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 Wisconsin Tax Exemption Certificate (often 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 Wisconsin 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 Wisconsin Seller’s Permit from the Wisconsin Department of Revenue. The Seller’s Permit is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
The Seller’s Permit and Resale Certificate are commonly thought of as the same thing but they are actually two separate documents. The Seller’s 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.
Read more about how to register for a Wisconsin Seller’s Permit. After registering, a Tax ID Number will be provided by the Department of Revenue. This number will be listed on the Resale Exemption Certificate.
Fillable Form S-211 Sales and Use Tax Exemption Certificate
How to fill out the Wisconsin Sales and Use Tax Exemption Certificate – Form S-211
Filling out Form S-211 is pretty straightforward, but is critical for the seller to gather all the information.
If audited, the Wisconsin Department of Revenue requires the seller to have a correctly filled out Form S-211 Resale 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 Form S-211 Wisconsin Sales and Use Tax Exemption Certificate
Step 1 – Begin by downloading the Wisconsin Resale Exemption Certificate Form S-211
Step 2 – Indicate whether the certificate is for a single purchase or continuous purchases. If the retailer is expected to be purchasing items frequently from the seller, instead of completing a resale certificate for every invoice, continuous (also known as a blanket certificate) should be checked.
Step 3 – Identify the name, address, type of business and Tax ID Number or FEIN of the buyer.
Step 4 – Enter the name and address of the seller
Step 5 – Check the reason for exemption. Most businesses purchasing merchandise to resell will choose the first box, “Resale”. If so, enter the purchaser’s seller’s permit or use tax certificate number.
Step 6 – 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 Wisconsin Exemption Certificate Expire?
Wisconsin Exemption Certificates do not expire but are recommended to be updated at least once every three years.
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 tax-exempt 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 Wisconsin sales taxes on the seller.
Before accepting a resale certificate from a buyer, the following steps should be taken.
- Review the resale certificate to make sure it is completely filled out.
- Verify the purchaser’s Wisconsin Seller’s Permit is valid and active by visiting the Wisconsin Department of Revenue.
- 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.