If you run an Ecommerce or CPG business in Connecticut, securing a Connecticut Resale Certificate is a smart move to protect your margins and streamline operations.
This certificate allows you to purchase inventory and raw materials tax-free, helping you lower upfront costs, stay competitive in pricing, and remain compliant with Connecticut sales tax laws.
Understanding Resale Certificates in Connecticut
What is a Connecticut Resale Certificate?
In Connecticut, a Sales & Use Tax Resale Certificate is a document issued by the Connecticut Department of Revenue Services that allows businesses to:
- Purchase goods without paying sales tax, provided these goods are intended for resale to their customers in the normal course of their business.
- Make tax-exempt purchases of inventory and materials that will become part of the products they sell by presenting a valid resale certificate to their suppliers.
The purpose is to prevent double taxation once at the wholesale level and again at the point of retail sale.
However, a Connecticut resale certificate is not a blanket exemption from all sales tax obligations. Businesses are still required to collect and remit sales tax on taxable sales to end consumers.
Why do you need a Resale Certificate in Connecticut?
Obtaining a resale certificate in Connecticut offers several significant advantages for businesses that purchase goods for resale.
Here are some key benefits:
- Avoid Paying Sales Tax on Inventory: The most direct benefit is that you can purchase inventory and materials for resale without paying Connecticut‘s sales tax upfront.
- Maintain Competitive Pricing: By not paying sales tax on the cost of goods, businesses have more flexibility in setting competitive prices for products in the Connecticut market. This can be a crucial advantage, especially in price-sensitive industries.
- Legal Compliance: Possessing and using a valid resale certificate for eligible purchases ensures businesses comply with Connecticut’s sales tax laws and regulations to avoid penalties.
In Connecticut, the specific form required for a resale certificate for multiple and recurring purchases is the Sales and Use Tax Resale Certificate.
When filling out the resale certificate, a purchaser must include the Sales & Use Tax Permit to identify that it is registered with the Connecticut Department of Revenue Services and authorized to make tax-exempt purchases for resale.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
A Connecticut Sales Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. A Connecticut Resale Certificate, on the other hand, allows you to purchase goods tax-free from suppliers if those goods are intended for resale. To use a resale certificate, you must have an active sales tax permit.
Who Can Use a Resale Certificate in Connecticut?
Businesses that purchase goods for resale can use a Connecticut Resale Certificate. To do so, the business must actively sell taxable tangible products and hold a valid Connecticut Sales Tax Permit.
How to Get a Resale Certificate in Connecticut: A Step-by-Step Guide
Getting a resale certificate in Connecticut is simple, but you’ll need to meet a few key requirements first. Here’s how to do it:
1. Make Sure You’re Eligible
Your business must sell taxable goods or services and be registered with the Connecticut Department of Revenue Services. Only businesses with a valid Connecticut Sales Tax Permit can use a resale certificate.
2. Get a Connecticut Sales Tax Permit
If you don’t already have one, apply for a Connecticut Sales Tax Permit through the MyConnectCT website. This permit is required before you can issue or use a resale certificate. Need help? Read our blog: How to Get a Seller’s Permit in Connecticut
3. Gather Your Business Information
You’ll need basic business details to complete the resale certificate, including:
- Your business information (name and address)
- Your description of the property or service that you are selling in the regular course of business
- Your description of the property or service being purchased from the seller
- Your Connecticut Tax Registration Number, which appears on the Sales and Use Tax Permit
- Your signature, title, and the date of the purchase
4. Complete the Resale Certificate Form
Download and fill out the Connecticut Resale Certificate from the Connecticut Department of Revenue Services website. You’ll present this form to your suppliers when making tax-exempt purchases.
5. Submission
No submission is required in Connecticut. You don’t need to submit the resale certificate to the state. Instead, give the completed form directly to your suppliers when buying items for resale.
6. Pay Any Applicable Fees
There’s no cost to use the resale certificate, but you’ll need a valid Connecticut Sales Tax Permit, which costs $100 to register. To see if there’s a cost for the permit, check out our guide on Sales Tax Permit fees.
7. Understand Renewal Requirements
Resale certificates are valid only while the buyer continues to resell the items listed on the certificate. While the certificate itself doesn’t “expire” in the same way a permit does, it’s a best practice to provide updated certificates to your suppliers at least every three years.
How to Use a Resale Certificate in Connecticut
To properly utilize your resale certificate in Connecticut when making tax-exempt purchases for resale, you’ll need to present a valid copy of your Connecticut Sales and Use Tax Resale Certificate to your supplier at the time of purchase.
Connecticut generally does accept resale certificates issued by other states. However, there might be specific conditions:
- Good Faith Acceptance: Vendors in Connecticut will typically accept an out-of-state resale certificate in good faith, provided it contains all the necessary information (buyer’s name, address, seller’s permit number from the issuing state, reason for exemption, etc.).
- Reciprocity: The acceptance might be based on reciprocal agreements with the state that issued the certificate. While Connecticut is not a member of the Streamlined Sales Tax Agreement (SSTA), it does accept the Multistate Tax Commission (MTC) Uniform Sales & Use Tax Certificate Multijurisdiction, which facilitates acceptance of a uniform certificate.
It’s always a good idea to confirm the vendor’s policy on accepting out-of-state certificates beforehand.
For more information regarding sales tax exemption laws in Connecticut, you may visit the state website.
