Sales Tax : Tax Exemption Certificate

A really simple guide to Sales Tax & Tax-exempt Certificate Compliances

The below information is for reference purposes only and should not be considered legal advice. For specific queries, please speak to a qualified accountant.

The United States of America comprises 50 states and from a tax standpoint, all the 50 states of America act as independent ‘nations’. Every state has its own sales tax rule, economic threshold, etc. which makes every state unique in its own way

  1. Sales Tax

The rate of sales or use tax varies per state, ranging from 2.9 to 7.25 percent. Any product or services sold must levy sales tax, the collected tax should be then remitted to the sales tax authorities within the given state.

  1. Reseller certificate

This certificate is also known as a tax-exempt certificate and it must be obtained by the business, that intends to buy products with an intention to re-sell. example – If you are a business called A, based in the state of Florida, then in order to re-sell goods within the state of Florida then you must obtain a reseller’s certificate. Normally reseller’s certificate is valid within the state however there is no clear-cut answer, as a few friendly states do accept certificates from other states, to do business in their own state.

If a reseller certificate is submitted by the business, supplier, or the provider of the service or goods, is authorized not the charge any sales tax, and the liability of sales tax, then lies with the re-seller, based on the value of the final sales. Example – $100 worth of items are sold by business A to business B, and because a reseller certificate was provided by reseller b (2A) no sales tax is charged in this transaction., however, when the reseller will sell the product for say $200 sales tax must be taxed on $200

There are 2 ways of sharing a reseller’s certificate by the reseller, this can be achieved, either through submitting an existing reseller certificate to the business or, by creating a reseller certificate on third-party platforms such as Avalara, Tax-exempt, etc.

The owners of validated the certificate lie with the supplier and all necessary steps must be undertaken to ensure that the certificate is valid

  1. Nexus

Nexus is defined as a level of connection or link between business and the tax jurisdiction of the state. If a link or Nexus is proved between a business and tax jurisdiction then subject to certain criteria, sales tax must be paid by the business to the given state.

Nexus can happen if a business has a physical presence in a state such as employees, office, storage or distribution etc. A nexus can also happen if certain activities of the business are undertaken within the state, such as but not limited to the sales representative, showroom, service providers, etc

Due to South Dakota vs. Wayfair, the court eliminated the physical presence criteria and clearly states that, if certain economic thresholds are achieved, a link between the business and the state is proven, in the fourth section, we will cover the exclusively cover the economic criteria

  1. Economic threshold

As stated in point 3, economic criteria or threshold is the key to proving a connection between business and tax jurisdiction, and by this rule almost all e-commerce companies need to make sure that they are following the economic threshold criteria while dealing with all the 50 states.

In simple words, if the business, achieves sales, of a certain level, within a given state, or has achieved a certain number of orders, within the given states, then Nexus will apply. Once the Nexus is established, the system will automatically charge the taxes.

In the case of South Dakota vs. Wayfair, the supreme court has clearly stated, that the economic threshold criteria, is the US $100,000 or 200 independent orders. As soon as a business achieves this criterion within a given state, it must charge sales tax, and reimburse the collected tax, to the tax authorities e.g. company x has achieved sales of $100,000 or more in the state of New Jersey, or achieved 200o transactions/orders, under this scenario, company x has an economic nexus with the state of New Jersey.

As stated at the beginning of this guide, each state works independently hence the economic threshold criteria are decided by the state, and every state has different economic criteria although, the overall structure, falls within the South Dakota vs Wayfair case.

