When a Michigan business purchases inventory to resell, it can do so without paying state sales taxes. To do so, the retailer must provide its vendor a Michigan Certificate of Exemption (commonly known as a Resale Certificate).
Learn how a Michigan Sales Tax Certificate of Exemption works, how to get one, and more.
What is a Michigan Certificate of Exemption?
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 state 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 their store, the pet store owner won’t typically 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 Michigan Department of Treasury.
It’s important to note that the sales tax exemption is only intended for inventory that will be resold and not for the tax-free purchase of items used in normal business operations, such as paper, pens, etc.
How to fill out the Michigan Sales and Use Tax Certificate of Exemption (Form 3372)
Before a business starts selling products or providing taxable services, it must first get a Michigan Sales Tax License (sometimes referred to as a seller’s permit, sales tax number, or sales tax permit) from the Michigan Department of Treasury. After registering for the license, a Sales Tax License Number will be issued, which will be used when filling out the certificate.
Step 1: Begin by downloading the Michigan Resale Certificate Form 3372
Step 2: Indicate whether the transaction is a one-time purchase or a blanket certificate. If the retailer is expected to purchase items frequently from the seller, the blanket certificate box should be used instead of completing a resale certificate for every invoice. The purchaser can select whether the blanket certificate will be used in the foreseeable future or expire on a certain date. Certificates are only valid for four years.
Step 3: Check whether the certificate covers all items purchased from the seller or is limited to certain items.
Step 4: Indicate the reason for sales tax exemption. If a retailer purchases merchandise for resale, check box number 2 and include their Sales Tax License Number.
Step 5: Fill out the business’s name, address, phone number, signature, title, and date.
Michigan Sales and Use Tax Certificate of Exemption Form 3372
Michigan Certificate of Exemption FAQs
How much does a Michigan Sales Tax Exemption Certificate cost?
There is no cost for an Exemption Certificate in Michigan.
Does a Michigan Certificate of Exemption Expire?
The Michigan Sales and Use Tax Certificate of Exemption is valid for up to four years.
How often is Michigan 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 file monthly, quarterly, or annually.
Where do I file the Michigan Certificate of Exemption?
In Michigan, 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 Certificate of Exemption the same as a Sales Tax License?
The Sales Tax License and Certificate of Exemption are commonly thought of as the same thing, but they are actually two separate documents. The Sales Tax License allows a business to sell and collect sales tax from taxable products and services in the state, while the Certificate of Exemption allows the retailer to make tax-exempt purchases for products they intend to resell.
These are two of several registrations your business may need. To learn more, check out our guide to Michigan business licenses.
What steps should a business take to accept a resale 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 make the seller liable for Michigan sales taxes.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
– Verify the purchaser’s Sales Tax License Number by calling the Michigan Department of Treasury at 517-636-6925.
– 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 wants to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates.
