Update 7/24/2014: The Exemption Certificate Survival Guide has the latest information on resale certificates, including multijurisidiction certificates.
“Multijurisdiction” resale certificates, or uniform sales tax certificates, can be a boon for multi-state companies by eliminating the need to issue dozens of certificates to a single vendor. But they are also one of the most abused and misunderstood of all certificates.
What are the risks of using these forms incorrectly?
- Incorrectly issuing a multijurisdictional form can result in your vendor delaying your shipment or tax being charged.
- As a seller, accepting a these forms when not appropriate puts you at risk of audit liability that can potentially be extrapolated, with penalty and interest.
This post will explain how to avoid these risks when using the most popular multijurisdictional exemption certificate: the Uniform Sales & Use Tax Certificate—Multijurisdictional, published by the MultiState Tax Commission (MTC MJ for short).
What is the MTC MJ?
The MTC MJ is the standard form to which most people refer when discussing the “MultiJurisdiction” form (also sometimes called the MTC MJ, Multi-J or just Multi). Many companies use it, even for documenting exemptions in only one state, mostly because it is so widely available.
Is it a good idea?
If used properly, it is a perfectly fine form to issue or accept. The problem is that using it properly is not as clear-cut as it should be. Confusion, leading to liability, often arises when working with this familiar certificate.
How to use it correctly:
These guidelines will be relevant to both the entity issuing and the entity accepting the MTC MJ. In both cases, the key is to know when the form is appropriate to use.
- Use or accept as a RESALE certificate only. A key thing to remember is that the MTC MJ is, according to www.mtc.gov, ONLY “acceptable for use as a “blanket” resale certificate and for similar purposes.” This means that other exemption types – agricultural, government, exempt organizations, manufacturing, etc – CANNOT be documented using this form.
- Double check whether states are accepting the form. The MTC site makes clear that they are not guaranteeing that this form is still accepted by any of the states, “States listed on the certificate accepted this certificate as of July, 2000. States may change their policies for acceptance of the certificate without notifying the Multistate Tax Commission. You may check with the relevant state to determine the current status of the state’s acceptance policy.”
- Read the fine print. With three pages of instructions and conditions, many taxpayers over look little details, and there are lots of details. In the fine print, you will find all sorts of caveats for when the form is not appropriate.
For instance, the instructions caution that New Mexico will only accept the form for third party drop shipments and any other transactions must use a valid New Mexico resale certificate. This means, you can only use the form if you are NOT registered in NM. So to use it properly, you cannot put a NM registration number next to the NM section of the certificate. ME and WA have the same requirements; only for use if the buyer is NOT registered in their state. Clear as mud? The list of caveats and conditions goes on. These may seem trivial, but missing a detail can mean that you have accepted an invalid certificate.
With so many variables to watch for, it’s buyer beware with this form unless you are very familiar with the rules. The best policy is either do extensive research or select another form. Each state on the MTC MJ also publishes a state specific certificate that can be used for resale exemptions with far fewer caveats. Also, the Streamlined certificate covers many of the same states AND adds a level of liability protection for sellers accepting a fully completed certificate.
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