As a retailer, do you ever wish you could purchase all of your business inventory without paying any sales tax? It seems like a farfetched thinking, doesn’t it? Not exactly; in New York, you can! If you’re a reseller, you can get a New York Resale Certificate (also known as a Sales Tax Exemption Certificate), which allows you to purchase items tax-free as long as you plan to resell them.
This minor certificate will save you loads of money and make your purchase process a breeze. First, however, you must sign up as a seller and get your Sales Tax Certificate of Authority. Now, ready to dive in and learn how to get your New York Resale Certificate? Let’s walk through the steps together and save your business some serious cash!
New York Sales Tax
Let’s briefly discuss sales tax and resale certificates since they’re closely linked and essential for your business.
Sales tax is a tax on retail sales of certain tangible personal property and services. In New York State, the combined statewide sales tax rate is 4%, plus the local rate that applies in the jurisdiction where the sale or transaction occurs. Use tax applies when you buy tangible personal property and services outside the state and use them within New York State.
New York Resale Certificate
A New York Resale Certificate, also known as a sales tax exemption certificate, allows businesses to purchase items for resale without paying sales tax. This certificate is issued by the New York Department of Revenue and Taxation. To obtain a resale certificate, you must first get a New York Sales Tax Certificate of Authority.
Also, be aware of the term ‘tax nexus.’ It is mandatory for your business to collect sales tax from buyers in a state where it has a substantial presence. Knowing these concepts can greatly help you manage your business taxes more efficiently.
Note: The New York Department of Revenue and Taxation issues New York resale certificates. Before you can get a resale certificate, you must obtain a NY Sales Tax Certificate of Authority.
What Are the Types of New York Resale Certificates?
There are two types of resale certificates in New York:
Single-Use Certificate
A single-use certificate is an exemption certificate that can be used once to purchase items for resale. Unlike a blanket certificate, which covers multiple transactions, a single-use certificate is provided to the seller for a specific purchase. This certificate allows you to buy goods without paying sales tax, as you’ll collect the tax from your customers when you resell the items.
For instance, if you’re purchasing a batch of electronics to resell in your store, you would provide a single-use certificate to the seller for that specific purchase. This ensures that the transaction is tax-exempt at the time of purchase.
Blanket Certificate
A blanket certificate lets you use a single exemption certificate for all similar purchases from a seller, rather than a separate one each time. This is perfect for frequent, similar purchases. For example, if you’re a wholesaler buying plumbing supplies to resell, you can give the manufacturer one blanket certificate for all purchases. Just mark the “blanket certificate” box on the form.
If any details on the blanket certificate change, like your address or ID number, provide an updated certificate to the seller. The certificate remains valid for ongoing exempt purchases unless updated.
Eligibility for New York Resale Certificate
If you’re planning to resell your purchased items in New York, you’re eligible for a resale certificate. Now, let’s say, you bought 70 tote bags from a wholesaler to sell in your store. With a resale certificate, you can buy these bags tax-free. When you sell the bags, your customers will pay the sales tax, which you will collect and remit to the Department of Revenue and Taxation.
Essentially, the resale certificate allows you to defer the sales tax until the final sale, helping you manage your cash flow more effectively.
Who Can’t Use the New York Resale Certificate?
As there are some eligibility rules on who can use New York resale certificates, there are also some rules on who can’t use this document.
You can’t use a New York Resale Certificate to:
- Avoid paying sales taxes on cigarettes or gasoline.
- Purchase supplies if you’re a contractor. (Contractors need to use a different form called the Contractor Exempt Purchase Certificate.)
- Buy goods or services that you don’t plan to resell.
Where the New York Resale Certificate Can Be Used
This certificate is intended for use by purchasers under the following conditions:
Registered Vendors
- You must be registered as a New York State sales tax vendor.
- You need a valid Certificate of Authority issued by the Tax Department.
- The certificate can be used for purchasing tangible personal property (excluding motor fuel or diesel motor fuel) or services that will be resold or transferred to your customers.
Non-Registered Vendors
- You’re not required to register with the New York State Tax Department.
- You must be registered in another state, the District of Columbia, a Canadian province, or another country, or be located in a place that doesn’t require sales tax or VAT registration.
- You can use the certificate for purchasing items for resale that will be either:
- Delivered by the seller to your customer or an unaffiliated fulfillment service provider in New York State.