 

resale sales tax exemption certificates

Sales Tax rate - 4.000%

Information required to register for a sales tax permit in the state of Alabama

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Business entity type
  • Date started doing business in Alabama
  • County you’d like to collect local tax in (if applicable)
  • Copy of form 8832 (if elected to be taxed as a corporation or partnership)
  • Nexus triggering activities

  • Alaska - The State of Alaska does not levy a sales tax

Sales Tax rate - 0.000%

        Information required to register for a sales tax permit in the state of Arizona

  • SSN or ITIN number
  • Business identification information
  • Business entity type
  • Nature of your business
  • NAICS Code

Sales tax rate - 6.500%

        Information required to register for a sales tax permit in the state of Arkansas

  • SSN or ITIN number
  • Business identification information
  • Business entity type
  • Nature of your business
  • NAICS Code

Sales tax rate - 7.250%

        Information required to register for a sales tax permit in the state of California

  • Social Security Number
  • Driver License Number
  • Email Address
  • Federal Employer Identification Number (FEIN)
  • State Employer Identification Number (SEIN)
  • For Corporations: corporate name, corporate number, State and date incorporated
  • Name, address and phone number of partner(s), corporate officer(s), member(s) or manager(s)
  • Name(s) and phone number(s) of personal references
  • Name(s) and address(es) of supplier(s)
  • North American Industry Classification System (NAICS) code
  • Standard Industrial Classification (SIC)
  • Bank Information (name and address)
  • Name and account number of the merchant credit card processor
  • Name, address, and phone number of the person(s) who maintains the books and records
  • If you purchased the business, name and contact information for previous business owner

Sales tax rate - 2.900%

Information required to register for a sales tax permit in the state of Colorado

  • Personal identification information
  • Business identification information
  • Business entity type

Products that you sell

Sales tax rate - 6.350%

Information required to register for a sales tax permit in the state of Connecticut

  • Business identification information
  • Major business activity
  • Business entity type
  • All business owners and officers

  • Delaware - Does not have a state sales tax and does not levy local sales taxes.

Sales tax rate - 0.000%

Sales tax rate - 6.000%

Information required to register for a sales tax permit in the state of Florida

  • Business name, physical address, contact information, and mailing address
  • Federal Employer Identification Number (FEIN); see instructions for item 8 if you do not have a FEIN
  • Bank routing number and account information if enrolling to file and pay tax electronically
  • Name, Social Security Number* (SSN), driver license number, address, and contact information of owner/sole proprietor, officers,
  • partners, managing members, and/or trustees
  • Dates when business activities began or will begin
  • Description of business activities
  • Employment information (date of hire, number of employees, payroll amounts, payroll agent’s PTIN, if applicable)

Sales tax rate - 4.000%

Information required to register for a sales tax permit in the state of Georgia

  • Business name, physical address, contact information, and mailing address
  • Federal Employer Identification Number (FEIN); see instructions for item 8 if you do not have an FEIN
  • Bank routing number and account information if enrolling to file and pay tax electronically
  • Name, Social Security Number* (SSN), driver license number, address, and contact information of owner/sole proprietor, officers,
  • partners, managing members, and/or trustees
  • Dates when business activities began or will begin
  • Description of business activities
  • Employment information (date of hire, number of employees, payroll amounts, payroll agent’s PTIN, if applicable)

Sales tax rate - 4.000%

       Information required to register for a sales tax permit in the state of Hawaii

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Corporate entity type (S-Corp, sole-prop, etc.)
  • Your accounting period (calendar or fiscal year)
  • Your accounting method (cash or accrual)
  • Other miscellaneous info depending on your business

Sales tax rate - 6.000%

Information required to register for a sales tax permit in the state of Hawaii

  • Federal tax ID, typically called the EIN, issued by the IRS.
  • Knowledge of your business entity structure.
  • Business owner information

Sales tax rate - 6.250%

Information required to register for a sales tax permit in the state of Illinois

  • Identifying information about your business
  • Type of business
  • Owners and officers
  • Description of business activities

The addresses of all Illinois locations from where you plan to ship products

Sales tax rate - 7.000%

Information required to register for a sales tax permit in the state of Indiana

  • Your estimated monthly taxable sales, if left blank you will be a monthly filer.
  • If you are a seasonal business.
  • If you provide lodging for less than 30 days.
  • If you will sell food and beverage.
  • If you will sell alcoholic beverages and your ABC Permit number with expiration date.
  • If gasoline will be sold through a metered pump.
  • If cars or trucks less than 11,000 lbs. will be rented from this location for less 30 days.
  • If income is derived from the sale of tobacco products.
  • If yes, from vending machines only.
  • If you report sales tax on a consolidated basis is this location included.
  • If you want your sales tax returns sent to a different address.