Multi-Jurisdictional Resale Certificates
A multi-jurisdictional resale certificate is a standardized form to simplify tax-exempt purchases for businesses that operate and make purchases for resale across state lines.
Unlike a standard resale certificate issued by a single state, a multi-jurisdictional certificate aims to be recognized and accepted by multiple states as valid proof that the goods being purchased are intended for resale and are therefore exempt from sales tax at the time of purchase.
However, it’s crucial to understand that not all states accept these multi-state forms, and acceptance can come with specific conditions.
There are two primary types of multi-jurisdictional resale certificates that a business operating in or selling to vendors in Connecticut might encounter:
- Uniform Sales & Use Tax Resale Certificate – Multijurisdiction Form: This is a widely recognized form accepted by a significant number of states (though not all). Connecticut accepts this form as a valid resale certificate, but not as a valid exemption certificate for any other purpose. For Connecticut-based buyers, it should include their Connecticut Sales Tax Permit number. Out-of-state purchasers should have the tax identification number from the issuer’s state of business or, if none, the Federal Employer Identification Number (FEIN). You can find this form on the Multistate Tax Commission (MTC) website.
- Streamlined Sales Tax (SST) Certificate of Exemption: The state of Connecticut is not a Member State of Streamlined Sales Tax of the Streamlined Sales Tax Governing Board website. As such, it does not accept the SST Certificate of Exemption for qualifying resale purchases.
Businesses need to verify whether Connecticut accepts these multi-jurisdictional certificates and if there are any specific requirements or limitations on their use within the state. This is to avoid any audit issues.
Responsibilities When Using or Accepting a Resale Certificate in Connecticut
Buyer Responsibilities
If you’re using a Connecticut resale certificate, you’re responsible for ensuring it’s used only for purchases of goods or services you intend to resell. Using it for personal or operational items (like office supplies or equipment) is illegal and may lead to penalties.
- Connecticut-based buyers: Provide a fully completed Sales & Use Tax Resale Certificate to your suppliers for qualifying purchases.
- Out-of-state buyers: While Connecticut prefers its own resale certificate form, Connecticut vendors will accept a valid resale permit issued by your home state. It does not matter whether the state or country in which the purchaser has a place of business imposes sales and use taxes.
Seller Responsibilities
As a seller in Connecticut, accepting a resale certificate comes with the responsibility of verifying and retaining proper documentation for tax-exempt sales. You must:
- Accept the certificate in good faith
- Ensure it includes all required information: buyer’s name, address, sales tax permit number (or equivalent), reason for exemption, and signature.
- Reject the certificate if the items aren’t for resale (e.g., personal or business use)
Keep records for at least 6 years: A properly completed resale certificate is your official proof of why sales tax wasn’t collected. All such records must be kept for at least six years for potential audits by the Department of Revenue Services.
Frequently Asked Questions About the Connecticut Resale Certificate
Are There Penalties for Misusing a Resale Certificate in this State?
Yes. Improper use of a resale certificate, such as using it for personal or non-resale purchases, can result in serious penalties. False statements made knowingly on resale certificates are punishable by a fine of not more than $5,000 or by imprisonment not more than five years, or both.
Always use the Connecticut Resale Certificate correctly and only for qualified resale purchases to avoid issues.
Does a Connecticut Resale Certificate Expire?
The Connecticut resale certificate doesn’t have a set expiration date printed on the form. However, its validity depends on two key factors:
- Active Sales and Use Tax Permit: The certificate remains valid only while the buyer holds an active Connecticut Sales & Use Tax Permit. This permit expires every two years but is typically auto-renewed by the Department of Revenue Services (DRS) if the account stays active and in good standing.
- Intent to Resell: The certificate applies only to purchases the buyer intends to resell in the normal course of business. If the buyer stops reselling those items, the certificate can no longer be used for such purchases.
For sellers, even though there’s no expiration in the form itself, the Department of Revenue Services guidance recommends renewing resale certificates at least every three years from the date of issue. This serves as a best practice for sellers to keep accurate, up-to-date records for audit purposes and to verify that the buyer is still eligible to use the certificate. Buyers should also issue an updated resale certificate if requested or if their business details, like the permit number, change.
How Do I Verify a Connecticut Resale Certificate?
If you’re a seller in Connecticut, here’s how to validate a buyer’s resale certificate:
1. Request a Completed Certificate.
- Ask the buyer to provide a fully completed Connecticut Resale Certificate. If the buyer is located out of state, you may accept a valid resale certificate from their home state or the Multistate Tax Commission (MTC) Uniform Sales & Use Tax Certificate – Multijurisdiction Form.
2. Check the Certificate Details
- A valid resale certificate must include a listed and active Sales & Use Tax Permit number from the buyer’s state. While Connecticut’s Department of Revenue Services (DRS) doesn’t offer a public tool to verify permit numbers in real time, it’s your responsibility to ensure the certificate is properly completed and appears legitimate.
3. Confirm the Purchase Is for Resale
- You must accept the certificate in good faith, meaning you have no reason to doubt the buyer’s intent to resell the items. If the products are clearly for personal or business use (not resale) or if you suspect misuse, you should reject the certificate.
How TaxHero Can Help
Managing sales tax compliance and resale certificates in Connecticut doesn’t have to be complicated. TaxHero simplifies the process, from keeping your Connecticut Sales Tax Permit active to ensuring you use resale certificates correctly.
Save time. Avoid penalties. Stay compliant.
Schedule a Demo to see how TaxHero can streamline your Connecticut resale certificate process today!