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 Pennsylvania Exemption Certificate (commonly called a Resale Certificate in most states) to their vendor. 

Learn more about how the Pennsylvania Exemption Certificate works, how to get one, and more.

Related: Guide to starting a business in Pennsylvania

What is a Pennsylvania Exemption Certificate?

When retailers purchase products to resell, they often don’t pay 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.

For instance, when a flower shop in Pennsylvania buys a fresh stock of roses to sell in their store, having an exemption certificate allows them not to pay sales tax on this particular transaction. When an end-user decides to buy these roses, the flower shop applies sales tax to the purchase, calculating it based on the full price of the bouquet.

The flower shop collects this sales tax from all their transactions throughout a given period, usually monthly, and then sends it to the Pennsylvania Department of Revenue.

It’s worth noting that the sales tax exemption is only intended for inventory that will be resold and is not intended for the tax-free purchase of items used in normal business operations, such as paper, pens, etc.

How to fill out the Pennsylvania Exemption Certificate (Form REV-1220)

Before a business starts selling products or providing taxable services, it must first get a Pennsylvania Sales Tax License from the Pennsylvania Department of Revenue. The Sales Tax License is sometimes referred to as a seller’s permit, sales tax number, or sales tax license. After registering for the sales tax license, the Pennsylvania Department of Revenue will provide a tax account ID number, which will be used when filling out the Exemption Certificate.

Step 1: Begin by downloading the Pennsylvania Exemption Certificate Form REV-1220 
Step 2: Indicate the type of tax the exemption is being requested for

• State and local sales and use tax (what most retailers will use)
• State and local hotel occupancy tax
• Public transportation assistance taxes and fees
• Vehicle rental tax
• Additional local, city, and county hotel tax

Step 3: Check whether the certificate is for a single transaction or blanket exemption. If the retailer is expected to purchase items frequently from the seller, instead of completing a resale certificate for every invoice, the blanket exemption box should be checked.
Step 4: Enter the name and address of the seller.
Step 5: Select one of the boxes to indicate why the exemption is being requested.  Most retailers will select number 3, “Property will be resold.”  Enter the buyer’s sales tax number.
Step 6: The purchaser signs and dates the certificate and includes their address and FEIN (Federal Employer Identification Number). 

Pennsylvania Sales Tax Exemption Certificate FAQs