If your Illinois business buys goods with the intention of reselling them, you should become familiar with the use of a resale certificate. By obtaining a resale certificate, you can avoid paying state sales tax on certain items that you plan to resell. The sales taxes on those items are then collected when they are sold at retail.
Illinois resale certificate applicability
Illinois applies sales tax on the sales of "tangible personal property for use or consumption," which excludes real estate and "paper" assets, including stocks and bonds. If your business is responsible for paying sales taxes on these types of items, an Illinois certificate of resale allows your business to purchase these goods tax free and then resell them, with the sales tax paid by the buyer.
Before you can use a resale certificate, you must register your business with the state. This process varies depending on what type of company you have. For more detailed information on how to register your business in Illinois, see the Department of Revenue's instructions. Note that you may be responsible for filling out other tax forms as well.
After registering your business, you will receive an Illinois Certificate of Registration, which allows you to conduct business responsible for remitting sales taxes to the state. You must then display the certificate prominently in your place of business. Certificates of Registration are renewed automatically so long as you are up-to-date on filing and payment obligations.
The instructions for how to apply for a resale certificate in Illinois are fairly straightforward since you don't even have to send anything to the state. You are in charge of keeping track of your purchases, as described in more detail below.
How to use a resale certificate
Once your business is registered as reseller with the Illinois Department of Revenue, you must keep track of your tax-exempt purchases on a resale certificate. Certificate of resale (Form CRT-61) provides an easy way for you to do this, although you may use your own form so long as it contains all of the required information. No matter which format you use, you must provide the retailer with a copy.
On the form, you must include the name and business addresses of both the seller and purchaser. You must also include your retailer account ID number and/or your reseller number.
What could be tricky is making sure your purchases actually qualify as exempt from sales, so be sure to read the Department of Revenue's definitions regarding sales and use taxes carefully.
Expiration of Illinois resale certificates
The Illinois Department of Revenue notes that resale certificates documenting tax-exempt purchases must be updated at least once every three years.
If you'd like to have some peace of mind that you're complying with all applicable tax rules, you might consider working with an attorney or legal document preparation service, which can guide you through the process.
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