If you run an Ecommerce or CPG business in Massachusetts, securing a resale certificate can protect your margins. It also helps streamline operations.
This certificate lets you buy inventory and raw materials tax-free. It reduces upfront costs, supports competitive pricing, and helps you stay compliant with Massachusetts sales tax laws.
Understanding Resale Certificates in Massachusetts
What is a Massachusetts Resale Certificate?
In Massachusetts, a Form ST-4 Sales Tax Resale Certificate is a document issued by the Massachusetts 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.
Resale certificates prevent double taxation by eliminating sales tax at the wholesale stage before goods reach the end consumer.
However, a Massachusetts resale certificate does not exempt all purchases from sales tax. Businesses remain responsible for collecting and remitting sales tax on taxable retail sales to end consumers. Vendors must fill out the certificate properly, accept it in good faith, and retain it in their tax records.
Why do you need a Massachusetts Resale Certificate?
Obtaining a resale certificate in Massachusetts 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 purchasing inventory and materials that will be resold to customers without paying Massachusetts’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 Massachusetts 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 Massachusetts’s sales tax laws and regulations to avoid penalties.
In Massachusetts, the specific form required for a resale certificate is Form ST-4, Sales Tax Resale Certificate.
The purchaser must include their Massachusetts Sales Tax Registration Number on Form ST-4. This proves they are registered with the Department of Revenue and allowed to make tax-exempt resale purchases.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
A Massachusetts Sales Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. A Massachusetts Resale Certificate (REV-1220), 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 Massachusetts?
Businesses that purchase goods for resale can use a Massachusetts Resale Certificate. To do so, the business must actively sell taxable tangible products and hold a valid Massachusetts Sales Tax Permit.
How to Get a Resale Certificate in Massachusetts: A Step-by-Step Guide
Getting a resale certificate in Massachusetts 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 in Massachusetts and be registered with the Massachusetts Department of Revenue (DOR). Only businesses with a valid Massachusetts Sales Tax Registration Certificate (sometimes called a Sales Tax Permit) can use a resale certificate.
2. Get a Massachusetts Sales Tax Permit: If you don’t already have one, you must apply for a Massachusetts Sales Tax Registration Certificate through MassTaxConnect on the DOR website. You must obtain a Massachusetts Sales Tax Permit before issuing or using a resale certificate.
Need help? Read our blog: How to Get a Seller’s Permit in Massachusetts
3. Gather Your Business Information: You’ll need basic business details to complete the resale certificate, including:
- Your business legal name and any trade names.
- Your business address and contact information.
- Your Federal Employer Identification Number (FEIN) or Social Security Number (SSN) if you’re a sole proprietor.
- Your Massachusetts state sales tax permit number (if already obtained)
- Your business type (e.g., sole proprietorship, LLC, corporation).
- NAICS Code
4. Complete Form ST-4: Download and fill out the Massachusetts Sales Tax Resale Certificate (Form ST-4) from the Massachusetts DOR website. You’ll present this form to your suppliers when making tax-exempt purchases for resale.
5. Submission: There is no need to submit the resale certificate to the state. Instead, give the completed Form ST-4 directly to your suppliers when purchasing items for resale. Your supplier keeps the form in their tax records.
6. Pay Any Applicable Fees: There’s no cost to obtain or use Form ST-4 itself. However, registering for a Massachusetts Sales Tax Registration Certificate is also free. Depending on your city or town, you might need a separate local business license, which can have a fee. To see if there’s a cost for the permit, check out our guide on Sales Tax Permit fees.
7. Understand Renewal Requirements: Massachusetts usually honors your resale certificate (Form ST-4) for 10 years. However, it only stays valid while your sales tax registration remains active and in good standing. If your sales tax registration is canceled, becomes inactive, or if the ST-4 reaches its 10-year expiration, your resale certificate becomes invalid. You should ensure both your sales tax registration remains current and that you issue updated ST-4 forms to your suppliers as needed, especially after 10 years.
The state usually initiates the renewal of your permit no less than every 5 years. A supplier may also request an updated certificate if their records are outdated or after their retention period (typically 4 years).
How to Use a Resale Certificate in Massachusetts
To use your resale certificate, present a valid, signed Form ST-4 to your supplier during the purchase. This allows you to claim tax exemption.
Massachusetts does not accept resale certificates issued by other states. If you’re an out-of-state business, you must register for a Massachusetts sales tax permit and use Form ST-4 to claim resale exemption when purchasing from a Massachusetts vendor.
- Good Faith Acceptance: Vendors in Massachusetts must accept the resale certificate in good faith, meaning they must reasonably believe the buyer is purchasing the items for resale and is engaged in selling the type of merchandise they are buying. The vendor should check that the buyer has properly filled out and signed the ST-4 and must keep it on file for at least 3 years as part of their tax records.
