If you have recently launched or are planning to launch a limited liability company (LLC) that will sell products or services in Indiana, you may want to get a sales tax exemption certificate, or several of them, before you start doing business, as this can save you a lot of time and money.
This document is known as a resale certificate in most other states and attaining one is a relatively simple process, as detailed in this step-by-step guide.
What is a Sales Tax Exemption Certificate?
If your LLC has a valid sales tax exemption 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 sales tax exemption 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 the sales tax, as well as possible fines or penalties.
Keep in mind, each sales tax exemption certificate, also known as a resale license, applies to a single vendor. This means you’ll need a sales tax exemption certificate for each one of your vendors.
You cannot use a sales tax exemption 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 sales tax exemption 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 Sales Tax Exemption Certificate in Indiana
You’ll need to obtain a blank copy of the sales tax exemption form from the Indiana Department of Revenue. The form is not filed with the state. You’ll simply fill it out, save it and then provide it to your vendor.
In a few states, a seller’s permit, or sales tax permit, also serves as a sales tax exemption certificate that applies to all vendors. But in most states, including Indiana, you’ll need a seller’s permit as well as sales tax exemption 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 sales tax exemption 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 Indiana Sales Tax Exemption Certificate
In Indiana, the revenue department handles the issuance of sales tax exemption certificates. Start by visiting the website, then follow these simple steps:
- Download the form from the link provided.
- Fill in your business name and address and your Indiana Registered Retail Merchant’s Certificate TID and LOC Number as shown on your certificate.
- Indicate whether the form is for ongoing use or for a one time purchase.
- Check the type of exemption being claimed.
- Sign the form and store in your records.
Again, you won’t file the certificate with the state. You’ll simply provide it to your vendor and keep a copy for your records.
Does an Indiana Sales Tax Exemption Certificate Expire?
In Indiana, sales tax exemption certificates do not expire unless they are provided for a single purchase.
Sales tax exemption certificates can be a bit of a hassle, but in Indiana, 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.