A Kentucky 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. In order to do this, the retailer will need to provide a Kentucky Resale Certificate to their vendor.
Learn more about how the Kentucky Resale Certificate works, how to get one, and more.
Related: Guide to starting a business in Kentucky
How Does a Kentucky Resale Certificate Work?
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 example, when a pet store purchases dog toys from their supplier to sell in the store, the pet store owner won’t typically have to pay sales tax to their supplier. When a customer (or end-user) purchases the dog toy, the retailer will charge sales tax to the customer based on the full price of the toy. The retailer will collect the sales tax from all their transactions and periodically (typically at the end of the month) send the sales tax to the Kentucky Department of Revenue.
Be sure to note that 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.
Steps to Fill Out the Kentucky Resale Certificate (Form 51A105)
Before a business starts selling products or providing taxable services, it must first get a Kentucky Sales Tax Permit (sometimes called a seller’s permit) from the Kentucky Department of Revenue. After registering for the permit, the Kentucky Department of Revenue will provide a sales tax & use tax number, which will be needed when filling out the certificate.
Step 1: Begin by downloading the Kentucky Resale Certificate Form 51A105
Step 2: If the retailer is expected to be purchasing items frequently from the seller, instead of completing a resale certificate for every invoice, check the blanket box.
Step 3: Identify the name, business address, and Sales & Use Tax Permit Number of the buyer
Step 4: Identify the name and business address of the seller
Step 5: Describe the products that will be purchased
Step 6: The purchaser will sign, list their title, and date the certificate.
Kentucky Resale Certificate FAQs
How much does a Kentucky Resale Certificate cost?
There is no cost for a Kentucky Resale Certificate.
Does a Kentucky Resale Certificate Expire?
The Kentucky Department of Revenue recommends updating the resale certificate every four years.
How often is Kentucky 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.
Where do I file the Kentucky Resale Certificate?
In Kentucky, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise for resale).
Is a Resale Certificate the same as a Sales Tax Permit?
No – The Sales Tax 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.
Also, in addition to these, your business may need to register for additional items. For more information, check out our guide to Kentucky 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 Kentucky 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.
– 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.
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