When a business purchases inventory to resell, they can do so without paying sales tax. In order to do so, the retailer will need to provide an Idaho Sales Tax 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 the state 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 Idaho State Tax Commission.
For instance, when a farming supply store in Idaho purchases items like seeds, fertilizer, or farming tools from a wholesaler to sell in their store, by having a resale certificate, the store owner won’t pay sales tax on these transactions. When a home gardener purchases these supplies, the retailer will charge sales tax to the customer based on the full price of the items.
Throughout the course of the business, the farming supply store will accumulate sales tax from all their transactions with customers. Periodically, typically at the end of the month, the store owner will collect all the sales tax that has been charged to the customers and send it to the state of Idaho. This way, the sales tax is effectively paid by the final consumer, not by the businesses involved in the supply chain.
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, resale 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 tangible personal property 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, it must first get an Idaho Seller’s Permit from the Idaho State Tax Commission. The Seller’s Permit is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
Is a Resale Certificate the same as a Seller’s Permit?
The Seller’s 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.
After registering, a Seller’s Permit Number will be provided by the State Tax Commission. This number will be listed on the Sales Tax Resale Certificate.
Filling out the Idaho Sales Tax Resale Certificate
The Idaho State Tax Commission created the Sales Tax Resale or Exemption Certificate (Form ST-101) to document tax-free transactions.
Filling out the Idaho Sales Tax Resale or Exemption Certificate (Form ST-101) is pretty straightforward but is critical for the seller to gather all the information.
If audited, the Idaho State Tax Commission requires the seller to have a correctly filled out ST-101 Sales Tax Resale 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.
Idaho Resale Certificate FAQs
How much does a Resale Certificate cost in Idaho?
There is no cost for an Idaho Resale Certificate.
Does an Idaho Resale Certificate Expire?
While sales tax numbers can become inactive or revoked if not used, resale certificates will not expire. To ensure the buyer’s information is up-to-date, it is recommended that certificates be updated at least every three years.
Where do I file the Idaho Resale Certificate?
The resale certificate is kept on file by the seller and is not filed with the state.
How often is Idaho sales tax due?
Most new businesses are set up to file and pay sales and use tax monthly, but depending on the amount of tax collected, your business may have a different filing frequency.
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 is available when filing the Idaho sales tax return.
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 Idaho 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 Idaho Seller’s Permit by logging into the Idaho State Tax Commission’s Taxpayer Access Point (TAP) website and selecting “Validate Seller’s Permit.”
– 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 should investigate further.
– Keep a file of resale certificates.
Alaska (no sales tax)
Delaware (no sales tax)
Montana (no sales tax)
New Hampshire (no sales tax)
Oregon (no sales tax)