If a business sells taxable goods or services in Rhode Island, you will want to obtain a resale certificate from the Rhode Island Division of Taxation. This certificate allows you to purchase inventory without paying sales tax.
Learn more about how a Rhode Island resale certificate works, how to get one, and more.
What is a Rhode Island Resale Certificate?
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 example, when a specialty gourmet food store in Rhode Island purchases spices to sell by having a resale certificate (also called a sales tax exemption certificate in some states), the store owner won’t pay state sales tax on the transaction. When a retail customer purchases the spice, the retailer will charge state sales tax to their customer based on the product’s full price. 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 state.
It’s important to know 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 Rhode Island Resale Certificate
Before a business starts selling products or providing taxable services, it must first get a Rhode Island Sales Tax Permit from the Rhode Island Division of Taxation. The Sales Tax Permit is sometimes called a seller’s permit, sales tax number, or sales tax license. After registering for the permit, the Division of Taxation will provide a sales tax number that is used to fill out the Resale Certificate.
Step 1: Begin by downloading the Rhode Island Resale Certificate
Step 2: Include the buyer’s retail permit number
Step 3: List what the buyer’s business sells
Step 4: Enter the name of the seller
Step 5: List the property being purchased from the seller
Step 6: Describe the property being purchased from the seller
Step 7: Enter the name and business address of the buyer
Step 8: Last, the purchaser will sign and date the certificate.
Rhode Island Resale Certificate FAQs
How much does a Rhode Island Resale Certificate cost?
There is no cost for a Resale Certificate in Rhode Island.
Does a Rhode Island Resale Certificate Expire?
The certificate does not expire, provided the buyer has made recurring purchases from the seller at least once in the previous 12 months.
How often is Rhode Island 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 Rhode Island Resale Certificate?
In Rhode Island, the Resale Certificate of Exemption is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise for resale).
Are sellers required to accept resale certificates?
Vendors can decline resale certificates, even if they’re valid and properly completed. While most accept resale certificates as standard practice, there’s no legal requirement for them to do so.
If a vendor refuses to accept your resale certificate, you can still complete the purchase by paying the sales tax. The tax paid in this situation isn’t lost – you can file a claim with the state to receive a refund or credit for the sales tax paid on items purchased for resale.
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 Rhode Island 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 Resale Certificate by calling the Rhode Island Division of Taxation at 401-574-8922.
– 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.
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.
These are two of several registrations your business may need. To learn more, check out our guide to Rhode Island business licenses.
