are actually two separate documents. The Sales Tax License allows a business to sell and collect sales tax from taxable products and services in the state, while the Sales and Use Tax Exemption Certificate allows the retailer to make tax-exempt purchases for products they intend to resell.
After registering, a Missouri Tax ID Number will be provided by the Department of Revenue. This number will be listed on the Sales and Use Tax Exemption Certificate.
Fillable Form 149 Sales and Use Tax Exemption Certificate
How to fill out the Missouri Sales and Use Tax Exemption Certificate – Form 149
Filling out Form 149 is pretty straightforward, but is critical for the seller to gather all the information.
If audited, the Missouri Department of Revenue requires the seller to have a correctly filled out Form 149 Sales and Use Tax Exemption 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 FORM 149 Missouri Sales and Use Tax Exemption Certificate
Step 1 – Begin by downloading the Missouri Sales and Use Tax Exemption Certificate Form 149
Step 2 – Identify the name, phone number, contact person, Doing Business As Name (DBA), address and Missouri Tax ID Number of the purchaser
Step 3 – Indicate the products or services the purchaser will be purchasing tax-exempt and what the purchaser’s business does
Step 4 – Include the name, phone number, contact person, DBA, and address of the seller
Step 5 – Indicate the reason for the sales tax exemption:
- Purchasing tangible personal property for resale
- Purchasing taxable services for resale
- Purchases are made by a manufacturer or wholesaler for wholesaler; or
- Purchases are made by a motor vehicle dealer
Step 6 – If the business is a manufacturer, check the appropriate boxes (not typically applicable for retailers)
Step 7 – The Other section is used when purchasing specific products that are tax exempt which include certain agricultural products, common carriers, locomotive fuel, air or water pollution goods or commercial motor vehicles or trailers.
Step 8 – The purchaser will certify the property being purchased is for resale and sign and date the certificate.
The resale certificate is kept on file by the seller and is not filed with the state.
Does a Missouri Sales and Use Tax Exemption Certificate Expire?
A Missouri Sales and Use Tax Exemption Certificate is valid for five years – Missouri Code 12 CSR 10-107.100.
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, 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 Missouri 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 License is valid by searching the Missouri revoked sales tax license database.
- 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 are wanting to purchase office supplies tax-free, the seller should investigate further.
- Keep a file of resale certificates.