When buying products to resell in the state of New Jersey, you can avoid paying sales tax on that purchase by presenting your New Jersey resale certificate.
Keep in mind that you should only use a resale certificate when you legitimately plan to resell, rent, or lease items or use them as parts or ingredients in products for resale. It’s not legal to use a resale certificate for items you plan to use yourself. (That’s even if those items are office supplies or other things you plan to use in the course of your business.)
Here’s what you need to know as a seller when using a New Jersey resale certificate, or if one of your customers presents a New Jersey resale certificate to you.
If you Wish to Use a New Jersey Resale Certificate
New Jersey has two separate resale certificates, here are the links to both:
- Form ST-3 Resale Certificate for in-state sellers.
- Form ST-3NR Resale Certificate for Non-New Jersey sellers.
You’re allowed to use these certificates to buy inventory, raw materials, and services tax-free as long as the form is filled out completely and correctly and you genuinely intend to to sell, lease, or rent the items you are purchasing tax-free. Make sure you don’t skip this step! You can be held legally liable if you buy items tax free but don’t sell them. If you find yourself later unable to sell the items, you can remit New Jersey use taxes on the goods or services once they’re determined unsaleable to get off the hook.
In general, New Jersey’s ST-3 resale certification requires the purchaser to provide their New Jersey tax identification number, but you can also provide a Federal Identification Number or an Out-of-State registration number when using the ST-3NR resale certificate.
You can find out more about New Jersey’s use of resale certificates by reading the NJ Department of Revenue’s Sales Tax Exemption Administration Bulletin S&U-6.
If You are Presented with a New Jersey Resale Certificate
You’re responsible for a few things when accepting a New Jersey resale certificate from a buyer. Failing to do any of these things and having a subsequent audit means that you’ll be the party on the hook for any fines and penalties. That said, the compliance steps are pretty easy.
- Make sure the resale certificate is fully completed – You’ll need to make sure the New Jersey resale certificate is properly completed and signed and includes the buyer’s New Jersey sales tax registration number. New Jersey retailers are also allowed to accept form ST-3NR from out-of-state sellers, and in this case make sure that the seller has provided their Federal Identification Number or their home state’s registration number.
- Verify it with the state – Here’s the link to check the validity of a New Jersey resale certificate and also make sure that your buyer’s sales tax registration number is valid and current. Here’s a handy guide to how you can verify retail sales certificates from every state.
- Don’t engage in fraud – This one’s kind of a no-brainer—I mean, “don’t participate in fraud” is pretty good business advice and something you’re probably well aware of, but we’re bringing it up here for our own due diligence. Colluding with a buyer to fraudulently make a sell without charging sales tax means you’ll be on the hook for fines, penalties, and maybe even worse things. Keep that in mind if a buyer ever gives you a resale certificate and asks you to look the other way!
Do you have questions or comments about New Jersey resale certificates? Start the conversation in our Sales Tax for eCommerce Sellers Facebook group!