If you’re a retailer or similar business, you don’t have to pay sales tax on the goods and services you purchase for the purpose of reselling, renting, or leasing them.
Example 1: Your business sells brand name bicycles to the public. You don’t pay sales tax when you buy those bicycles from the manufacturers.
Example 2: You are a bicycle repair shop. You don’t pay sales tax on the parts you buy for use in the repairs, nor for any services you have to outsource to complete those repairs, such as welding.
Example 3: You custom make bicycles to your clients’ specifications. You don’t pay sales tax on the materials used in construction: parts, paint, etc.
In order to receive the sales tax exemption, you must present a state resale certificate to your supplier at the time of the transaction. Both retailers and suppliers must abide by certain regulations in the use of the Florida resale certificate.
Sales Tax Exemption for Retailers
Purchases that qualify for the sales tax exemption include:
- Products that will be resold in their present form
- Physical components of products made or repaired by your business
- Services used in the manufacture or repair of those products
Purchases that DON’T qualify include:
- Tools and equipment used by your business
- Materials and services used for capital improvements to your business
- Office supplies
- Anything for your personal use
In order to get a Florida resale certificate, you must have a Florida sales tax permit. Florida is one of nine U.S. states that do not allow out-of-state resale certificates. The registration number from your sales tax permit must be included on your Florida Resale Certificate.
To obtain a Florida resale certificate, simply print one out from the Florida Department of Revenue website and fill it in. Your resale certificate is good until December 31 of the same year it was issued. So each January, you must make a new one with updated information.
Even if you present your supplier with a resale certificate, they are not obligated to give you the tax exemption. Target, for one, is well-known for refusing to accept resale certificates. The reason they might refuse is that they bear the responsibility for verifying that your certificate is valid, and could end up paying the sales tax plus penalties if it’s not.
Sales Tax Exemptions for Suppliers
When your buyer presents you with a Florida resale certificate, you are required to keep a record of each tax-exempt transaction. You can choose any one of these three methods:
- Keep a paper or electronic copy of the certificate in your files for three years (so that it can be inspected by Florida state auditors if necessary).
- Obtain a transaction authorization number by calling 877–357–3725, visiting Florida’s certificate verification site, or using the FL Tax-Verify mobile app. You supply your customer’s resale certificate number and receive an authorization number good for that one transaction only.
- For your regular customers, get an annual authorization number (which expires each December 31). Then you can batch upload your tax-exempt transactions with that customer at Florida’s certificate verification site.
Of course, in order to accept a resale certificate, your own business must be registered to collect sales tax in Florida.
Whether you’re a retailer or a supplier, we know you’d rather not hassle with all this “taxing” red tape: sales tax exemption, registration, and reporting in the state of Florida. Let our Xendoo tax experts and our bookkeeping team in Miami take that load off your shoulders while giving you the time and peace of mind to work on the parts of your business you actually love to do.