A Tennessee Resale Certificate allows a business in Tennessee to purchase items for resale without paying sales tax. In order to do so, the retailer will first need to provide a Tennessee Resale Certificate to their vendor.
Learn more about what the Tennessee Resale Certificate is, how to get one, and more.
Related: Guide to starting a business in Tennessee
What is a Tennessee 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. The collected sales tax is then sent by the retailer to the Tennessee Department of Revenue.
For instance, when a gardening supplies store in Tennessee buys a batch of seed packets to sell, the store owner is usually not going to pay sales tax on that purchase to their vendor. The retailer will apply sales tax to the total cost of the seed packet when a retail customer buys the seed packets from the store to plant at home.
The gardening supplies store collects the state sales tax from all of their sales and sends it to the Tennessee Department of Revenue.
It is worth mentioning that 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.
How to get a Tennessee Resale Certificate?
Before a business starts selling products or providing taxable services, it must first get a Tennessee Sales Tax Permit from the Tennessee Department of Revenue. The Sales Tax Permit is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
After registering for the Sales Tax Permit, businesses that indicate they will make taxable sales will automatically be issued a Tennessee Sales and Use Tax Certificate of Resale. The certificate can be downloaded from the businesses’ Tennessee Taxpayer Access Point (TNTAP) account.
Tennessee Resale Certificate FAQs
How much does a Tennessee Resale Certificate cost?
There is no cost for a Resale Certificate in Tennessee.
Does a Tennessee Resale Certificate Expire?
Tennessee Resale Certificates don’t expire provided the certificate was registered as a blanket certificate and make at least one purchase with the seller every 12 consecutive months.
How often is Tennessee 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 or annual filing frequency instead.
Are sellers required to accept resale certificates?
Sellers are not required to accept resale certificates for the sale of tax free 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, they will be able to get a credit for the sales taxes when filing their Tennessee 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 Tennessee 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 Tennessee Sales and Use Tax Certificate is valid by visiting the Tennessee Taxpayer Access Point and then select “Look Up Information”
– 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 resale certificates in case of audits.
Is a business license the same thing as a Resale Certificate?
No, a business license and a resale certificate are not the same thing. Each serves a different purpose and is used in different contexts.
A business license is a permit issued by a government agency that allows individuals or companies to conduct business within the government’s geographical jurisdiction. It is the authorization to start a business issued by the local government. Business licenses are typically required for most types of businesses and must be renewed periodically.
On the other hand, businesses use a certificate of resale when purchasing goods intended for resale. This certificate allows a retailer to buy these goods without paying sales tax, assuming that the tax will be collected from the retail customer at the point of sale.
So, while a business license gives you the legal right to operate a business, a resale certificate enables a business to purchase items for resale without paying sales tax.
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.
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