Did you know that you can avoid paying sales tax most of the time when purchasing retail products for the purpose of reselling them?
To purchase items tax free for resale in the state of North Carolina, you’ll need to present a North Carolina Sales and Use Tax Agreement Certificate of Exemption to the merchant from whom you’re buying the merchandise to be resold.
Here are the basics of how to obtain, complete, and use this certificate and also what to do you if one is presented to you.
If you Wish to Use a North Carolina Resale Certificate
North Carolina has a pretty easy process for using a resale certificate. First, you must be registered for your North Carolina sales tax permit (remember, this means you’ll need to collect sales tax from your North Carolina customers). Then, you’ll just need to print out form E-595E Streamlined Sales and Use Tax Agreement Certificate of Exemption and do the following:
- Add your business name
- Add your business address
- Add your North Carolina tax ID number or FEIN
- Check the appropriate option under “type of business”
- Under “Reason for Exemption” choose “Resale”
After that, you’ll just need to sign the document and give it to the vendor for their files.
If you are not yet registered for your North Carolina sales tax permit, you can find instructions on our How to Register for a North Carolina Sales Tax Permit blog post. (Keep in mind that once you are registered for a sales tax permit you are required to collect and remit sales tax on taxable sales in North Carolina).
If you are Presented with a North Carolina Resale Certificate
If you’re a seller with nexus in North Carolina and a buyer provides North Carolina Sales and Use Tax Agreement Certificate of Exemption to purchase items for resale, you’ll need to make sure the buyer has completely filled out and signed the form. If the Resale box is checked as their Reason for Exemption you’ll need to double check that they’ve provided a North Carolina sales and use tax account id number.
If the buyer is out-of-state and does not have a North Carolina seller’s tax account number, they’ll need to provide their home state’s seller’s permit number or a statement indicating the out-of-state buyer is a seller who is not required to hold a permit.
Make sure that you file away every such certificate your business receives for audit purposes. The good news is that North Carolina does not have sellers “on the hook” if the resale certificate is fraudulent, provided that the certificate is complete and you accepted it in good faith. Still, you can always check the validity of a resale certificate online using the info from our blog post How to Verify a Resale Certificate in Every State.
If you have any questions about the certificate, you can check the North Carolina Department of Revenue’s Sales and Use Tax Frequently Asked Questions or contact the Taxpayer Assistance and Collection Center at 1-877-252-3052 (toll free).
Do you have questions or something to say? Start the conversation in the comments!