DRS: IP 2000(14), Notice to Retailers on Sales and Use Tax Resale Certificates

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Informational Publication has been modified and superseded by
IP 2009(15)

IP 2000(14)

Notice to Retailers on Sales and Use Tax Resale Certificates


PURPOSE: This informational publication is intended as a general guide to retailers about the proper use of resale certificates. The gross receipts from the sale of a taxable item or service are subject to sales tax unless the purchaser issues a properly completed resales certificate (or exemption certificate) to you at the time of the sale, and you keep a copy for your records.


EFFECTIVE DATE: Upon issuance.


STATUTORY AUTHORITY: Conn. Gen. Stat. §12-410 and Conn. Agencies Regs. §12-410(5)-1.


Who may issue a resale certificate to a retailer?

A person who:

  • Is engaged in the business of selling goods or services of the type being purchased or who will resell the taxable service being purchased without change or will resell a service enumerated in Conn. Gen. Stat. §12-407(2)(i) as an integral, inseparable part of another service enumerated in Conn. Gen. Stat. §12-407(2)(i); and
  • Has a sales and use tax permit issued by the Department of Revenue Services (DRS), or is similarly registered by the revenue agency of another state (in which case additional information is needed); and
  • At the time of purchase, intends to sell what is being purchased in the regular course of business.

 Who may not issue a resale certificate to a retailer?

A person who:

  • Is not engaged in the business of selling the type of goods or services being purchased from the retailer; or
  • Does not intend to sell the goods or services being purchased in the regular course of business.

Example: A car dealer may not issue a resale certificate when purchasing a computer system. Car dealers are not engaged in the business of selling computers.

Example: A contractor who does not sell at retail may not issue a resale certificate for goods consumed in completing a construction contract.


What information must a resale certificate include?

The resale certificate must:

  • Be signed by the issuer;
  • Have the name and address of the issuer;
  • Describe the general character of the property or service sold by the issuer in the regular course of business;
  • Describe the property or service being purchased by the issuer from the seller; and
  • Have the 10-digit Connecticut tax registration number as it appears on the issuer’s Connecticut Sales and Use Tax Permit. (See below for out-of-state retailers.)

You cannot accept the purchaser’s tax registration number instead of a resale certificate. DRS does accept the Multistate Tax Commission’s Uniform Sales & Use Tax Certificate — Multijurisdiction, as a valid resale certificate.


Is additional information needed if an out-of-state business that is not required to have a Connecticut Sales and Use Tax Permit issues a resale certificate?

The Connecticut resale certificate should have the tax identification number from the issuer’s state of business, or, if none, the Federal Employer Identification Number.

In addition, the issuer must attach to the resale certificate proof that the issuer is engaged in business, including a location and telephone number. This could be:

  • A brochure
  • Business stationery
  • A business card

Finally, the issuer should attach a statement to the resale certificate stating that the issuer is not required to have a Connecticut Sales and Use Tax Permit because it is not making sales in Connecticut or making sales that are otherwise subject to Connecticut sales and use taxes.


Must I obtain a new resale certificate for each purchase by the same purchaser?

No. A resale certificate may be issued for one purchase or may be issued as a blanket certificate for a continuing line of purchases. To use a resale certificate for a continuing line of purchases, the purchaser marks the certificate "Blanket Certificate."

A blanket certificate is only valid for:

  • Purchases of items or services described in the certificate; and
  • The period in which the issuer is purchasing those items for resale. (The certificate must be renewed at least every three years from the date it is issued.)

 What is my responsibility in accepting a resale certificate?

You may only accept a resale certificate in good faith from the issuer. The property purchased must be similar to or of the same general character as what you could reasonably assume the issuer would sell. If a service is being purchased, it must either be similar to or of the same general character as what you could reasonably assume the issuer would resell. If a service enumerated in Conn. Gen. Stat. §12-407(2)(i) is being purchased, you must reasonably assume that it will become an integral, inseparable component part of another service enumerated in Conn. Gen. Stat. §12-407(2)(i). You may not accept a resale certificate if you have reason to believe that:

  • The issuer does not ordinarily sell the types of goods or services purchased; or
  • The goods or services will not be resold.

Example: If an auto repair shop tries to buy a computer using a resale certificate, you should not accept the certificate. You have reason to believe that auto repair shops do not ordinarily sell computers in the regular course of business.

Example: If a computer store tries to buy a personal computer using a resale certificate and asks that it be delivered to the store owner’s home, you should not accept the resale certificate. You have reason to believe that the computer will not be resold.

Example: A management company provides taxable services to industrial, commercial or income-producing real property and contracts with a protective services company for taxable watchman services to guard the property it manages. It may purchase the protective services using a resale certificate. However, if the management company purchases protective services to guard its own offices, you should not accept a resale certificate because the management company is not reselling the services as an integral, inseparable part of its services.


How long should I keep resale certificates that have been issued to me?

You should keep resale certificates for at least six years. Do not mail resale certificates to DRS.


What penalties are imposed for the improper issuance or acceptance of a resale certificate?

DRS can review resale certificates and make audit assessments either against retailers who accept improperly issued certificates, or against purchasers who improperly issue resale certificates, or against both the retailer and the purchaser. Knowingly false statements made on resale certificates are punishable by a fine not to exceed $2,000 or by imprisonment not to exceed one year, or both.


EFFECT ON OTHER DOCUMENTS: This Informational Publication supersedes Informational Publication 93(4.2), Notice to Retailers Regarding Sales and Use Tax Resale Certificate.


EFFECT OF THIS DOCUMENT: An Informational Publication is a document that addresses frequently asked questions about a current DRS position, policy or practice, usually in a less technical question and answer format.


FOR FURTHER INFORMATION: Please call the Department of Revenue Services during business hours, Monday through Friday:

  • 1-800-382-9463 (toll-free within Connecticut), or
  • 860-297-5962 (from anywhere).

TTY, TDD, and Text Telephone users only may transmit inquiries 24 hours a day by calling 860-297-4911.


FORMS AND PUBLICATIONS: Forms and publications are available all day, seven days a week:

  • Internet: Preview and download forms and publications from the DRS Web site: http://www.ct.gov/drs
  • Telephone: Call 860-297-4753 (from anywhere), or 1-800-382-9463 (toll-free within Connecticut) and select Option 2 from a touch-tone phone

IP 2000(14)
Sales and Use Tax
Resale Certificates
Issued 07/31/00