Saturday, May 27, 2006


Here are some thoughts about accepting certificates (exemption and resale) from your customers:

1. GET THEM! Get them before you ship to avoid hassles down the road, and to assure that the sale IS exempt, and the sales rep isn't trying to slip something past you.
2. Make sure they are completely filled out, per the form's instructions.
3. Check the rules for the state where the delivery is made. If it's a "drop ship rule" state, you'll need the resale certificate (and registration number) from that state.
4. As a general rule, getting the certificate from the state where the final delivery is made is a good idea.
5. Make sure the registration number is from the correct state. Watch out for FEIN numbers, which are often used incorrectly.
6. Accept the certificates in "good faith." If there's something about the transaction that you know is not exempt, either because the certificate itself is obviously a problem, or you just know that what you're selling isn't exempt, then you should charge tax. You're not accepting it in good faith.
7. In certain situations, states put an added burden beyond good faith. To be safe, ask your customer to also provide you with a copy of whatever paperwork they got from the state (eg. the resellers permit). For even more protection, confirm the number is valid with the state. Some allow an automated process, confirmation by email, or may provide a look-up function on their web site.
8. Check expiration dates for the various states. You're probably in good shape if you refresh your certificates every three years. Simply go through your customer list and ask for a new certificate from one third of them every year. That way, you'll never have a certificate that's more than three years old.
9. Speaking of dates, make sure that the dates match your sale. It won't do you any good to get an exemption certificate that's effective in 2006 if your sales to the customer were in 2005.
10. There is software available to help you manage this process. I won't make any recommendations, but a web search may help you.
11. Follow the instructions, both on the form and on the state's web site when accepting certificates.

Sales Tax Guy
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