Sales tax exemption certificates on invoices
What a resale or exemption certificate is, why you keep one before you skip sales tax, and how to show the exemption on the invoice.
Some buyers do not pay sales tax on a purchase, for example a business that buys goods to resell, or certain non-profit and government buyers. The seller usually cannot simply take the buyer's word for it. In most states the seller is expected to collect a valid exemption or resale certificate from the buyer and keep it on file. Without one, a state auditor may hold the seller liable for the uncollected tax. The forms and the rules differ by state. Some states accept a multistate uniform certificate issued by the Multistate Tax Commission, while others require their own form. Check the state's department of revenue. 4invoices does not validate certificates; it only lets you set a zero rate on a line and add a note.
- Get the certificate before you invoice without sales tax, not after.
- Rules and forms differ by state; some accept a multistate uniform certificate.
- Keep the certificate with your records for as long as the state requires.
- Note the exemption on the invoice and set the line tax rate to zero.
How it works
Ask the customer for the certificate. Request it before the first exempt sale. Ask for the state form your sale requires.
Check that it is complete. Look for the buyer's name and address, the reason for the exemption, the buyer's tax ID or permit number where required, the date, and a signature.
Confirm that it fits the sale. A resale certificate covers goods bought for resale, not goods the buyer uses itself. Check the state's rules for what the certificate covers.
Invoice without the tax and note why. Set the tax rate on the exempt lines to zero and add a note such as the exemption type and the certificate reference.
Keep the certificate on file. Store it with the invoices it supports and renew it when the state requires. Ask your accountant how long to keep it.
Legal references
- State department of revenue rules on exemption and resale certificates — each state sets its own forms and retention.
- Multistate Tax Commission (MTC) Uniform Sales and Use Tax Exemption/Resale Certificate — accepted by some states.
- South Dakota v. Wayfair, Inc. (2018) — background on why sellers track sales and exemptions state by state.
Frequently asked questions
Can I skip sales tax if the customer says they are exempt?
Not safely. In most states you should hold a valid certificate for the sale. Without it, the state may assess the tax against you.
Does a resale certificate work in every state?
No. Each state has its own rules and forms, and some accept a multistate form. Check the destination state's department of revenue.
How long should I keep exemption certificates?
Follow the state's retention rule and your accountant's advice. A common practice is to keep them at least as long as the sales tax records they support.
Does 4invoices manage exemption certificates?
No. 4invoices does not store or validate certificates or verify tax IDs, and it does not connect to any tax authority. You can set a tax rate of zero on a line and add a note to the invoice, and download it as a PDF.