Sales Tax Exemption Certificate Expirations By State

The exemption certificate figures big in your sales tax toolbox. But that document isn’t going to do you much good if it’s out of date.

A sales tax exemption certificate means you, the seller, don’t have to collect and remit sales tax on certain products and services and to certain clients (such as schools, hospitals or churches) in a state. Your buyer produces a valid exemption certificate that you keep on file. Otherwise, you (the seller) have legal responsibility to assess and collect the sales tax from the purchaser and can be penalized later if you don’t.

It pays to know not only how to validate tax exemption certificates, but also how long they are good for.

Different forms

Exemption certificates come in different types. Most states have their own resale and exemption certificates that apply to purchases within their state; even client-created certificates are allowed under certain circumstances. The Streamlined Sales Tax form is also an alternative for states involved in the Streamlined Sales Tax initiative (but not for all states are, and in some cases this isn’t an alternative even in states that do participate in the SST).

Certificates must contain specific information: state Tax ID numbers, the name of the seller and customer, the type of exemption and a valid signature and date from the customer.

Do tax exempt forms expire?

It varies. Responsibility to determine the validity (and therefore expiration) of the sales tax exemption certificate is held by you, the business. An invalid certificate offers you no protection from sales tax liability.

Many states’ tax exemption certificates have no expiration: Arizona (the seller chooses the period of exemption); Arkansas; Colorado (this can depend on the purpose of the exemption); Georgia; Hawaii; Idaho; Indiana; Maine; Minnesota; Mississippi; Nebraska; New Mexico; New Jersey, New York, North Carolina; North Dakota; Ohio; Oklahoma; South Carolina; South Dakota; Tennessee; Texas; Utah; Vermont (where some forms do expire); Virginia (ditto); West Virginia; Wisconsin; and Wyoming.

In other states, exemption certificates expire after set periods, such as one year in Alabama and three years in Connecticut, Illinois (where three years is the recommended update period for a resale certificate), Iowa and Louisiana.

Certificates expire after four years in California, Michigan, Rhode Island and Washington; five years in Florida, Maryland, Missouri, Nevada and Pennsylvania; and 10 years in Massachusetts.

Also consider

• Even if there’s no expiration, some states require at least one purchase over a time (usually 12 months) for a certificate to remain valid. Utah was among the latest states to do this.
• It’s a good idea to update any state’s exemption certificate every few years even if there’s no expiration date.
• States alter expiration rules frequently. The sales tax exemption certificate for Kansas, for instance, happens to change on Oct. 1 this year. Check often with a state if you have many exempt sales there.
• A certificate might be specific to the seller and should be updated if any circumstances of the exempt sale changes.

If you think your business may be impacted by sales tax developments, contact TaxConnex. TaxConnex provides services to become your outsourced sales tax department. Get in touch to learn more.