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How To Get An Indiana Sales Tax Exemption Certificate

How To Get An Indiana Sales Tax Exemption Certificate

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How To Get An Indiana Sales Tax Exemption Certificate

An Indiana Sales Tax Exemption Certificate (also referred to as a Resale 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 used in the production of products that will be sold.

Learn how the Sales Tax Exemption Certificate works, how to get one, and more.

Related: Guide to starting a business in Indiana

How Does an Indiana Sales Tax Exemption Certificate Work?

A sales tax exemption certificate allows a business to purchase items tax-free. Two scenarios in which a business can purchase tax-free are products that are resold and 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.

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 typically 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. Then, typically, at the end of the month, the store owner takes the collected state sales taxes and sends the funds to the Indiana Department of Revenue.

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.

How To Fill Out the Indiana Sales Tax Exemption Certificate (Form ST-105)

Indiana Form ST 105

Before a business starts selling products or providing taxable services, it must first get an Indiana Registered Retail Merchant Certificate (sometimes referred to as a sales tax license or seller’s permit). After registering for the Registered Retail Merchant Certificate, the Indiana Department of Revenue will provide a sales tax number, which will be used when filling out the Sales Tax Exemption Certificate.

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 provide their title, sign, and date the certificate. 

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Indiana Sales Tax Exemption FAQs

How much does an Indiana Sales Tax Exemption Certificate cost?

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?

In Indiana, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise for resale).

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.

Is a Sales Tax Exemption Certificate the same as a Registered Retail Merchant Certificate?

No – 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.

Also, in addition to these, your business may need to register for additional items. For more information, check out our guide to Indiana business licenses.

What steps should a business take to accept a sales tax exemption certificate?

When a business is presented with a resale certificate, the seller has the burden of proof to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may result in the seller being liable for Indiana sales taxes.

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 Sales Tax Exemption Certificate

How To Get An Indiana 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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