How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)
An Indiana Sales Tax Exemption Certificate is a document that allows a business to purchase goods and services tax-free from suppliers for the purpose of reselling those goods and services or to purchase equipment that is being used in the production of products that are sold. The certificate is also sometimes referred to as a “resale permit” or a “reseller’s permit.”
Learn more about what a sales tax exemption certificate is, how to get one, and more.
What is a Sales Tax Exemption Certificate?
A sales tax exemption certificate allows a business to purchase items tax-free. Two scenarios when a business can purchase tax free is when purchasing products that are resold and to purchase equipment used to produce a finished good.
Purchasing inventory tax-free
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 Indiana Department of Revenue.
For instance, when a furniture store in Indiana purchases items like sofas, tables, or chairs from a manufacturer to sell in their store, by having a sales tax exemption certificate, the store owner won’t pay sales tax on these transactions. When a customer purchases a piece of furniture, the retailer will charge sales tax to the customer based on the full price of the item.
Throughout the course of the business, the furniture 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 Indiana. In this way, the sales tax is effectively paid by the final consumer.
Purchasing manufacturing equipment
Indiana also offers a sales tax exemption for manufacturing equipment, machinery, tools, and supplies that are “directly used” in production (Indiana Admin. Code 45 §2.2-5-10). To qualify for this exemption, the equipment must have an immediate effect on the tangible personal property being processed and be an “essential and integral” part of an integrated production process. The exemption also includes property incorporated into the final product, property consumed in the production process, and research and development equipment.
For example, if a business uses a laser engraver to produce an etched phone case that is going to be sold, the laser engraver can be purchased tax-free.
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, it must first get an Indiana Registered Retail Merchant Certificate from the Indiana Department of Revenue. The Registered Retail Merchant Certificate is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
Is a Sales Tax Exemption Certificate the same as a Registered Retail Merchant Certificate?
The Registered Retail Merchant Certificate and Sales Tax Exemption Certificate is commonly thought of as the same thing, but they are actually two separate documents. The Registered Retail Merchant Certificate allows a business to sell and collect sales tax from taxable products and services in the state, while the Sales tax exemption certificate allows the retailer to make tax-exempt purchases for products they intend to resell.
After registering for the Registered Retail Merchant Certificate, a sales tax number will be provided by the Indiana Department of Revenue. This number will be listed on the Sales Tax Exemption Certificate.
How to fill out the Indiana Sales Tax Exemption Certificate
Filling out the Indiana Sales Tax Exemption Certificate (Form ST-105) is pretty straightforward but is critical for the seller to gather all the information.
If audited, the Indiana Department of Revenue requires the seller to have a correctly filled out ST-105 Sales Tax 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.
Begin by downloading the Indiana Sales Tax Exemption Certificate Form ST-105
Step 1: Enter the Purchaser’s Information
Identify the name and business address of the seller in addition to either the Indiana Registered Retail Merchant’s Certificate number or state tax ID number if the business is located out of state.
Step 2: Enter the Seller’s Information
Enter the name and address of the seller.
Step 3: Explain the Frequency of Purchases
If the retailer is expected to be purchasing items frequently from the seller, instead of completing a sales tax exemption certificate for every invoice, check the “blanket purchase exemption request box. In section 2, the buyer will provide a description of the items they will be purchasing.
Step 4: Indicate the Type of Sales Tax Exemption
The purchaser will indicate the type of exemption being claimed. The two most common responses are the first two choices:
– Sales to a retailer, wholesaler, or manufacturer for resale only
– Sale of manufacturing machinery, tools, and equipment to be used for direct production.
– Sales to a company providing public transportation.
– Sales to farmers.
– Sales to contractors for exempt public projects such as public schools, government agencies, or nonprofits.
– Sales to Indiana Government units such as state agencies, cities, towns, municipalities, public schools, and universities.
– Sales to the US Federal Government
Step 5: Certify and Sign Form ST-105
The purchaser will certify the property being purchased is for resale and provider their title, sign, and date the certificate.
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Indiana Sales Tax Exemption FAQs
How much does a Sales Tax Exemption Certificate cost in Indiana?
There is no cost for a Sales Tax Exemption Certificate in Indiana.
Does an Indiana sales tax exemption certificate expire?
Indiana sales tax exemption certificates do not expire.
Where do I file the Indiana sales tax exemption certificate?
The completed form is kept on file by the seller and is not filed with the state.
How often is Indiana 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 or sales tax exemption certificates?
Sellers are not required to accept sales tax exemption 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 Indiana sales tax return.
What steps should a business take to accept a sales tax exemption 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 Indiana sales taxes on the seller.
Before accepting a sales tax exemption or resale certificate, a seller should:
– Review the sales tax exemption certificate to make sure it is completely filled out.
– Verify the purchaser’s Registered Retail Merchant Certificate is valid. There is no online verification, so sellers will have to call the Department of Revenue at 317-233-4015 to verify the certificate is valid.
– 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 sales tax exemption certificates.
Alaska (no sales tax)
Delaware (no sales tax)
Montana (no sales tax)
New Hampshire (no sales tax)
Oregon (no sales tax)