Sales tax rate  - 6.000%

Information required to register for a sales tax permit in the state of Iowa

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Business entity type (sole-proprietor, corporation, LLC, etc.)
  • Date you started sell in Iowa
  • Types of products or services sold

Sales tax rate - 6.500%

Information required to register for a sales tax permit in the state of Kansas

  • Reason for application
  • Tax type
  • Business info including name, address, phone, parent company, subsidiaries
  • Location information
  • Annual Kansas sales estimation
  • Other questions about the nature of your business (if you’re connected to construction, natural gas, etc.)

Sales tax rate - 6.000%

Information required to register for a sales tax permit in the state of Kentucky

  • Effective date
  • Legal business name
  • Previous account numbers
  • Primary business location
  • Ownership type
  • Information about types of sales
  • North American Industrial Classification System (NAICS) code required for all businesses. Look up NAICS code.
  • Social Security Number

Sales tax rate - 4.450%

Information required to register for a sales tax permit in the state of Louisiana

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • A description of your business
  • Your NAICS code

Sales tax rate - 5.500%

Information required to register for a sales tax permit in the state of Maine

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Business entity type
  • Description of what your business sells

Information required to register for a sales tax permit in the state of Maryland

  • Reason for your application
  • Basic business information
  • Your business type (sole proprietorship, corporation, etc.)
  • The type of business you run (dry cleaner, limousine, food and beverage, etc.)
  • The start date you’ll begin collecting sales tax
  • Other business owner

Sales tax rate - 6.250%

Information required to register for a sales tax permit in the state of Massachusetts

  • Identifying information about your business
  • Type of business
  • Owners and officers
  • Description of business activities

Sales tax rate - 6.000%

Information required to register for a sales tax permit in the state of Michigan

  • Personal and business identification information
  • Major business activity
  • Business entity type
  • Locations of offices or other places of business

Sales tax rate - 6.875%

Information required to register for a sales tax permit in the state of Minnesota

  • Your Federal employer ID number (FEIN), if applicable
  • Your legal name or sole-proprietor name and business address
  • Your business name (DBA), if applicable
  • Your North American Industry Classification System (NAICS) code.
  • The names and Social Security numbers of the sole-proprietor, officers, partners or representatives
  • The email address and name of a contact person

Sales tax rate - 7.000%

Information required to register for a sales tax permit in the state of Mississippi

  • Business name, address, and contact information
  • Federal EIN number
  • Date business activities began or will begin
  • Projected monthly sales
  • Projected monthly taxable sales
  • Products to be sold

Sales tax rate - 4.225%

Information required to register for a sales tax permit in the state of Mississippi

  • Names, addresses, and SSN of owners/officers/members
  • Business address
  • Legal business name and DBA / Fictitious Name Registration if applicable
  • Employer Identification Number (EIN) from the IRS, or owner’s Social Security Number if a sole proprietorship with no employees
  • Types of products
  • Type of business entity: Sole Proprietorship, Partnership, Limited Liability Partnership, Corporation, Limited Liability Company (LLC)
  • Charter number or certificate of authority number (corporations and LLCs only) from the Missouri Secretary of State
  • Date taxable sales will begin
  • Projected sales tax liability
  • Seasonality of the business

  • Montana - Does not have a state sales tax and does not levy local sales taxes.