- Delivered to you in New York State but resold from a business located outside the state.
- Delivered by the seller to your customer or an unaffiliated fulfillment service provider in New York State.
Note: For deliveries to your customers (point 1), this includes delivery by the seller’s vehicle or a common carrier, regardless of who arranges the transportation.
Where the New York Resale Certificate Can’t Be Used
When using a New York Resale Certificate, it’s important to know its limitations to avoid any penalties. Here’s where you can’t use the certificate:
Personal Use: Your resale certificate cannot be used to purchase items or services for personal use. It’s strictly for purchases intended for resale.
Consumption: If you purchase tangible personal property or services for resale but use or consume them in New York State, you must report and pay any unpaid taxes directly to the state.
Please keep in mind that, any misuse of the resale certificate can lead to tax liabilities, along with substantial penalties and interest. Always ensure you’re using the resale certificate correctly to stay compliant and avoid unnecessary costs.
How to Get a New York Resale Certificate
Getting a New York Resale Certificate involves a simple two-step process. First, obtain a Sales Tax Certificate of Authority, and then apply for the resale certificate itself. Here’s how to go about it:
1. Get a New York Sales Tax Certificate of Authority.
- A Sales Tax Certificate of Authority (definition mentioned below) allows your business to collect sales tax on items you plan to resell.
- Apply for your Certificate of Authority online with New York Business Express.
- After the Department of Taxation and Revenue approves your application, they will mail you your Certificate of Authority.
- If you have multiple business locations, you’ll need a Certificate of Authority for each one.
- Your Certificate of Authority must be displayed at your business location. If you don’t have a physical location, you can display it on a vehicle, cart, or even the wall of your home office.
2. Complete the New York Resale Certificate
- After receiving your Certificate of Authority, you can complete the New York Resale Certificate using the website wizard.
- Use the certificate when purchasing items for resale. Fill it out and give it to the vendor, who will keep it on file.
- Ensure you give the resale certificate to the vendor within 90 days of the purchase.
Required Information for a New York Resale Certificate
The required information for a New York resale certificate is included but not limited to:
- Applicant’s Personal Information.
- EIN/SSN.
- Business Information.
- Business Location(s) (if you have multiple locations in New York you’ll need to file for a New York sales tax permit for each location).
- Sales tax Certificate of Authority number.
- Applicant’s signature.
By gathering these requirements, you’ll be able to obtain and use a New York Resale Certificate, helping you manage your business purchases more effectively.
Required Information for Non-Residents
The requirements for a New York resale certificate for non-residents are the same as for residents. Non-residents can use an ITIN instead of an SSN. To obtain an ITIN, simply form a US company.
Required Fee for Obtaining New York Resale Certificate
There is no fee to apply for the Sales Tax Certificate of Authority or the New York Resale Certificate.
What Is a Certificate of Authority?
As the term—sales tax certificate of authority—briefly appeared above, we assume there may be a question in your mind: What is a Sales Tax Certificate of Authority? Don’t worry; just read on.
In New York, you must obtain a Certificate of Authority before beginning to sell anything as a business. This certificate allows you to collect sales tax and accept or issue tax exemption certificates, such as when a manufacturer sells to a reseller.
Applying is simple: register online at least 20 days before starting your business. More details can be found at the New York License Center.
Remember, the mentioned certificate is only for business sales. You don’t need it for occasional personal sales, like selling a phone on eBay. Sales tax collection is required only if you are considered a “vendor” by law.
What Should I Do After Getting a New York Resale Certificate?
Once your business is registered and you have your certificate of authority along with the resale certificate, you can use it to buy items without paying sales tax, as long as you plan to resell them and collect sales tax from your customers.
Here’s what you need to do next:
- Provide the Resale Certificate: Within 90 days of your purchase, give the seller your resale certificate. If you frequently buy from the same seller, you can use a “blanket certificate” to cover multiple purchases.
- Use the Right Certificate: New York has different exemption certificates, so make sure you’re using the correct one for your transaction. Each certificate needs specific information, like the names and addresses of both buyer and seller, the date, and the buyer’s signature.
- Electronic Certificates: New York accepts electronic sales tax exemption certificates, making the process even easier.
