A resale certificate allows a business to purchase goods or services for resale without paying the Arizona Transaction Privilege Tax (TPT), which is the equivalent of sales tax.
Learn how the Arizona Resale Certificate works, how to get one, and more.
How Does an Arizona Resale Certificate Work?
When retailers purchase products to resell, they often don’t pay state sales tax to the supplier on purchasing those items. Taxes will still be paid, but instead of the retailer paying the state sales tax, the retailer charges sales tax to their customer on the final value of the merchandise.
For instance, consider a bookstore in Phoenix, Arizona. When the bookstore purchases books from publishers or distributors for resale, it can avoid paying sales tax on these transactions by presenting its resale certificate. So, when a customer comes into the bookstore and buys a book, the bookstore adds Arizona’s TPT tax to the book’s price. The bookstore then keeps track of all the TPT tax collected over a given period, often monthly (but can be quarterly or annually, depending on their tax liability). At the end of this period, the bookstore totals all the tax it has collected and sends it to the Arizona Department of Revenue.
Be aware that the sales tax exemption is only intended for inventory that will be resold and not for the tax-free purchase of items used in normal business operations, such as paper, pens, etc.
Steps To Fill Out the Arizona Resale Certificate (Form 5000A)
Before a business starts selling products or providing taxable services, they must first get an Arizona Transaction Privilege Tax License from the Arizona Department of Revenue. After filing the license, a TPT number will be issued by the Arizona Department of Revenue, which will be needed when filling out the Resale Certificate.
Step 1: Get the form
A Resale Certificate can be generated by the buyer or by the seller, provided the certificate contains the required information as outlined in A.R.S. § 42-5009(A). To make things easier, Form 5000A was created by the Department of Revenue to document tax-free transactions.
Begin by either logging into your Arizona Department of Revenue account and fill in the form or download the Arizona Resale Certificate Form 5000A.
Step 2: Enter the buyer’s information
Identify the name, business address, and TPT License number of the buyer.
Step 3: Indicate whether the certificate covers a single transaction or a blanket date range
If the buyer is expected to purchase items frequently from the seller, they can indicate a period of time during which the certificate is valid.
Step 4: Business description
Describe the nature of the purchaser’s business.
Step 5: Describe the property being purchased
Briefly explain what is being purchased from the vendor. This should roughly match what the purchaser’s business sells.
Step 6: Entity selection
Some entities are not required to provide a TPT or Sales Tax License, including sales to the U.S. government, Arizona school districts, or charitable organizations. If the buyer falls into any of the exempt categories, check the corresponding box in section E.
Step 7: Certification
The purchaser will certify the property being purchased is for resale and that the information on the certificate is correct, then sign and date the certificate.
Arizona Resale Certificate FAQs
How much does an Arizona Resale Certificate cost?
There is no cost for a Resale Certificate in Arizona.
Does an Arizona Resale Certificate Expire?
To ensure the buyer’s information is up-to-date, the Arizona Department of Revenue strongly encourages updating certificates each year, however, they will accept certificates for up to four years provided the TPT number is verified each calendar year.
Where do I file the Arizona Resale Certificate?
In Arizona, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise to the reseller).
Are sellers required to accept resale certificates?
Vendors can decline resale certificates, even if they’re valid and properly completed. While most accept resale certificates as standard practice, there’s no legal requirement for them to do so.
If a vendor refuses to accept your resale certificate, you can still complete the purchase by paying the sales tax. The tax paid in this situation isn’t lost – you can file a claim with your state tax authority to receive a refund or credit for the sales tax paid on items purchased for resale.
Is a Resale Certificate the same as a Transaction Privilege Tax License?
No – The Transaction Privilege Tax License and Resale Certificate are commonly thought of as the same thing, but they are actually two separate documents. The Transaction Privilege Tax License allows a business to sell and collect the Transaction Privilege Tax from taxable products and services in the state, while the Resale Certificate allows the retailer to make tax-exempt purchases only for products they intend to resell.
Also, in addition to these, your business may need to register for additional items. For more information, check out our guide to Arizona business licenses.
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 Arizona Transaction Privilege Taxes on the seller.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to ensure it is completely filled out. A missing signature is a common mistake.
– Indicate on the invoice that the gross proceeds of sales or gross income are tax-exempt.
– Verify that the purchaser’s Arizona account ID or Arizona resale number is valid and active by logging into the Arizona Department of Revenue and entering the buyer’s 8-digit TPT number.
– 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 may want to investigate further.
