How To Get A Tennessee Certificate of Resale [2023 Guide]
A Certificate of Resale allows a business in Tennessee to purchase items for resale without paying sales tax. In order to do so, the retailer will first need to provide a Tennessee Certificate of Resale to their vendor.
Learn more about what the Certificate of Resale is, how to get one, and more.
What is a Certificate of Resale?
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 collected sales tax is then sent by the retailer to the Tennessee Department of Revenue.
For instance, when a gardening supplies store in Tennessee procures a batch of seed packets to sell in their establishment, the presence of a resale certificate means the store owner is not required to pay sales tax on that purchase. The point at which sales tax comes into play is when a retail customer buys the seed packets from the store. The retailer applies sales tax to the total cost of the seed packet at this juncture.
The gardening supplies store consolidates the sales tax obtained from all their transactions over a given period, typically a month. At the close of the month, this accumulated sales tax is forwarded to the state. This practice effectively shifts the responsibility of paying the sales tax from the retailer to the retail customer, while the retailer acts as an intermediary, gathering and passing along the 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, sales tax 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 Tennessee Sales Tax Permit from the Tennessee Department of Revenue. The Sales Tax Permit is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
Is a Certificate of Resale 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.
How to get a Tennessee Certificate of Resale?
After registering for the Sales Tax Permit, businesses that indicate they will make taxable sales will be automatically issued a Tennessee Sales and Use Tax Certificate of Resale. The certificate is saved for download in the businesses’ Tennessee Taxpayer Access Point (TNTAP) account.
Tennessee Certificate of Resale FAQs
How much does a Sales Tax Certificate of Resale cost in Tennessee?
There is no cost for a Certificate of Exemption in Tennessee.
Does a Tennessee Resale Certificate Expire?
Tennessee Resale Certificates don’t expire provided the certificate was registered as a blanket certificate and make at least one purchase with the seller every 12 consecutive months.
How often is Tennessee 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 quarterly or annual filing frequency instead.
Are sellers required to accept resale certificates?
Sellers are not required to accept resale certificates for the sale of tax free purchases, 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 when filing their Tennessee 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 Tennessee 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 Tennessee Sales and Use Tax Certificate is valid by visiting the Tennessee Taxpayer Access Point and then select “Look Up Information”
– 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 in case of audits.
Is a business license the same thing as a certificate of resale?
No, a business license and a resale certificate are not the same thing. Each serves a different purpose and is used in different contexts.
A business license is a permit issued by a government agency that allows individuals or companies to conduct business within the government’s geographical jurisdiction. It is the authorization to start a business issued by the local government. Business licenses are typically required for most types of businesses and must be renewed periodically.
On the other hand, a certificate of resale is used by businesses when purchasing goods intended for resale. This certificate allows a retailer to buy these goods without paying sales tax under the assumption that the tax will be collected from the retail customer at the point of sale.
So, while a business license gives you the legal right to operate a business, a resale certificate enables a business to purchase items for resale without paying sales tax.
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