Tax-exempts need certificates
Retailers buying or selling for resale need sales tax license
A notice the Alabama Revenue Department sent to retailers Nov. 4 about new certification requirements for statutorily tax-exempt organizations — such as United Way agencies and YMCAs — caused confusion for retailers, prompting the department to send a clarifying notice out Nov. 18 related to retailers buying or selling for resale.
The Alabama Retail Association sought further clarification from the Revenue Department about the various groups and ways merchandise can be purchased tax free and here’s what we learned:
STATUTORILY TAX-EXEMPT GROUPS
As of 2016, these groups need a certificate of exemption (Form STE-1) as proof of a sales, use or lodging tax exemption. Not all nonprofits are exempt. Examples of statutorily tax-exempt organizations include Boy and Girl Scouts, YMCAs, United Way agencies and volunteer fire departments. A more complete, but not all-inclusive list can be found in the Alabama Code under Title 40, Chapter 9. Verify an exemption number and its expiration date through My Alabama Taxes, or MAT, on the home page. Under “I want to …,” click “Verify Exemption Certificate.” Several ARA members requested a sample letter to send to their tax-exempt group customers to remind them that they will need an exemption certificate as of Jan. 1. Go here for a sample letter.
RETAILERS BUYING OR SELLING FOR RESALE
When you make purchases for resale, provide your vendors with a copy of your sales tax license. When selling to another retailer that plans to resell, obtain a copy of the customer retailer’s sales tax license. Retailers are issued a paper Alabama Sales Tax License when you register with the Revenue Department as a retailer. If you need a copy of your license, you can print a copy from your My Alabama Taxes account or contact the Business Registration Unit at (334) 242-1584. Anyone with a sales tax account and registered on MAT may also log in to their MAT account and choose the option to verify a sales tax account or direct pay permit. This link explains the process.
WHOLESALERS AND MANUFACTURERS
Exemption certificates (Form STE-1) for statutorily exempt organizations are the same as those for wholesalers and manufacturers. Each certificate contains the reason for the exemption and lists restrictions or additional exemption information. Wholesalers and manufacturers are not required by law to obtain a certificate of exemption but having a certificate could make purchasing raw materials or items for wholesale easier. Download a certificate application here. If your business sells both on a wholesale basis and retail (to the end user of a product), you are considered a dual business and will need a sales tax license, rather than an exemption certificate.
GOVERNMENTS, PUBLIC SCHOOLS AND CERTAIN PUBLIC UTILITIES
Governments (federal, state, county or city), public schools and certain public utilities can continue to present Revenue Department letters or copies of state law as a proof of exemption.
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ARA STAFF CONTACTS
Nancy King Dennis | 334.551.0643 | 800.239.5423
Brett Johnson | 334.551.0641 | 800.239.5423