If you are a small business owner who sells online to customers in the US or have an ecommerce store, you need to be aware of the sales tax rules and regulations in each state where you do business. One of the most important aspects of sales tax compliance is collecting and managing sales tax exemption certificates.
Sales tax exemption certificate expiration and renewal date for each state in the US
Sales tax exemption certificates are documents that allow you to buy or sell certain goods or services without paying sales tax. They are issued by the state where you do business and have different rules and requirements depending on the state.
Some states also have different types of exemption certificates for different purposes, such as resale, manufacturing, or nonprofit.
In this blog post, I will provide you with a state-by-state guide to sales tax exemption certificate expiration dates and renewal procedures for 2024. I will also provide you with some tips and resources to help you manage your exemption certificates more effectively.
What are sales tax exemption certificates and why do you need them
Sales tax exemption certificates are documents that validate sales tax exempt purchases by explaining why the buyer qualifies for tax-exempt status. There are several reasons why sales tax would not apply to normally taxable sales. Maybe the buyer will resell the goods or incorporate them into products they’re manufacturing. Perhaps the buyers themselves are exempt entities, as is generally the case with the federal government and nonprofit organizations like public schools.
If you sell to customers who are eligible for sales tax exemptions, you need to collect the appropriate and properly completed form from them at the point of sale. The exemption certificate should then be stored in a secure and easily accessible manner for at least the entire audit period. And those vary.
There’s generally a three-year statute of limitations on tax audits in New York, though as the New York State Department of Taxation and Finance reminds, the statute of limitations doesn’t always apply.
Collecting and managing exemption certificates is crucial for your sales tax compliance. If you’re audited and can’t produce a certificate to justify an exempt sale, you may be responsible for the applicable taxes, as well as potential penalties.
How do you know when your sales tax exemption certificates expire and how to renew them
Unfortunately, there’s no simple answer to this question. Expiration dates and renewal procedures for sales tax exemption certificates vary by state, by situation, and, in some cases, by the type of certificate. Some sales tax exemption certificates are intended to last as long as there’s a business relationship between the buyer and the seller (provided the information is accurate and up to date). Some certificates are project-specific and cease to be valid after the project is complete. And some certificates will expire on a specific date or after a set amount of time has passed.
Since many forms expire and different certificates expire at different times, it’s important for you to develop a process for keeping track of each certificate’s status. That way, you can request updated exemption certificates as needed.
To help you with this task, I have compiled a table that summarizes the expiration dates and renewal procedures for sales tax exemption certificates for each state in the US in 2024. The table also includes links to the official state websites where you can find more information and download the forms you need.
| State | Expiration date | Renewal procedure | Source |
|---|---|---|---|
| Alabama | No expiration date | No renewal required | Alabama Department of Revenue |
| Alaska | No state sales tax | N/A | Alaska Department of Revenue |
| Arizona | No expiration date | No renewal required | Arizona Department of Revenue |
| Arkansas | No expiration date | No renewal required | Arkansas Department of Finance and Administration |
| California | 4 years from the date of issuance | Submit a new certificate before the expiration date | California Department of Tax and Fee Administration |
| Colorado | No expiration date | No renewal required | [Colorado Department of Revenue] |
| Connecticut | 3 years from the date of issuance | Submit a new certificate before the expiration date | [Connecticut Department of Revenue Services] |
| Delaware | No state sales tax | N/A | [Delaware Division of Revenue] |
| Florida | 5 years from the date of issuance | Submit a new certificate before the expiration date | [Florida Department of Revenue] |
| Georgia | No expiration date | No renewal required | [Georgia Department of Revenue] |
| Hawaii | No expiration date | No renewal required | [Hawaii Department of Taxation] |
