A Tennessee Resale Certificate allows a business in Tennessee to purchase items for resale without paying sales tax. To be eligible for the sales tax exemption, the retailer will need to provide their vendor with a Tennessee Resale Certificate.
Learn more about the Tennessee Resale Certificate, how to get one, and more.
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 retailer then sends the collected sales tax 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 usually does not 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 their sales and sends it to the Tennessee Department of Revenue.
It is worth mentioning 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 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 called 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?
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 receive a refund or credit for the sales tax paid on items purchased for resale from the state.
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 result in the seller being liable for Tennessee 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 Tennessee Sales and Use Tax Certificate is valid by visiting the Tennessee Taxpayer Access Point and selecting “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 wants 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 different. 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 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.
