How to use or accept an Ohio resale certificate
- Sales Tax
- February 24, 2017 | Suzanne Kearns
If you buy or sell tangible personal property in Ohio, chances are you’ll either provide or accept a resale certificate at some point during your business dealings. These certificates make it legal for vendors to purchase products without paying sales tax[,] as long as they resell the products to an end user.
But in order to conduct the process legally, you need to understand the rules. If a customer presents you with a resale certificate, here’s what you need to know.
Presenting or accepting an Ohio resale certificate
According to the Ohio Department of Taxation, sellers will never need to request a resale certificate for nontaxable products, or from verified buyers that are always exempt, such as the federal government, the state of Ohio, or any other local government office (as long as the invoice reflects that the buyer is a tax exempt entity). But if any other buyer wants to purchase a taxable item tax-free, they will need to provide you with a valid resale certificate.
The state offers official certificates for both single unit exemptions and blanket exemptions, but also allows vendors to create their own or use another form as long as it include the buyer’s name and business address, and the reason for the claimed exemption. If the certificate is submitted in paper form, the buyer must sign it. If it’s presented in electronic form, no signature is required.
According to a representative at the Ohio Department of Taxation, sellers should keep a copy of the exemption certificate for at least seven years, and that includes both single unit exemptions and blanket exemptions. If a buyer issues you a blanket certificate, or if you present one to a seller, it must be renewed every seven years.
What are the penalties for misusing Ohio resale certificates?
According to the representative we spoke with, auditors can look at the past seven years of a vendor's activities. But if it’s discovered that a seller accepted invalid resale certificates, the auditors can then request records going back even further. If it’s found that resale certificates were improperly used, the vendor can be required to pay the owed taxes, plus penalties and interest.
It’s important to say in compliance with the state’s rules on resale certificates. Luckily, those rules are pretty straightforward and easy to follow.