- Out-of-state Sellers: If you’re an out-of-state business purchasing from a Massachusetts vendor, make sure to register for a Massachusetts permit and provide a completed ST-4 at the time of purchase. It’s also a good idea to confirm the vendor’s policy beforehand.
For more information regarding sales tax exemption laws in Massachusetts, you may visit the state’s website.
Multi-Jurisdictional Resale Certificates
States designed the multi-jurisdictional resale certificate 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.
For Massachusetts:
- Uniform Sales & Use Tax Resale Certificate – Multijurisdiction Form: Massachusetts generally does not accept the Uniform Sales & Use Tax Resale Certificate Multijurisdiction Form or any out-of-state resale certificate. Out-of-state buyers must register for a Massachusetts sales tax permit and use Form ST-4, completed with their Massachusetts Sales Tax Registration Number, when making resale purchases. While the MTC form is available on the Multistate Tax Commission website, it is not sufficient in Massachusetts. You can find this form on the Multistate Tax Commission (MTC) website.
- Streamlined Sales Tax (SST) Certificate of Exemption: Massachusetts is not a member of the Streamlined Sales Tax (SST) Governing Board, and therefore does not accept the SST Certificate of Exemption for tax-exempt resale purchases. Vendors must collect the Massachusetts ST-4 form instead.. More about SST member states can be found on the Streamlined Sales Tax Governing Board website.
Businesses must confirm that their resale certificates meet Massachusetts-specific requirements. If you use an out-of-state or multi-jurisdictional form, the state may deny your tax exemptions or issue audit assessments.
Responsibilities When Using or Accepting a Massachusetts Resale Certificate
Buyer Responsibilities
If you’re using a Massachusetts 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 can lead to penalties, including assessments for unpaid tax, interest, fines, and possible criminal charges under Massachusetts law.
Massachusetts-based buyers:
- Must hold a valid Massachusetts Sales Tax Registration (Account ID) to issue a resale certificate (Form ST-4).
- Must complete Form ST-4 accurately, providing the business name, address, Massachusetts Sales Tax Registration Number, and a description of the type of property purchased for resale.
- If any property purchased with a resale certificate is later used for personal or non-resale purposes, buyers must self-assess and pay Massachusetts use tax on the purchase price when first used
Out-of-state buyers:
- Providing an out-of-state resale certificate will not relieve vendors of their tax liability; vendors must reject certificates that do not include a valid Massachusetts Sales Tax Registration Number.
Take note that you can’t use the REV-1220 for sales tax exemption on vehicle purchases or registrations.
Seller Responsibilities
As a seller in Massachusetts, 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 resale certificate you’ve properly completed serves as your official proof for not collecting sales tax. You must retain it in your records for at least three years from the date the related sales tax return was filed or due, whichever is later, in case of a sales tax audit by the Massachusetts Department of Revenue. Note that the Department may audit records for up to six years in cases of substantial understatement of tax.
Frequently Asked Questions About the Massachusetts Resale Certificate
Are There Penalties for Misusing a Massachusetts Resale Certificate?
Yes. If you misuse a Massachusetts resale certificate, you may face serious penalties. Penalties can include repayment of unpaid taxes with interest, additional fines, and even criminal charges for willful misuse.
According to Massachusetts General Laws Chapter 62C, §73 and guidance from the Department of Revenue, intentional misuse can lead to criminal tax evasion penalties of up to one year in prison and fines of up to $10,000 for individuals or $50,000 for corporations. It’s critical to use Form ST-4 correctly and only for legitimate resale purchases to avoid these issues.
Does a Massachusetts Resale Certificate Expire?
Form ST-4 doesn’t expire, but it remains valid only while your Massachusetts Sales Tax Registration stays active and in good standing. If the buyer’s sales tax account becomes inactive, is revoked, or closed, their resale certificate automatically becomes invalid. Vendors should request an updated certificate if they become aware of changes in a buyer’s registration status to remain compliant.
How Do I Verify a Resale Certificate in Massachusetts?
To confirm a Massachusetts resale certificate, sellers should request a completed and signed Form ST-4 that includes the buyer’s Massachusetts Sales Tax Registration Number. Vendors can verify the buyer’s registration number by calling the Department of Revenue. Reach them at (617) 887-MDOR or 1-800-392-6089 for in-state calls.
If you have a MassTaxConnect account, you can also log in to confirm registration details online. Keeping a valid, properly filled-out ST-4 on file is essential because it serves as your proof of why you did not collect sales tax on the transaction and must be retained for at least three years in case of an audit.
How TaxHero Can Help
You don’t have to complicate managing sales tax compliance and resale certificates in Massachusetts. TaxHero simplifies the process, from keeping your Massachusetts 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 resale certificate in Massachusetts process today!