| Idaho | No expiration date | No renewal required | [Idaho State Tax Commission] |
| Illinois | 5 years from the date of issuance | Submit a new certificate before the expiration date | [Illinois Department of Revenue] |
| Indiana | 2 years from the date of issuance | Automatic renewal at no extra charge | [Indiana Department of Revenue] |
| Iowa | 5 years from the date of issuance | Submit a new certificate before the expiration date | [Iowa Department of Revenue] |
| Kansas | No expiration date | No renewal required | [Kansas Department of Revenue] |
| Kentucky | No expiration date | No renewal required | [Kentucky Department of Revenue] |
| Louisiana | 3 years from the date of issuance | Submit a new certificate within 30 days of the expiration date | [Louisiana Department of Revenue] |
| Maine | No expiration date | No renewal required | [Maine Revenue Services] |
| Maryland | No expiration date | No renewal required | [Maryland Comptroller] |
| Massachusetts | No expiration date | No renewal required | [Massachusetts Department of Revenue] |
| Michigan | 4 years from the date of issuance | Automatic renewal unless cancelled | [Michigan Department of Treasury] |
| Minnesota | 3 years from the date of issuance | Submit a new certificate before the expiration date | [Minnesota Department of Revenue] |
| Mississippi | No expiration date | No renewal required | [Mississippi Department of Revenue] |
| Missouri | 5 years from the date of issuance | Submit a new certificate before the expiration date | [Missouri Department of Revenue] |
| Montana | No state sales tax | N/A | [Montana Department of Revenue] |
| Nebraska | No expiration date | No renewal required | [Nebraska Department of Revenue] |
| Nevada | No expiration date | No renewal required | [Nevada Department of Taxation] |
| New Hampshire | No state sales tax | N/A | [New Hampshire Department of Revenue Administration] |
| New Jersey | No expiration date | No renewal required | [New Jersey Division of Taxation] |
| New Mexico | No expiration date | No renewal required | [New Mexico Taxation and Revenue Department] |
| New York | No expiration date | No renewal required | [New York Department of Taxation and Finance] |
| North Carolina | No expiration date | No renewal required | [North Carolina Department of Revenue] |
| North Dakota | No expiration date | No renewal required | [North Dakota Office of State Tax Commissioner] |
| Ohio | No expiration date | No renewal required | [Ohio Department of Taxation] |
| Oklahoma | No expiration date | No renewal required | [Oklahoma Tax Commission] |
| Oregon | No state sales tax | N/A | [Oregon Department of Revenue] |
| Pennsylvania | No expiration date | No renewal required | [Pennsylvania Department of Revenue] |
| Rhode Island | No expiration date | No renewal required | [Rhode Island Division of Taxation] |
| South Carolina | No expiration date | No renewal required | [South Carolina Department of Revenue] |
| South Dakota | No expiration date | No renewal required | [South Dakota Department of Revenue] |
| Tennessee | No expiration date | No renewal required | [Tennessee Department of Revenue] |
| Texas | No expiration date | No renewal required | [Texas Comptroller of Public Accounts] |
| Utah | No expiration date | No renewal required | [Utah State Tax Commission] |
| Vermont | No expiration date | No renewal required | [Vermont Department of Taxes] |
| Virginia | No expiration date | No renewal required | [Virginia Department of Taxation] |
| Washington | No expiration date | No renewal required | [Washington Department of Revenue] |
| West Virginia | No expiration date | No renewal required | [West Virginia State Tax Department] |
| Wisconsin | No expiration date | No renewal required | [Wisconsin Department of Revenue] |
| Wyoming | No expiration date | No renewal required | [Wyoming Department of Revenue] |
What are some common mistakes to avoid when managing sales tax exemption certificates?
Sales tax exemption certificates are valuable documents that can save you from paying unnecessary taxes or facing penalties for non-compliance. However, managing them can be tricky and prone to errors. Here are some of the common mistakes that you should avoid when dealing with exemption certificates:
- Not collecting the right certificate for the exemption. Different states have different forms and requirements for exemption certificates. You need to make sure that you collect the correct and valid certificate for each state and each type of exemption. For example, some states have separate certificates for resale and manufacturing exemptions, while others use the same form for both. Some states also have specific certificates for certain industries or purposes, such as agriculture, construction, or education.
