If you have recently launched or are planning to launch a limited liability company (LLC) that will sell products or services in Missouri, you may want to get an exemption 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 an Exemption Certificate?
If your LLC has a valid exemption certificate, or 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 an 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 costly fines or potential jail time.
Keep in mind, each exemption 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 an 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 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 an Exemption Certificate in Missouri
In Missouri, you’ll need to obtain the exemption certificate form from the Department of Revenue. The certificate is not filed with the state of Missouri, it’s simply kept on file by the seller.
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 Missouri, you’ll need a seller’s permit for your business as well as 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 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 Missouri Exemption Certificate
In Missouri, the Department of Revenue handles the issuance of resale certificates. Start by visiting the website, then follow these simple steps:
- On the Forms and Manuals page, scroll down to the 149 link and download the form.
- In the first section, fill out your business information, including your Missouri Tax ID Number.
- Next, enter your seller’s information.
- The next several fields contain product and sales-specific tax information. Review and check off the boxes that apply to your business.
- Finally, sign and date the form and keep a copy for your records.
For assistance, contact the Missouri Department of Revenue at (573) 751-2836 or [email protected].
Does a Missouri Exemption Certificate Expire?
In Missouri, exemption certificates expire after five years. It’s best to create calendar reminders so you’re aware when expirations are coming up to ensure you’re able to apply for renewal in time and run your business without interruption.
Exemption certificates can be a bit of a hassle, but in Missouri 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.