Sales tax rate - 0.000%

Sales tax rate - 5.50%

Information required to register for a sales tax permit in the state of Nebraska

  • Employer Identification Number (EIN) from the IRS, or owner’s Social Security Number if a sole proprietorship with no employees
  • Doing Business As and legal name of the business
  • The physical and mailing address of the business
  • Names, addresses, and social security numbers of owners/officers/members
  • Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
  • Accounting basis (cash or accrual)
  • Accounting period (calendar or fiscal)
  • Description of what products or services are being sold
  • Projected sales tax liability
  • Expected date of the first sale

Sales tax rate - 6.85%

Information required to register for a sales tax permit in the state of Nevada

  • DBA (as shown on the Nevada Business Registration form)
  • Estimated total monthly receipts
  • Estimated total Nevada monthly TAXABLE receipts
  • Reporting cycle choice
  • Total Nevada business locations
  • Information for business registration, such as Social Security Number, address, list of owners, partners, and description of your business

  • New Hampshire - Does not have a state sales tax and does not levy local sales taxes.

Sales tax rate- 0.000%

Sales tax rate - 6.625%

        Information required to register for a sales tax permit in the state of New Jersey

  • Federal Identification Number
  • SSN
  • Name
  • Trade Name
  • Type of Ownership
  • New Jersey Business Code
  • Owner, partnership, corporate officers info
  • Other basic info (if business is seasonal, entity, subsidiary, info about what you sell, etc.)

Sales tax rate - 5.125%

  Information required to register for a sales tax permit in the state of New Mexico

  • Personal Identification Information (including SSN, address, and more)
  • Business Identification Information (including EIN/FEIN, address, and more)
  • Business Entity Type
  • Primary Business Type
  • Start of Business Date in New Mexico
  • Accounting Method Used (cash or accrual)

Sales tax rate - 4.000%

  Information required to register for a sales tax permit in the state of New York

  • Business name, address, phone number
  • Federal Employer Identification Number (FEIN) with the IRS, or owner’s Social Security Number if a sole proprietorship with no employees
  • Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
  • The date the business will begin collecting sales tax
  • Bank account information
  • Tax preparer information (if used)
  • Names, home address, Social Security Number, and ownership percentages of owners/officers/members

Sales tax rate -  4.750%

  Information required to register for a sales tax permit in the state of North Carolina

  • Your Social Security Number (SSN) or Federal Employer Identification Number (FEIN), and North Carolina Secretary of State Number (SOS), if applicable.
  • Your business name, address, phone number.
  • Partner or Responsible Person, if applicable (name, title, SSN, address).
  • Details about your business (begin date, type of business, etc.).

 

Sales tax rate - 5.000%

Information required to register for a sales tax permit in the state of North Carolina

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Type of business entity
  • NAICS code
  • Description of business activities

Sales tax rate - 5.750%

Information required to register for a sales tax permit in the state of Ohio

  • Business identification information
  • Business entity
  • Locations
  • Date you will begin collecting Ohio sales tax
  • NAICS Code

Sales tax rate - 4.500%

Information required to register for a sales tax permit in the state of Oklahoma

  • Personal identification information (Name, address, SSN, etc.)
  • Business identification information (Name, address, EIN, etc.)
  • Business entity type
  • Date of incorporation (if applicable)
  • Types of products sold

  • Oregon - Does not have a state sales tax and does not levy local sales taxes

Sales tax rate - 0.000%

Sales tax rate - 6.000%

       Information required to register for a sales tax permit in the state of Pennsylvania

  • Enterprise Information (name, date of operations, etc.)
  • Taxes you’re applying for
  • Business structure
  • Owners/Partners/Shareholders etc. information
  • Business activity information
  • Transient vendor certificate, if applicable
  • Promoter license, if applicable

Sales tax rate - 7.000%

 Information required to register for a sales tax permit in the state of Rhode Island

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Business entity type
  • Date began doing business in Rhode Island
  • Description of business activity

Sales tax rate- 6.000%

Information required to register for a sales tax permit in the state of South Carolina

  • Owner, partnership, corporate charter name
  • Physical location
  • Mailing address
  • Type of business
  • Type of ownership
  • Names of business owner, partners, officers, and members

