A Minnesota Sales Tax Certificate of Exemption is a document that allows a Minnesota business to purchase goods and services tax-free from suppliers for the purpose of reselling them. The certificate is sometimes called a “resale permit” or a “reseller’s permit.”
Learn more about how the Minnesota Certificate of Exemption works, how to get one, and more.
What is a Minnesota Certificate of Exemption?
When retailers purchase products to resell, they often don’t pay sales tax to the supplier on tax-exempt purchases. The state sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges the state sales tax to their customer on the final value of the merchandise.
For instance, when a sporting goods store in Minnesota orders a new shipment of golf clubs to sell in their shop by holding a Certificate of Exemption, the sporting goods store owner won’t pay sales tax on the purchase of inventory. When a customer decides to buy one of these golf clubs from the store, the retailer will charge sales tax to the customer based on the full price of the club. In its role as the retailer, the sporting goods store is obligated to collect this sales tax from all of its transactions. Then, typically at the end of each month, the sporting goods store sends the collected sales tax to the Minnesota Department of Revenue.
Note that this 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 Minnesota Certificate of Exemption (Form ST3)
Before a business starts selling products or providing taxable services, it must first get a Minnesota Sales Tax Permit from the Minnesota Department of Revenue. After registering for the permit, the Minnesota Department of Revenue will issue a state tax ID number, which will be used when filling out the certificate of exemption.
Step 1: Begin by downloading the Minnesota Certificate of Exemption Form ST3.
Step 2: Select whether the certificate is for a one-time purchase (include the invoice or purchase order number). If the retailer expects to purchase items frequently from the seller, instead of completing a resale certificate for every invoice, leave this box blank to use as a blanket resale certificate.
Step 3: Indicate whether the purchaser is a contractor and has a purchasing agent agreement with an exempt organization to purchase tax-free for a specified job.
Step 4: Include the purchaser’s name, business address, tax ID number, state where the ID number was issued, and driver’s license number.
Step 5: Enter the name and business address of the seller
Step 6: Select the purchaser’s type of business
Step 7: Check the reason for exemption. Retailers reselling merchandise will typically select box H, Resale.
Step 8: The purchaser will certify that the property is for resale and sign and date the certificate.
ST3 Certificate of Exemption Form
Minnesota Certificate of Exemption FAQs
How much does a Minnesota Certificate of Exemption cost?
There is no cost for a Certificate of Exemption in Minnesota.
Does a Minnesota Resale Certificate expire?
While sales tax numbers can become inactive or revoked if not used, resale certificates will not expire. The state recommends updating certificates every three years to ensure the buyer’s information is up-to-date.
How often is Minnesota 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 Minnesota Sales Tax Exemption Certificate?
In Minnesota, 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 Permit?
The Sales Tax Permit and Certificate of Exemption 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.
These are two of several registrations your business may need. To learn more, check out our guide to Minnesota business licenses.
What steps should a business take to accept a resale certificate?
When a small 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 Minnesota 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 Minnesota Tax ID Number is valid and active by calling the Department of Revenue at 651-282-5225.
– 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.
