How to Use and Accept Resale Certificates in Minnesota

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 Minnesota?

To qualify for a resale certificate, a business must:

• Be registered with the Minnesota Department of Revenue 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 Minnesota

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 Permit with the Minnesota Department of Revenue. This can typically be done online through their official portal.

Once approved, the business will receive a Sales Tax Account Number (also called a Sales Tax Permit Number).

2. Obtain the ST3 Form

Minnesota resale certificates use the ST3 form, which is used to claim sales tax exemption on purchases for resale.

The ST3 form serves as a resale certificate, which businesses provide to suppliers.

3. Provide the Completed Form to Suppliers

When purchasing tax-exempt inventory for resale, businesses must provide a completed copy of the ST3 form to suppliers.

Some suppliers may require additional verification of your sales tax account status.

4. Ensure Proper Use and Compliance

Businesses must only use the ST3 form for tax-exempt purchases of items intended for resale.

Suppliers may verify the validity of your form and account using the Minnesota Department of Revenue’s 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?

• Minnesota uses a specific form (ST3) for claiming resale exemptions, unlike some states which may issue an additional certificate.
• The ST3 form is used in place of a separate resale certificate document and is specific to Minnesota.

How to Accept a Resale Certificate as a Seller in Minnesota

When purchasing goods for resale, follow these steps:

1. Provide the supplier with a completed ST3 form 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 Minnesota’s ST3 form.

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, incomplete, or incorrect ST3 form
• 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 Minnesota

Minnesota’s sales tax 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 Minnesota

Misusing a resale certificate in Minnesota 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 Minnesota

Do resale certificates expire? 

Minnesota resale certificates do not have an explicit expiration date but should be reviewed periodically to ensure all information is accurate.

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

Businesses must ensure that out-of-state certificates are valid under Minnesota regulations; otherwise, they may need a Minnesota-specific ST3 form.

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.

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 Minnesota 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 Minnesota. By leveraging our team’s professional assistance, businesses can focus on what they do best while staying compliant with state regulations.