There are no fees for getting a certificate of authority or using a resale certificate. However, New York takes this resale certificate matter much more seriously. Operating without a certificate of authority can result in penalties of up to $10,000. So, make sure you’re compliant to avoid any hefty fines.
What Should I Do If I am Presented with a New York Resale Certificate?
If a customer presents you with a New York Resale Certificate, ensure it’s valid to avoid being liable for the tax. Here’s how:
- Make sure you have the resale certificate in hand within 90 days of the purchase.
- Ensure the customer fills out the resale certificate entirely and correctly.
- Ensure the ST-120 New York Resale Form is properly completed and verify the customer’s Certificate of Authority Number.
- Store the document for at least 3 years in case of an audit.
How to Verify a Resale Certificate in the New York
To verify a New York resale certificate, simply follow the steps given below:
- Visit the New York Registered Sales Tax Vendor Lookup site.
- Enter the security check.
- Enter the buyer’s sales tax identification number in the “Vendor Information” section.
- Click “Continue”.
Filing of Sales Tax and New York Resale Certificate
If you’re registered for sales tax purposes in New York State, you must file sales and use tax returns quarterly, part-quarterly (monthly), or annually with the Department of Taxation and Finance. Even if your business didn’t make any taxable sales or purchases during the reporting period, you still need to file your sales and use tax return by the due date.
When you use a resale certificate to purchase items tax-free for resale, you must keep detailed records to support your tax-exempt purchases. This documentation is crucial when filing your sales tax returns, including any applicable county taxes in New York. Different counties may have varying tax rates, so maintaining accurate records ensures compliance with both state and local tax laws.
Businesses with taxable receipts exceeding $500,000 or an annual liability for prepaid sales tax on motor fuel and diesel motor fuel over $5 million are required to participate in the department’s PrompTax program. Other vendors can also opt to join the PrompTax program voluntarily.
You can use the Web File system to submit all forms and schedules, including:
- Monthly, quarterly, and annual sales tax returns (most taxpayers are required to e-file).
- PrompTax filers submitting Form ST-810.
- No-tax-due returns and final returns.
- The Sales Tax Record of Advance Payment (ST-330).
Staying compliant with these filing requirements and properly using your resale certificate ensures your business operates smoothly and avoids any penalties or legal issues.
Oh, here’s a tip: If you are curious to learn more about sales tax filing, visit the New York state website’s blog on “Filing Requirements for Sales and Use Tax Returns.”
Penalties for Sales and Use Tax in New York
If you fail to comply with sales tax laws in New York, you may face penalties:
- Late Filing: $50 for late returns with no tax due; 10% of the tax due for the first month plus 1% for each additional month, up to 30% of the tax due.
- Failure to File: Up to $10,000 or 100% of the tax due.
- Failing to Collect Tax: Subject to fines and possible jail time.
- Miscellaneous Penalties: $50 to $5,000 for document and record-keeping violations, false information, and other infractions.
To learn more, visit the New York State Department of Taxation and Finance.
Penalties for Misuse of New York Resale Certificate
Misusing a New York Resale Certificate can lead to severe civil and criminal penalties, along with the payment of any owed tax and interest. Here’s what you could face:
- A penalty of 100% of the tax owed.
- Each fraudulent exemption certificate issued will incur a $50 penalty.
- Criminal felony prosecution, which could result in a substantial fine and possibly a jail sentence.
- Your Certificate of Authority may be revoked if you are required to register as a vendor.
Keep in mind that the misuse of this exemption certificate is taken very seriously, so it’s a must to use it correctly to avoid these harsh consequences.
The Expiration and Renewal of a New York Resale Certificate
While a New York resale certificate itself doesn’t expire, the Certificate of Authority associated with it is only valid for a maximum of three years. After this period, the Certificate of Authority can be renewed, but this renewal is at the discretion of the Department of Taxation and Finance.
As for the renewal part, You will get a notification letter from the New York State Department of Taxation and Finance when it’s time to renew your sales tax Certificate of Authority. Vendors are randomly selected, and you can’t apply for renewal until you receive this letter.
Renewal is mandatory for all registered sales tax vendors. If you don’t renew before the expiration date, it will be illegal to conduct any business subject to New York State sales and use tax law, and you may face a penalty of up to $10,000.
Can a New York Resale Certificate Be Revoked?
Yes, a New York Resale Certificate can be revoked if it is misused or if the holder fails to comply with state regulations. Misuse includes using the certificate for personal purchases or providing false information.
