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How To Get A North Carolina Sales Tax Certificate of Exemption (Resale Certificate)

How To Get A North Carolina Sales Tax Certificate of Exemption (Resale Certificate)

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How To Get A North Carolina Sales Tax Certificate of Exemption (Resale Certificate)

How To Get A North Carolina Sales Tax Certificate of Exemption (Resale Certificate)

When a business purchases inventory to resell, it can often do so without paying sales tax.  In order to do so, the retailer will need to provide a North Carolina Certificate of Exemption (commonly known as a Resale Certificate) to their vendor. 

Learn more about what a Sales Tax Certificate of Exemption is, how to get one, and more.

What is a Sales Tax Certificate of Exemption?

When retailers purchase products to resell, they often don’t pay state sales tax to the supplier on the purchase. The state 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. The collected sales tax is then sent by the retailer to the North Carolina Department of Revenue.

For example, when a clothing boutique in North Carolina orders a variety of designer dresses to sell in their store, by having a resale certificate, the boutique owner won’t pay sales tax on that transaction. When a shopper purchases a dress, the boutique will charge sales tax to the end user based on the full retail price of the dress.

The boutique will accumulate the sales tax from all their transactions and typically, at the end of the month, remit the gathered sales tax to the state. In this manner, the tax burden is transferred to the final user and not the businesses in between.

The purpose of the certificate is to provide evidence of why sales tax was not collected on a transaction. Similar names for a resale certificate include reseller number, seller’s permit, exemption certificate, wholesale license, or reseller’s license. In order for the supplier to allow the tax-exempt purchase, the seller needs proof the buyer intends to resell the product by providing a valid resale certificate.

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.

Getting Started

Before a business starts selling products or providing taxable services, it must first get a North Carolina Sales Tax Permit from the North Carolina Department of Revenue. The Sales Tax Permit is sometimes referred to as a seller’s permit, sales tax permit, or sales tax license.

Is a Sales Tax Certificate the same as a Sales Tax Number?

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.

Related: How to register for a North Carolina Sales Tax Number

After registering, a sales tax number will be provided by the Department of Revenue. This number will be listed on the Certificate of Exemption.

How to fill out the North Carolina Certificate of Exemption

A Resale Certificate is generated by filling out the Certificate of Exemption. Filling out the North Carolina Streamlined Sales Tax Certificate of Exemption (Form E-595E) is pretty straightforward but it is critical for the seller to gather all the information.

If audited, the North Carolina Department of Revenue requires the seller to have a correctly filled out E-595E Certificate of Exemption.  Without it correctly filled out, the seller could end up owing sales taxes that should have been collected from the buyer in addition to penalties and interest.  

Steps for filling out the E-595E North Carolina Certificate of Exemption

Step 1 – Begin by downloading the North Carolina Streamlined Sales and Use Tax Agreement Certificate of Exemption Form E-595E 
Step 2 – Indicate whether the Multistate Supplemental form is being attached.  This is the second page of the exemption form.  Several states joined together to accept one resale form to make it easier for merchants
Step 3 – Check whether the certificate is for a single purchase. Otherwise, the form is considered a blanket certificate that allows a buyer to purchase multiple times from a vendor without having to file a separate certificate.
Step 4 – Include the name, address, and State Tax ID Number.  If there is no State Tax ID Number, enter the purchaser’s FEIN and Driver’s license number.
Step 5 – Enter the name and address of the seller.
Step 6 – Check the box that corresponds closest to the type of business the buyer is in.
Step 7 – Indicate the reason for exemption.  Most retailers are going to check box G for Resale. 
Step 8 – The purchaser will certify the property being purchased is for resale, including their title, phone number, and email address, then sign and date the certificate. 

E-595E Certificate of Exemption Fillable Form

E-595E Certificate of Exemption Fillable Form

North Carolina Sales Tax Exemption Certificate FAQs

How much does a Sales Tax Exemption Certificate cost in North Carolina?

There is no cost for a Certificate of Exemption in North Carolina.

Does a North Carolina Certificate of Exemption Expire?

Provided the single purchase box isn’t checked, and the purchaser makes at least one purchase within 12 months, the certificate does not expire.

How often is North Carolina 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 quarterly filing frequency instead.

Where do I file the North Carolina Sales Tax Exemption Certificate?

The exemption certificate is kept on file by the seller and is not filed with the state.

Are sellers required to accept resale certificates?

Sellers are not required to accept resale certificates for tax exempt purchases, however, most do.  If the vendor doesn’t accept the certificate, the buyer will have to pay sales tax on the merchandise being purchased.  In most cases, a credit for the sales taxes paid is available when filing the North Carolina sales tax return. 

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 North Carolina 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 North Carolina Sales Tax ID is valid by visiting the Department of Revenue’s Registry of Sales and Use Tax Numbers.
– 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 all resale 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 A North Carolina Sales Tax Certificate of Exemption (Resale Certificate)

How To Get A North Carolina Sales Tax Certificate of Exemption (Resale Certificate)

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