- Not collecting the certificate at the time of sale. The best practice is to collect the exemption certificate from your customer before or at the time of the transaction. This way, you can verify the information and ensure that the exemption is valid and applicable. If you wait until after the sale, you may have trouble contacting the customer or obtaining the certificate. Some states also have deadlines or limitations for accepting exemption certificates after the sale. For example, in Texas, you have 60 days from the date of sale to obtain a valid exemption certificate from your customer. After that, you are liable for the tax unless you can prove that the sale was exempt by other means.
- Not validating the certificate immediately. Once you collect the exemption certificate from your customer, you should validate it as soon as possible. This means checking that the certificate is complete, accurate, and current. You should also verify that the customer’s name, address, and tax identification number match the records of the state taxing authority. You can use online tools or services to help you with this process. For example, the Multistate Tax Commission offers a free online verification system for exemption certificates.
- Not renewing the certificate on time. Some exemption certificates have expiration dates and need to be renewed periodically. You should keep track of the expiration dates and request new certificates from your customers before the old ones expire. Otherwise, you may lose the exemption and have to pay tax on the sales. You can use the state-by-state guide above to find out the expiration dates and renewal procedures for each state.
- Not storing the certificate in a secure and accessible location. You are required to keep the exemption certificates on file for as long as the state statute of limitations for sales tax audits, which can range from three to six years or more. You should store the certificates in a secure and accessible location, preferably electronically, so that you can retrieve them easily when needed. You should also organize the certificates by state, customer, and type of exemption, and update them regularly. You can use software or services to help you with this task. For example, Avalara CertCapture is a cloud-based solution that automates the collection, validation, storage, and management of exemption certificates.
How do I know if my business is eligible for a sales tax exemption certificate
To claim a sales tax exemption, you need to meet the criteria set by the state where you do business. The criteria may vary depending on the type of exemption, the type of business, and the type of product or service. Generally, you may be eligible for a sales tax exemption certificate if:
- You intend to resell the product or service to another customer who will pay sales tax on the final sale. This is called a resale exemption, and it requires a resale certificate.
- You intend to use the product or service for a purpose that is exempt from sales tax by the state law. This may include manufacturing, research and development, agriculture, education, health care, or nonprofit activities. This is called a use-based exemption, and it requires an exemption certificate specific to the purpose.
- You are an exempt entity, such as a government agency, a nonprofit organization, or a religious institution. This is called an entity-based exemption, and it requires an exemption certificate specific to the entity.
To find out the eligibility criteria and the required documentation for each state and each type of exemption, you can use the state-by-state guide above or visit the official state websites.
The difference between resale and manufacturing exemptions
Resale and manufacturing exemptions are two common types of sales tax exemptions that apply to businesses that buy or sell products or services. However, they have different rules and requirements depending on the state.
A resale exemption allows a business to buy a product or service without paying sales tax if the business intends to resell it to another customer who will pay sales tax on the final sale. For example, if you are a distributor who buys products from a manufacturer and sells them to retailers, you can claim a resale exemption on your purchases from the manufacturer. To claim a resale exemption, you need to provide a resale certificate to the seller, which proves that you are registered to collect and remit sales tax in the state where the sale occurs. A resale certificate is usually valid for as long as you have a business relationship with the seller, unless it is revoked or cancelled.
A manufacturing exemption allows a business to buy a product or service without paying sales tax if the business intends to use it in the manufacturing process of another product or service that will be sold. For example, if you are a manufacturer who buys raw materials, machinery, or equipment to produce finished goods, you can claim a manufacturing exemption on your purchases. To claim a manufacturing exemption, you need to provide an exemption certificate to the seller, which proves that you are engaged in manufacturing activities in the state where the sale occurs. A manufacturing exemption certificate may have an expiration date and need to be renewed periodically, depending on the state.
The scope and definition of manufacturing exemptions may vary by state. Some states have broad exemptions that cover all items used in the manufacturing process, while others have narrow exemptions that only cover certain items or stages of the process. Some states also have specific exemptions for certain industries or products, such as food, clothing, or software