When a business purchases inventory to resell, it can do so without paying sales tax. In order to do so, the retailer will need to provide a Massachusetts Resale Certificate to their vendor.
Learn more about how the Massachusetts Resale Certificate works, how to get one, and more.
Related: Guide to starting a business in Massachusetts
How does a Massachusetts Resale Certificate work?
When retailers purchase products to resell, they often don’t pay state sales tax to the supplier on the purchase. The sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise.
For instance, when a furniture store in Massachusetts orders a new line of dining sets to sell in their store, by having a resale certificate, the furniture store owner doesn’t typically pay sales tax on the inventory they purchase. Later on, when a customer chooses to buy one of these dining sets from the store, the retailer will charge sales tax to the customer based on the full price of the dining set. Then, typically at the end of each month, the furniture store sends the compiled sales tax to the Massachusetts 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 for filling out the ST-4 Massachusetts Resale Certificate
Before a business starts selling products or providing taxable services, they must first register as a vendor and get a Sales Tax Permit from the Massachusetts Department of Revenue. After registering for the permit, a sales tax number will be issued, which will be needed to fill out the Resale Certificate.
Step 1: Begin by logging into your MassTaxConnect account or downloading the Massachusetts Resale Certificate Form ST-4
Step 2: Identify the name and business address of the purchaser
Step 3: Include the Account ID number or Federal ID number (FEIN)
Step 4: Describe the purchaser’s business
Step 5: List what tangible personal property or services are being purchased
Step 6: Identify the name and business address of the buyer
Step 7: The purchaser will certify they hold a valid Massachusetts Vendor Registration and are in the business of selling the property that is being purchased.
ST-4 Resale Certificate Fillable Form
Massachusetts Resale Certificate FAQs
How much does a Massachusetts Resale Certificate cost?
There is no cost for a Resale Certificate in Massachusetts.
Does a Massachusetts Resale Certificate Expire?
Resale Certificates don’t expire in Massachusetts.
How often is Massachusetts 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 Massachusetts Resale Certificate?
In Massachusetts, 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.
In addition to these, your business may also need to register for additional items. For more information, check out our guide to Massachusetts 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 Massachusetts 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 Massachusetts Sales & Use Tax ID is valid and active by visiting MassTax Connect.
– 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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