  • South Dakota

 - https://apps.sd.gov/rv23cedar/Application/TaxpayerInformationStep1.aspx

Sales tax rate - 4.500%

Information required to register for a sales tax permit in the state of South Dakota

  • Legal business name
  • Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
  • Description of what products or services are being sold
  • Physical address and mailing address of the business
  • North American Industry Classification System (NAICS) code
  • Federal Employer Identification Number (FEIN) with the IRS
  • Name, address, SSN, driver’s license number, phone number, and email of owners/officers/members

Sales tax rate - 7.000%

Information required to register for a sales tax permit in the state of Tennessee

  • Reason for applying
  • Gross sales – (Remember, you must make at least $4800 in revenue per year in the state of Tennessee or your sales tax license could be revoked)
  • Date business began
  • Business name & location
  • Mailing address
  • Type of ownership
  • Business activity, including products sold

EDI/EFT, if applicable

Sales tax rate - 6.250%

 

Information required to register for a sales tax permit in the state of Texas

  • Sole owner’s social security number.
  • Partnership social security numbers or federal employer’s identification numbers for each partner.
  • Texas corporation’s file number from the Texas Secretary of State.
  • All corporations’ social security numbers for each officer or director.
  • North American Industrial Classification System (NAICS) code required for all businesses.
  • Applicants must be at least 18 years of age. Parents/legal guardians may apply for a permit on behalf of a minor.
  • Adobe Reader
  • A printer (to print Signature Form)

Sales tax rate - 4.850%

Information required to register for a sales tax permit in the state of Utah

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Business entity type
  • Date you’ll start selling in Utah
  • An estimate of your annual net sales and purchases subject to Utah sales and use tax

 

Sales tax rate - 6.000%

       Information required to register for a sales tax permit in the state of Vermont

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • NAICS Code

Sales tax rate - 4.300%

       Information required to register for a sales tax permit in the state of Virginia

  • Business location
  • Mailing address
  • Contact info
  • Sales tax types your business will be responsible for
  • Basic info

Sales tax rate - 6.500%

       Information required to register for a sales tax permit in the state of Washington

  • Your Federal Employer Identification Number and/or Social Security Number and the info for anyone authorized on your account
  • Your legal form of business (e.g. partnership, corporation, sole proprietor)
  • Your business address
  • The names, titles, home address, and Social Security number of the proprietor, partners, or principal officers (mandatory)
  • The former Entity Information if previously registered with the District

Sales tax rate - 6.000%

 Information required to register for a sales tax permit in the state of West Virginia

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.) – Always use your home business or business address, even if you are located outside West Virginia
  • NAICS code
  • Date you began doing business in West Virginia (Not sure what to enter here? Read more about “When to Register for a Sales Tax Permit“)

Sales tax rate - 5.000%

Information required to register for a sales tax permit in the state of Wisconsin

  • Federal tax ID, typically called the EIN, issued by the IRS
  • Knowledge of your business entity structure
  • Business owner information
  • North American Industry Classification System (NAICS) number
  • Start date with the state of Wisconsin
  • Your estimated monthly sales in Wisconsin

Sales tax rate - 4.000%

Information required to register for a sales tax permit in the state of Wyoming

  • Personal identification info (SSN, address, etc.)
  • Business identification info (EIN, address, etc.)
  • Date of first sale in Wyoming
  • Some information about the items you plan to sell

  1. Data management for Tax compliance

It is critical for the business the ensure that all the data is securely stored, as 2/3 of the audit queries are with regard to previous reseller certificates, transaction details or the number of orders etc. Few third-party software can assist businesses in achieving these objectives, however, if you are a medium to large business, it would be advisable to have its own systems and procedures in place to achieve these levels of compliance.

It is equally important to obtain the reseller’s certificate also known as a tax-exempt certificate or to register with a relevant sales tax jurisdiction once the economic threshold or total order transactions have been achieved, the below links will assist the businesses indirectly accessing the sales tax jurisdiction of all 50 states.