How to Use and Accept Resale Certificates in Connecticut

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 Connecticut?

To qualify for a resale certificate, a business must:

• Be registered with the Connecticut Department of Revenue Services 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 Connecticut

Businesses must follow these steps to obtain a resale certificate:

1. Register for a Sales Tax Permit

Businesses must first register for a Sales Tax Permit with the Connecticut Department of Revenue Services (DRS) through their online portal.

Once approved, the business will receive a Sales Tax Permit Number.

2. Complete the Resale Certificate (Form OR-204)

Connecticut requires businesses to fill out Form OR-204 for resale certificates. This form certifies that the business is purchasing goods for resale.

3. Provide Your Certificate to Suppliers

When purchasing tax-exempt inventory for resale, businesses must provide a completed resale certificate to suppliers for their records.

4. Ensure Proper Use and Compliance

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

Suppliers are encouraged to verify the validity of your certificate with the Connecticut DRS database.

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

If the process seems complex, doola’s expert bookkeeping team can guide you through each step and handle the paperwork.

What Are Differences from Other States?

• Connecticut uses a specific resale certificate form (Form OR-204), unlike some states that allow a general form or simply a permit.
• Businesses must comply with specific state rules that may differ from neighboring states.

For detailed and updated information, consult Connecticut’s DRS resources. 

How to Accept a Resale Certificate as a Seller in Connecticut

When selling goods for resale, follow these steps:

1. Obtain a completed resale certificate from the buyer before the sale.
2. Verify 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. Confirm that your suppliers accept Connecticut’s resale certificate.

Not following these guidelines might lead to tax exemptions being denied, additional tax liabilities, or penalties.

Common Mistakes to Avoid

Misusing a resale certificate can lead to audits, fines, and loss of tax-exempt status. Common mistakes include:

• Purchasing items for business or personal use instead of resale
• Providing incomplete or expired certificates
• Neglecting to maintain proper records of tax-exempt purchases

To ensure compliance, businesses should regularly review their resale certificate usage and keep thorough records.

Sales Tax Rules and Exemptions in Connecticut

Connecticut’s sales tax rules may exempt certain products or services from tax with a resale certificate. Businesses must stay informed about these regulations to ensure proper compliance and refer to state guidelines for a comprehensive understanding of taxable versus non-taxable items.

Resale Certificate vs. Sales Tax Permit

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

Resale Certificate:
Used to purchase inventory tax-free for resale

Sales Tax Permit:
Required to collect and remit sales tax to the state

Both are essential for compliance, and businesses should ensure they hold the necessary registrations.

Penalties for Misusing a Resale Certificate in Connecticut

Improper use of a resale certificate in Connecticut can result in serious consequences, including fines and audits. Businesses must ensure resale certificates are used correctly and solely for valid purposes. Violations can incur hefty penalties, affecting both financial health and business reputation.

FAQs About Resale Certificates in Connecticut

Do resale certificates expire?

In Connecticut, there is no specific expiration for resale certificates, but it is wise to update records periodically.

Can out-of-state resale certificates be used in Connecticut?

Out-of-state certificates may need verification according to Connecticut’s regulations, and businesses often need a Connecticut-specific certificate.

Can a resale certificate be used for multiple states?

Generally, resale certificates are only valid in the state of issuance except under reciprocal agreements.

How long is a resale certificate valid?

Connecticut resale certificates generally don’t expire, but they should be reviewed regularly for any regulatory changes.

Staying Compliant With doola 

Resale certificates are crucial for enabling tax-free transactions, aiding businesses in managing their tax liabilities. Understanding the proper use of these certificates is essential for businesses in Connecticut to avoid penalties and maintain compliance. With doola’s comprehensive financial solutions, including expert tax guidance, businesses can focus on their growth while ensuring full compliance with state tax laws. To manage your resale tax requirements efficiently, doola is here to help with every step of the process.