If you run an Ecommerce or CPG business in Iowa, securing an Iowa Resale Certificate is a smart move to protect your margins and streamline operations.
This certificate allows you to purchase inventory and raw materials or components that become an integral part of a product you ultimately sell tax-free, helping you lower upfront costs, stay competitive in pricing, and remain compliant with Iowa sales tax laws.
Understanding Resale Certificates in Iowa
What is an Iowa Resale Certificate?
In Iowa, a Sales/Use/Excise Tax Exemption Certificate is a document issued by the Iowa Department of Revenue 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, an Iowa 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 Iowa?
Obtaining a resale certificate in Iowa 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 Iowa‘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 Iowa 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 Iowa’s sales tax laws and regulations to avoid penalties.
In Iowa, the specific form required for a resale certificate is the Iowa Sales/Use/Excise Tax Exemption Certificate (Form 31-014).
When filling out Form 31-014, a purchaser must include their sales/use/excise tax permit number to identify that it is registered with the Iowa Department of Revenue and authorized to make tax-exempt purchases for resale.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
An Iowa Sales Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. An Iowa Resale Certificate (Form 31-014), 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 Iowa?
Businesses that purchase goods for resale can use an Iowa Resale Certificate. To do so, the business must actively sell taxable tangible products and hold a valid Iowa Sales Tax Permit.
How to Get a Resale Certificate in Iowa: A Step-by-Step Guide
Getting a resale certificate in Iowa 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 Iowa Department of Revenue. Only businesses with a valid Iowa Sales Tax Permit can use a resale certificate.
2. Get an Iowa Sales Tax Permit: If you don’t already have one, apply for an Iowa Sales Tax Permit through the GovConnectIowa 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 Iowa
3. Gather Your Business Information: You’ll need basic business details to complete the resale certificate, including:
- Your legal name and address
- Seller’s legal name and address
- Your nature of business (wholesaler, retailer, manufacturer, lessor, other)
- Your reason for exemption (resale, processing, other)
- When required, the purchaser’s identification number (e.g., Iowa-issued sales and use tax permit, another state’s issued sales tax identification number, and Federal Employer Identification Number).
- Your signature and date of issue
4. Complete the Form 31-014: Download and fill out the Iowa Sales/Use/Excise Tax Exemption Certificate (Form 31-014) from the Iowa Department of Revenue website. You’ll present this form to your suppliers when making tax-exempt purchases.
5. Submission: No submission required in Iowa. You don’t 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 Form 31-014, but you’ll need a valid Iowa Sales Tax Permit. To see if there’s a cost for the permit, check out our guide on Sales Tax Permit fees.
7. Understand Renewal Requirements: While the Iowa resale certificate (Form 31-014) itself doesn’t specify an expiration date, it remains valid only as long as your sales tax permit is active and in good standing.
Suppliers may, however, periodically request an updated form (e.g., every few years) to ensure their records are current. The Iowa Sales and Use Tax Permit remains valid for as long as the business exists without any changes in ownership or structure.
If you’re a registered retailer, you must keep up with all sales tax filings and payments to stay in good standing. If there are any changes to your business details or exemption status, you should give your suppliers an updated Form 31-014.
How to Use a Resale Certificate in Iowa
To properly utilize your resale certificate in Iowa when making tax-exempt purchases for resale, you’ll need to present a valid copy of your Iowa Sales and Use Tax Resale Certificate to your supplier at the time of purchase.
Iowa generally does accept resale certificates issued by other states. However, there might be specific conditions:
- Good Faith Acceptance: Vendors in Iowa 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, and Iowa also participates in the Streamlined Sales Tax Agreement (SSTA), which facilitates acceptance of a uniform certificate.
If you are an out-of-state business purchasing from a vendor in Iowa, you can use the Uniform Sales and Use Tax Certificate – Multijurisdiction Form.
It’s always a good idea to confirm the vendor’s policy on accepting out-of-state certificates beforehand.
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 Iowa 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). Iowa accepts this form, provided it is properly completed. For Iowa-based buyers, it should include their Iowa Sales Tax Permit number. Out-of-state purchasers should include their home state’s registration number where indicated. You can find this form on the Multistate Tax Commission (MTC) website.
- Streamlined Sales Tax (SST) Certificate of Exemption: The state of Iowa became a full member of the Streamlined Sales Tax on October 1, 2005. As such, it accepts the SST Certificate of Exemption for qualifying resale purchases. Businesses using either certificate must ensure they meet all Iowa-specific requirements. You can find more information about the SST and its member states on the Streamlined Sales Tax Governing Board website.
Businesses need to verify whether Iowa 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 Iowa
Buyer Responsibilities
If you’re using an Iowa resale certificate, ensure it’s only for goods or services you genuinely intend to resell. Using it for personal or operational items (like office supplies or equipment) is illegal and may lead to penalties.
- Iowa-based buyers: Provide a fully completed Form 31-014 to your suppliers for qualifying purchases.
- Out-of-state buyers: While Iowa prefers its own resale certificate form, Iowa vendors will accept a valid resale certificate from your home state or the Uniform Sales and Use Tax Certificate – Multijurisdiction Form, under specific conditions, ensuring that tax-exempt purchases are properly documented and compliant with state regulations. You can complete the Uniform Sales and Use Tax Certificate – Multijurisdiction Form instead of Form ST-101.
Seller Responsibilities
As a seller in Iowa, 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 3 years: A properly completed resale certificate is your official proof of why sales tax wasn’t collected. Keep the resale certificate for at least three years in case of a sales tax audit by Iowa authorities.
Frequently Asked Questions About the Iowa 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:
Fraudulent intent includes sellers who fail to collect tax or encourage buyers to make unlawful exemption claims. The seller may be held responsible for any sales tax due from such transactions.
Always use Form 31-014 correctly and only for qualified resale purchases to avoid issues.
Does an Iowa Resale Certificate Expire?
The resale certificate (Form 31-014) is valid for up to three years from the original issue. Additionally, this certificate must be executed or be in effect within thirty (30) days of the time of sale.
Blanket certificates stay valid until canceled or 12 months pass without purchases between the same buyer and seller.
However, it is only valid while your Iowa Sales Tax Permit remains active. If your permit is revoked or inactive, your resale certificate becomes invalid.
How Do I Verify an Iowa Resale Certificate?
If you’re a seller in Iowa, online verification is not available. Here’s how to validate a buyer’s resale certificate:
- Request a completed Form 31-014 and review it to confirm resale purpose and all required information is provided.
- The purchaser will provide you with their 9-digit ID number.
- Use it to verify the active status of their sales tax permit by calling the Iowa Department of Revenue.
How TaxHero Can Help
Managing sales tax compliance and resale certificates in Iowa doesn’t have to be complicated. TaxHero simplifies the process, from keeping your Iowa 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 Iowa resale certificate process today!