If you have recently launched or are planning to launch a limited liability company (LLC) that will sell products or services in Arizona, you’ll want to get a resale certificate, or several of them, before you start doing business, as this can save you a lot of time and money.
It’s a relatively simple process, as detailed in this step-by-step guide.
What is a Resale Certificate?
If your LLC has a valid resale certificate, you can buy goods from a wholesaler without paying sales tax, though you may pay a use tax. Depending on the size of your business, this can save you tens of thousands of dollars each year.
The catch is that whenever you do use a resale certificate to purchase goods, you are legally bound to resell those items and collect sales tax when you do so. If you do not resell those items, or fail to collect sales tax, the punishment could be liability for use tax on the items.
Keep in mind, each resale certificate, also known as a resale license, applies to a single vendor. This means you’ll need a resale certificate for each one of your vendors.
You cannot use a resale certificate to buy items you do not intend to resell, such as a new computer for your business. This would be tax fraud, a felony offense. You are only able to buy items tax-exempt if you are going to collect sales tax on them later.
Not all wholesalers will accept resale certificates, nor do they have to. They may choose not to because of the risk of expired or false certificates, which would put the wholesaler on the hook for the sales tax.
How to Apply for a Resale Certificate in Arizona
You will obtain the resale certificate form from the Arizona Department of Revenue. The form does not get filed with the Department of Revenue. You simply fill It out for each vendor, keep it on file and present it to them at the time of purchase.
In a few states, a seller’s permit, or sales tax permit, also serves as a resale certificate that applies to all vendors. But in most states, including Arizona, you’ll need a seller’s permit as well as resale certificates for each of your vendors.
The seller’s permit identifies you with your state as a collector of sales tax. If you sell tangible personal property or goods you are required to have a sales tax permit. In some states, even a service provider like a lawyer is required to have a sales tax permit and collect state sales tax.
The resale certificate applies to items that you buy for resale, or for parts that you buy to manufacture something for sale.
How to Fill out the Arizona Certificate of Resale
In Arizona, the Department of Revenue issues resale certificates. Start by visiting the website, then follow these simple steps:
- Download the form.
- Fill in your business name and address.
- Select whether the certificate applies to a single purchase transaction or for a specific time period.
- Fill in the nature of your business and a description of the items being purchased.
- Select any of these situations that apply.
- Fill in your name and sign the form.
Again, this form does not have to be submitted to the revenue department. You simply present it to the seller of the goods you’re purchasing.
Does an Arizona Resale Certificate Expire?
In Arizona, resale certificates expire based on the duration dates you specified on your resale certificate form. It’s best to create calendar reminders so you’re aware when expirations are coming up to ensure you’re able to present new forms to vendors in time and run your business without interruption.
Resale certificates can be a bit of a hassle, but in Arizona, they are an absolute necessity. So take the time to get certificates for each of your vendors to ensure full compliance with your state’s tax regulations.