How to Use and Accept Resale Certificates in Indiana

What Is a Resale Certificate?

When a business purchases products for resale, a resale certificate allows them to avoid paying sales tax on those purchases. Instead, the sales tax is collected when the item is sold to the end consumer.

Suppliers use the resale certificate to verify that the buyer is indeed a legitimate reseller. Misuse, such as using the certificate for personal purchases, can lead to penalties and tax liabilities, ensuring taxes are only collected at the final point of sale.

Who Qualifies for a Resale Certificate in Indiana?

To qualify for a resale certificate in Indiana, a business must:

• Be registered with the Indiana Department of Revenue for sales tax purposes
• Sell tangible goods that are taxable when sold to end consumers
• Intend to resell the items and not use them personally or for business operations

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

How to Get a Resale Certificate in Indiana

Businesses must follow these steps to obtain a resale certificate:

1. Register for a Sales Tax Account

Businesses must first register for a Sales Tax License with the Indiana Department of Revenue. This can be done through their online portal or by submitting the necessary paperwork.

Once approved, the business will receive a Tax Identification Number, which is essential for obtaining a resale certificate.

2. Complete the Indiana Resale Certificate Form

In Indiana, businesses need to fill out the ST-105, the Indiana General Sales Tax Exemption Certificate.

The completed form is then presented to suppliers when making tax-exempt purchases for resale.

3. Provide Your Resale Certificate to Suppliers

When buying tax-exempt inventory, businesses must provide a copy of the ST-105 form to suppliers.

Some suppliers may also request additional documents to validate the tax exemption status.

4. Ensure Proper Use and Compliance

Businesses should use the resale certificate exclusively for tax-exempt purchases intended for resale.

Suppliers may verify the validity of your certificate through the Indiana Department of Revenue.

Abuse of tax-exempt privileges can result in penalties, back taxes, and revocation of tax benefits.

To streamline the process, doola’s expert bookkeeping team is available to assist you with compliance and ease the paperwork burden.

What Are Differences from Other States?

• Unlike some states that might not require formal documentation, Indiana requires businesses to submit the ST-105 form for resale purchases.
• Indiana’s resale certificate process involves a specific exemption form rather than just a Sales Tax License.

Always stay updated with the latest guidelines by referring to the Indiana Department of Revenue.

How to Accept a Resale Certificate as a Seller in Indiana

As a seller accepting resale certificates, follow these guidelines:

1. Collect the completed ST-105 form from the buyer before proceeding with a tax-exempt sale.
2. Ensure the sold items are legitimately intended for resale.
3. Maintain records of all resale certificate transactions for audit purposes.
4. Confirm that your buyer’s resale certification is recognized in Indiana.

Incorrect handling of resale certificates can lead to denied exemptions or tax penalties.

Common Mistakes to Avoid

Improper use of a resale certificate can result in audits, fines, or loss of tax-exempt status. Mistakes include:

• Purchasing items for company use instead of resale
• Using an expired or invalid certificate
• Neglecting to retain proper documentation of tax-exempt transactions

Regular evaluations of resale certificate usage can aid in maintaining compliance.

Sales Tax Rules and Exemptions in Indiana

Indiana’s tax laws specify that not all products or services qualify for exemption under a resale certificate. It’s crucial for businesses to be acquainted with these regulations to remain compliant. Consult state tax codes for detailed guidance on taxable versus nontaxable resale items.

Resale Certificate vs. Sales Tax Permit

A resale certificate allows tax-free inventory purchases, while a sales tax permit enables businesses to collect and remit sales tax. Both are essential for tax compliance:

Resale Certificate:
Enables tax-free purchases for resale

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

Businesses should ensure proper registration for these documents to meet legal requirements.

Penalties for Misusing a Resale Certificate in Indiana

Misuse of a resale certificate in Indiana can have severe consequences, including fines and audits. Businesses must adhere to sales tax laws, ensuring the legitimate use of resale certificates. Non-compliance can lead to penalties that affect the business’s financial health and reputation.

Staying Compliant With doola 

Resale certificates are crucial for enabling tax-free transactions, helping manage sales tax obligations efficiently. Indiana businesses must comprehend how to procure and use these certificates to avoid penalties and stay compliant. For comprehensive financial solutions, including expert tax advice, doola’s team can assist in ensuring compliance with Indiana tax laws. This allows businesses to focus on growth while adhering to state regulations.