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How to get a Certificate of Exemption in Vermont

Overview

How to get a Certificate of Exemption in Vermont

A Vermont Certificate of Exemption 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. The certificate is also sometimes referred to as a “resale permit” or a “reseller’s permit.”

Check out the rest of this guide to determine who needs a sales tax permit, what products and services are taxable, how to register for a permit, and reporting requirements.

What is a Resale 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 Vermont Department of Taxes.

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.

Getting Started

To get a Certificate of Exemption in Vermont, you must first register with the Vermont Department of Taxes. After you have registered, you will be able to request a Certificate of Exemption from the Department.

Is a Certificate of Exemption the same as a sales tax ID?

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 Vermont Sales Tax Permit

After registering, a Sales & Use Tax Account Number will be provided by the Department of Taxes. This number will be listed on the Certificate of Exemption.

Fillable Form S-3 Certificate of Exemption

Fillable Vermont Sales Tax Exemption Certificate (Form S-3)

How to fill out the Vermont Certificate of Exemption – Form S-3

Filling out Form S-3 is pretty straightforward, but is critical for the seller to gather all the information.

If audited, the Vermont Department of Taxes requires the seller to have a correctly filled out Form S-3 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 S-3 Vermont Certificate of Exemption

Step 1 – Begin by downloading the Vermont Certificate of Exemption Form S-3 
Step 2 – Check whether the certificate is for a single purchase or multiple purchases.  If the retailer is expected to be purchasing items frequently from the seller, instead of completing a resale certificate for every invoice, the multiple purchase (also known as a blanket certificate) box should be checked
Step 3 – Identify the name, FEIN (Federal Employment Identification Number), address and description of the buyer’s business
Step 4 – Include the name and address of the seller
Step 5 – Describe the merchandise being resold  
Step 6 – Check the box with the reason for claiming an exemption.  Most businesses reselling the merchandise being purchased will check the first box “For resale/wholesale”.  In that case, include the buyer’s Vermont Sales & Use Tax Account Number
Step 7 – The purchaser will certify the property being purchased is for resale and sign and date the certificate. 

How much does a Sales Tax Exemption Certificate cost in Vermont?

There is no cost for a Certificate of Exemption in Vermont.

Does a Vermont Sales Tax Exemption Certificate?

Vermont Resale Exemption Certificates do not expire.

Where do I file the Vermont Sales Tax Exemption Certificate?

The resale certificate is kept on file by the seller and is not filed with the state of Vermont.

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, a credit will be provided by filing the Vermont 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 Vermont 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 Vermont Tax Account Number is valid and active by calling the Department of Taxes at 802-828-2505 Option 2.   
– 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 for at least three years from the date of the last transaction. 

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