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How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)

How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)

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How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)

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.

Getting Started

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.

Related: How to register for an Indiana Registered Retail Merchant Certificate

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

Indiana Form ST 105

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

Indiana Sales Tax Purchaser 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

Indiana Sales Tax Sellers Information

Enter the name and address of the seller.

Step 3: Explain the Frequency of Purchases

Indiana Sales Tax

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

Indiana Sales Tax Exemption Request

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

Indiana Sales Tax Permit Certification

The purchaser will certify the property being purchased is for resale and provider their title, sign, and date the certificate. 

This material is property of StartingYourBusiness.com

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. 

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)

How to get an Indiana Resale Certificate (Sales Tax Exemption Certificate)

6 Responses

  1. The form you offer to download, doesn’t match your example. In the downloadable form, there are 5 sections. In your example, there are only 4 sections.

  2. Hello, I just got a quick question. It seemed to me that you could only get exempt for purchases where you will resell the item(s) purchased, yet one of the options when you choose the type of exemption being claimed is – Sale of manufacturing machinery, tools, and equipment to be used for direct production. My question is if you have a business and need equipment or machinery that you don’t resell but that you use in production of your product, can you get exempt from sales tax on these purchases? Really appreciate any help you can give me! Thanks!

    1. Hi September – You are correct – Indiana 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.

      So, 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.

      I updated the article to include this exemption. Let me know if you have any other questions.

      Thanks!
      Greg

  3. Greg,

    Can you tell me if the for ST-134 Exemption Certificate for Construction Contractors is an obsolete form? I’ve worked for the same general contractor since ’05, I’ve never seen this form before, however it came up in a public works specifications documents today. I can’t find it DOR website. Just curious if you can give me a bit of insight?

    Thanks so much for your help!
    Shelly

    1. Hi Shelly – Based on my research, it looks like Indiana Form ST-134, Exemption Certificate for Construction Contractors, isn’t used any longer. Instead contractors will use the General Sales Tax Exemption Certificate (ST-105).

      Here is where I got my information (see page 3 Time and Material Contractors) – https://www.in.gov/dor/files/sib60.pdf

      If this doesn’t clear things up, you may want to contact the Indiana Department of Revenue for clarification – https://www.in.gov/dor/contact-us/

      I hope this helps!

      Greg

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