Should you verify a sales tax resale certificate?
June 8, 2017 | Sales Tax
By Suzanne Kearns
If you sell products online, you’ve likely been presented with a resale certificate by a buyer at some point. These buyers want to purchase your products tax-free so they can resell them to their customers. But any time a buyer presents you with a sales tax resale certificate, it’s up to you to verify that the certificate is valid, otherwise you could end up owing the sales tax even though you didn’t collect it.
Because every state handles resale certificates differently, you will need to learn the verification procedures in each state where you do business. Here are two of the most common ways states ask sellers to verify resale certificates.
- Verify the certificate online. Many states make it easy to verify a resale certificate by offering the service online. For example, if a Florida seller presents you with a resale certificate, you can simply log on to the Florida Department of Revenue’s verification portal and enter the certificate number to determine whether or not it’s valid. If you don’t have access to the internet, you can also call them at 1-877-FL-RESALE (877-357-3725). Some other states that allow online certificate verification are New York, Ohio, Kansas and Illinois.
- Call to verify the certificate. Verifying a resale certificate in some states is as easy as picking up a phone and calling to check on it. For example, the Nebraska Department of Revenue requires buyers to fill out Form 13 when purchasing tax-free goods and present it to the seller. Sellers can only accept the form if it is filled out completely, and then should call 800-742-7474 to verify that the certificate is valid. Other states that allow you to call to verify a resale certificate are Oklahoma, Pennsylvania, Rhodes Island and South Carolina.
If you aren’t already familiar with the rules in the states you sell in, you can find a complete list of state government websites at the IRS website and then inquire into the verification procedures. And if you’re not sure which states you have nexus in, be sure to take this free survey to determine where you should be collecting sales tax.
Penalties for accepting an invalid resale certificate
It’s in your best interest to do your due diligence when accepting a resale certificate, because if you accept an invalid one, it could come back to haunt you. For instance, if an audit finds that you accepted an invalid resale certificate, you could be required to pay the sales tax on the transaction.
And if you knowingly accept a resale certificate to help the buyer avoid paying sale tax illegally, some states will prosecute you. For example, doing that in California could land you in county jail for one year and a fine of $1,000 to $5,000. In Texas, you could be charged with a third degree felony for knowingly accepting a fraudulent resale certificate for sales between $750 and $20,000.
By taking the simple steps listed above to verify resale certificates, you’ll do all you can to minimize any risk to your business from buyers who would try to use fraudulent certificates.
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