How to Use and Accept Resale Certificates in New York

What Is a Resale Certificate?

When a business buys products for resale, they can use a resale certificate to avoid paying sales tax on those purchases. Instead, the tax is collected when the item is sold to the final consumer.

Suppliers rely on the resale certificate to confirm that the buyer is a legitimate reseller. Misuse of the certificate, such as using it for personal purchases, can lead to penalties and tax liabilities. This helps to ensure taxes are collected only once, at the final point of sale.

Who Qualifies for a Resale Certificate in New York?

To qualify for a resale certificate, a business must:

• Be registered with the New York State Department of Taxation and Finance for sales tax purposes
• Sell tangible goods that are subject to sales tax when sold to consumers
• Intend to resell the items rather than use them for personal or operational purposes

If your business meets these requirements, you can apply for and use a resale certificate to purchase tax-free goods.

How to Get a Resale Certificate in New York

Businesses must follow these steps to obtain a resale certificate:

1. Register for a Sales Tax Permit

Businesses must first register with the New York State Department of Taxation and Finance through the online services portal to obtain a Sales Tax Certificate of Authority.

Once approved, the business will receive a Sales Tax Certificate of Authority Number, which allows the business to collect and remit sales tax.

2. Understand the New York Resale Certificate Rules

In New York, businesses use the Resale Certificate (Form ST-120) to claim tax-exempt purchases on items intended for resale.

Provide this certificate to suppliers when making purchases to ensure they do not collect sales tax.

3. Provide Your Resale Certificate to Suppliers

When purchasing inventory for resale, businesses must provide a completed resale certificate to suppliers.

Make sure to use the correct resale form and ensure all required fields are accurately filled out to avoid any issues.

4. Ensure Proper Use and Compliance

Businesses must only use the resale certificate for tax-exempt purchases of items intended for resale.

Suppliers may verify the validity of your certificate using the New York State Department of Taxation and Finance database.

Misuse of tax-exempt status can result in penalties, back taxes, and revocation of tax privileges.

If all of this feels too overwhelming, doola’s expert bookkeeping team can guide you through the process and ease the bureaucratic burden. 

What Are Differences from Other States?

• New York requires businesses to provide a specific resale certificate form (ST-120) for tax-exempt purchases.
• Unlike some states that may accept a general Sales Tax License, New York requires the specific resale certificate for tax-exempt transactions.

How to Accept a Resale Certificate as a Seller in New York

When purchasing goods for resale, follow these steps:

1. Provide the supplier with a completed resale certificate before making a tax-exempt purchase.
2. Ensure that the items purchased are intended for resale and not for business use.
3. Keep a record of all resale certificate transactions for tax compliance.
4. Verify that your suppliers accept New York’s resale certificate (Form ST-120).

Failing to follow these steps could result in denied exemptions, additional tax payments, or penalties.

Common Mistakes to Avoid

Using a resale certificate improperly can lead to audits, fines, and revoked tax-exempt status. Common mistakes include:

• Purchasing items for business use instead of resale
• Providing an expired or invalid certificate
• Failing to keep proper records of tax-exempt purchases

To stay compliant, businesses should periodically review their resale certificate use and maintain proper documentation.

Sales Tax Rules and Exemptions in New York

New York’s resale tax exemption rules specify that certain products or services may not qualify for tax exemption under a resale certificate. It is essential for businesses to stay informed about these state-specific regulations to ensure proper compliance. Refer to state regulations for comprehensive guidance on taxable versus non-taxable resale items.

Resale Certificate vs. Sales Tax Permit

While a resale certificate allows businesses to make tax-exempt purchases, a sales tax permit enables them to collect and remit sales tax to the state. These two documents are closely linked:

Resale Certificate:
Used to buy inventory tax-free from suppliers

Sales Tax Permit:
Required to charge and collect sales tax from customers

Both are necessary for tax compliance, and businesses should ensure they are properly registered.

Penalties for Misusing a Resale Certificate in New York

Misusing a resale certificate in New York can lead to severe consequences, including fines and tax audits. Businesses have a responsibility to maintain compliance with sales tax laws, ensuring that resale certificates are used correctly and only for legitimate purposes. Violations can result in penalties that affect both the financial standing and reputation of the business.

FAQs About Resale Certificates in New York

Do resale certificates expire? 

No, in New York, resale certificates do not expire but should be maintained and updated if any business information changes.

Can out-of-state resale certificates be used in New York? 

No, resale certificates must be issued by New York to be valid for purchases in the state; an out-of-state resale certificate will not suffice.

Can a resale certificate be used for multiple states?

Generally, resale certificates are state-specific and may not apply to transactions in other states unless reciprocal agreements exist.

How long is a resale certificate valid? 

While New York’s resale certificates do not technically expire, businesses should ensure the information is up-to-date.

Staying Compliant With doola 

Resale certificates play a vital role in facilitating tax-free transactions for resellers, ultimately helping businesses manage their sales tax liability effectively. It is crucial for businesses in New York to understand how to obtain and use these certificates correctly to avoid penalties and ensure compliance. For comprehensive financial solutions, including expert tax guidance, doola can provide guidance to ensure compliance with resale tax laws in New York. By leveraging our team’s professional assistance, businesses can focus on what they do best while staying compliant with state regulations.