How to get a Sales Tax Certificate of Exemption in Virginia

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Quick Reference

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 Virginia Sales and Use Tax Certificate of Exemption (typically referred to as a 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 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 Virginia Department of Taxation.

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

Before a business starts selling products or providing taxable services, they must first get a Virginia Sales Tax Certificate from the Virginia Department of Taxation. The Sales Tax Certificate is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.

The Sales Tax Certificate and Resale Certificate are commonly thought of as the same thing but they are actually two separate documents. The Sales Tax Certificate 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 Virginia Sales Tax Certificate

After registering, a sales tax account number will be provided by the Department of Taxation. This number will be listed on the Resale Certificate of Exemption.

Fillable Form ST-10 Resale Certificate of Exemption

 

How to fill out the Virginia Resale Certificate of Exemption – Form ST-10

Filling out Form ST-10 is pretty straightforward, but is critical for the seller to gather all of the information.

If audited, the Virginia Department of Taxation requires the seller to have a correctly filled out Form ST-10 Resale 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 ST-10 Virginia Resale Certificate of Exemption

Step 1 – Begin by downloading the Virginia Resale Certificate of Exemption Form ST-10 

Step 2 – Identify the name and business address of the seller

Step 3 – Check the box that represents the sales tax exemption.  Most businesses purchasing merchandise for resale will choose the first box “Tangible personal property for RESALE only”.

Step 4 Enter the buyer’s name, Virginia sales tax account number, business name, and address.

Step 5 – Describe what the buyer’s business is in.

Step 6 – The purchaser will certify the property being purchased is for resale and sign the certificate. 

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

Does a Virginia Resale Certificate Expire?

A Virginia Certificate of Exemption does not expire until revoked from the Virginia Department of Taxation.

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 Virginia 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 Virginia account ID is valid and active by calling the Department of Taxation at 804.367.8037.
  • 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.