Additionally, failure to renew the Sales Tax Certificate of Authority or not complying with sales tax collection and payment requirements can also lead to revocation. Always ensure that the certificate is used correctly and in accordance with New York state laws to avoid revocation.
Does New York Accept Out-of-State Resale Certificates?
No, New York does not accept out-of-state resale certificates. To claim an exemption from New York State and local sales and use tax, purchasers must use a resale certificate issued by New York. If you’re doing business in New York and wish to use a resale certificate, you need to obtain a New York Sales Tax Certificate of Authority and provide the correct New York resale certificate to the seller within 90 days of the purchasing transaction.
Note: Some vendors, like Target, may choose not to sell to resellers and therefore do not accept resale certificates.
Does New York Accept Multi-Jurisdictional Resale Certificates?
New York does not accept multi-jurisdictional resale certificates, such as those issued by the Multi-State Tax Commission (MTC). Instead, businesses must use a New York-specific resale certificate to claim sales tax exemptions for purchases made for resale within the state.
In the Case of a Resale Certificate, Where Does Business Globalizer Stand?
Business Globalizer stands as your reliable partner in obtaining a New York Resale Certificate. We streamline the application process, ensuring compliance with state regulations and providing expert guidance—or you can say, premium business consulting—to help you secure your certificate efficiently. Trust Business Globalizer to handle all the complexities, so you can focus on growing your business.
FAQs
Q1: What Is a Temporary Vendor?
Answer: A temporary vendor is someone who sells taxable tangible personal property or services for no more than two quarters in a 12-month period. This excludes show or entertainment vendors.
Q2: Does New York Support Blanket Certificates?
Answer: Yes, New York State supports blanket certificates.
Q3: What happens if I do business in New York without a valid Certificate of Authority?
Answer: If you meet the registration requirements and engage in business activities in New York without a valid Certificate of Authority, you may be fined up to $500 for the first day of sales or purchases, and up to $200 for each additional day, with a maximum penalty of $10,000.
Q4: When should I surrender or destroy a Certificate of Authority?
Answer: You must surrender or destroy your Certificate of Authority if you:
- Stop doing business.
- Sell, transfer, or assign your business.
- Change the form of your business (e.g., from a sole proprietorship to a corporation).
Continue to file your sales tax returns on time until you officially discontinue your business, even if you have no taxable sales or owe no tax. Failure to file can result in penalties and collection activities. After processing your final return, the authority will inactivate your sales tax account, rendering your Certificate of Authority invalid. While you don’t need to surrender it to the Tax Department, you should destroy your copy.
Q5: Do New York counties have different sales tax rates?
Answer: Yes, New York counties can have different sales tax rates. In addition to the state sales tax, each county in New York can impose its own local sales tax. These local rates can vary, so it’s important to check the specific rate for the county where your business operates or where you make purchases. Keeping track of these varying rates is crucial for accurate tax filings.
Q6: Do I need to pay county taxes when using a New York resale certificate
Answer: Yes, when using a New York resale certificate to purchase items tax-free for resale, you are still required to account for any applicable county taxes.
Q7: How do I find the correct sales tax rate for a specific New York county?
Answer: To find the correct sales tax rate for a specific New York county, you can visit the New York State Department of Taxation and Finance website. They provide detailed tables and tools that list the current sales tax rates for all counties. This ensures you apply the correct rate when collecting and remitting sales tax. Accurate rate application helps maintain compliance and avoid potential penalties.
Q8: How do county tax rates affect my resale purchases in New York?
Answer: County tax rates in New York can affect the overall tax obligations for your business. When you make tax-exempt purchases using a New York resale certificate, you must still be aware of the different tax rates applicable in each county where you operate.
Final Words
Getting your New York Resale Certificate is a game-changer for your business—whether it’s an LLC, sole proprietorship, or corporation. It lets you buy inventory without paying sales tax upfront, saving you money and helping your business run smoothly. Whether you’re a small retailer or a large company, understanding and using this certificate correctly is crucial.
We hope this guide has made the process clearer and easier to understand. If you need any help or have more questions, Business Globalizer is here to support you every step of the way. Secure your New York Resale Certificate today and watch your business thrive!
Ready to get started? Let’s make your tax-free purchases happen!
