How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)

An Indiana 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 or to purchase equipment that is being used in the production of products that are sold. The certificate is also sometimes referred to as a “resale permit” or a “reseller’s permit.”

Learn more about what a sales tax exemption certificate is, how to get one, and more.

What is a Sales Tax Exemption Certificate?

A sales tax exemption certificate allows a business to purchase items tax-free. Two scenarios when a business can purchase tax free is when purchasing products that are resold and to purchase equipment used to produce a finished good.

Purchasing inventory tax-free

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 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 Indiana Department of Revenue.

For instance, when a furniture store in Indiana purchases items like sofas, tables, or chairs from a manufacturer to sell in their store, by having a sales tax exemption certificate, the store owner won’t pay sales tax on these transactions. When a customer purchases a piece of furniture, the retailer will charge sales tax to the customer based on the full price of the item.

Throughout the course of the business, the furniture store will accumulate sales tax from all their transactions with customers. Periodically, typically at the end of the month, the store owner will collect all the sales tax that has been charged to the customers and send it to the state of Indiana. In this way, the sales tax is effectively paid by the final consumer.

Purchasing manufacturing equipment

Indiana also offers a sales tax exemption for manufacturing equipment, machinery, tools, and supplies that are “directly used” in production (Indiana Admin. Code 45 §2.2-5-10). To qualify for this exemption, the equipment must have an immediate effect on the tangible personal property being processed and be an “essential and integral” part of an integrated production process. The exemption also includes property incorporated into the final product, property consumed in the production process, and research and development equipment.

For example, if a business uses a laser engraver to produce an etched phone case that is going to be sold, the laser engraver can be purchased tax-free.

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, it must first get an Indiana Registered Retail Merchant Certificate from the Indiana Department of Revenue. The Registered Retail Merchant Certificate is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.

How to fill out the Indiana Sales Tax Exemption Certificate

Filling out the Indiana Sales Tax Exemption Certificate (Form ST-105) is pretty straightforward but is critical for the seller to gather all the information.

If audited, the Indiana Department of Revenue requires the seller to have a correctly filled out ST-105 Sales 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. 

Begin by downloading the Indiana Sales Tax Exemption Certificate Form ST-105 

Step 1: Enter the Purchaser’s Information

Identify the name and business address of the seller in addition to either the Indiana Registered Retail Merchant’s Certificate number or state tax ID number if the business is located out of state.

Step 2: Enter the Seller’s Information

Enter the name and address of the seller.

Step 3: Explain the Frequency of Purchases

If the retailer is expected to be purchasing items frequently from the seller, instead of completing a sales tax exemption certificate for every invoice, check the “blanket purchase exemption request box. In section 2, the buyer will provide a description of the items they will be purchasing.

Step 4: Indicate the Type of Sales Tax Exemption

The purchaser will indicate the type of exemption being claimed.  The two most common responses are the first two choices:
– Sales to a retailer, wholesaler, or manufacturer for resale only
– Sale of manufacturing machinery, tools, and equipment to be used for direct production.
– Sales to a company providing public transportation.
– Sales to farmers.
– Sales to contractors for exempt public projects such as public schools, government agencies, or nonprofits.
– Sales to Indiana Government units such as state agencies, cities, towns, municipalities, public schools, and universities.
– Sales to the US Federal Government

Step 5: Certify and Sign Form ST-105

The purchaser will certify the property being purchased is for resale and provider their title, sign, and date the certificate. 

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Indiana Sales Tax Exemption FAQs