Also known as a Minnesota resale certificate, a resale license allows your business to buy goods from sellers for the purpose of reselling them to customers and not have to pay sales tax at the time of purchase. If you don't have this certificate, you'll find yourself paying unnecessary taxes for wholesale goods.
TL;DR (Too Long; Didn't Read)
The process for qualifying to use this certificate in Minnesota involves setting up your business properly, obtaining necessary tax identification numbers and registering to pay sales and use tax in the state. You'll then complete Form ST3 for each vendor from whom you plan to buy for resale purposes.
Minnesota Resale Certificate Basics
A Minnesota resale certificate is a form used to prove to a seller that your business is purchasing the items for resale and won't be liable for sales tax at the time of purchase. Instead, your business will collect any due sales and use tax when customers purchase the goods; this applies both for purchases at a physical location and through means such as the phone and internet. You'll then have to file regular sales and use tax returns and pay the money due to Minnesota to avoid paying penalties.
Note that there are a few warnings for when you use a MN resale certificate. The state will fine you $100 if you file this certificate simply to not pay sales tax and don't plan to really resell the items to customers. Furthermore, if you purchase goods using your Minnesota resale certificate and don't successfully resell them to customers, you'll need to pay the regular sales tax on the purchase.
Prerequisites for a Resale Certificate
Before you can qualify for a MN resale certificate, you need to have properly registered and set up your business. This typically involves declaring a business structure and name, registering with the state, applying for the necessary taxpayer identification numbers and setting up your sales-and-use tax account.
The type of tax identification number you need for the Minnesota resale certificate will depend on your business structure. If you're a sole proprietor and single-member limited liability company, you can often use your Social Security number unless you meet criteria such as hiring employees or paying federal excise taxes. Otherwise, you'll likely need to get both a federal employer identification number through the IRS and file with the state for a Minnesota taxpayer identification number too.
You'll also need to register for a Minnesota sales tax account using your business's identification number. This application process will ask how often your business plans to file a sales and use tax return; this will be annually, quarterly or monthly depending on how much tax you plan to owe each month. You'll also need to state the type of accounting method your business uses and determine if you also need to pay special or local taxes.
Completing Minnesota Form ST3
Once you have the necessary identification numbers, you can visit the Minnesota Department of Revenue website and download Form ST3, Certificate of Exemption. You'll need to print and fill out this form for each vendor from whom you purchase for resale purposes, and the vendors will keep the certificate on file for as long as you make purchases with them.
To fill out this form, you'll need to answer some questions about the purchase and provide details for both yourself and the seller. Some specific information you'll provide for the Minnesota resale certificate includes:
- Whether you're making a one-time purchase or entering a specific purchase agreement
- Your business's name, address and tax identification number(s)
- Your drivers' license number and state of issuance (if applicable)
- The seller's name and address
- The industry in which your business does work
- The reason for exemption, which will be option H – resale
After filling in these details, you'll both sign and print your name, write your job title and record the date. Make a copy of the form for yourself and then hand the form to the seller for record keeping. You don't need to send the form to the Minnesota government.
- Minnesota Employment and Economic Development: Tax Identification Numbers
- Sales Tax Handbook: Minnesota: Sales Tax Handbook
- Sales Tax State Permit: Why Your Business Needs a Minnesota Sellers Permit
- Minnesota Department of Revenue: Form ST3, Certificate of Exemption
- CorpNet: What Is a Reseller License?
- Minneapolis Business Portal: Register Your Business
- Minnesota Department of Revenue: Filing Information