If you run an Ecommerce or CPG business in Minnesota, securing a Minnesota 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 Minnesota sales tax laws.
Understanding Resale Certificates in Minnesota
What is a Minnesota Resale Certificate?
In Minnesota, a Certificate of Exemption (Form ST3) is a document issued by the Minnesota 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, a Minnesota 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 Minnesota?
Obtaining a resale certificate in Minnesota 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 Minnesota‘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 Minnesota 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 Minnesota’s sales tax laws and regulations to avoid penalties such as unpaid tax, interest, and fines.
In Minnesota, the specific form required for a resale certificate for multiple and recurring purchases is the Minnesota Certificate of Exemption (Form ST3).
When completing Form ST3, include your Minnesota Tax ID to show you’re registered and authorized for tax-exempt resale purchases.
Although you can list a Federal Employer Identification Number (FEIN), the Minnesota Tax ID is the standard for regular tax-exempt resale transactions.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
A Minnesota Sales Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. A Minnesota Certificate of Exemption (Form ST3), 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 Minnesota?
Businesses that purchase goods for resale can use a Minnesota Resale Certificate. To do so, the business must actively sell taxable tangible products and hold a valid Minnesota Sales Tax Permit.
How to Get a Resale Certificate in Minnesota: A Step-by-Step Guide
Getting a resale certificate in Minnesota 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 Minnesota Department of Revenue. Only businesses with a valid Minnesota Sales Tax Permit can use a resale certificate.
2. Get a Minnesota Sales Tax Permit: If you don’t already have one, apply for a Minnesota Sales Tax Permit through the MN E-Services 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 Minnesota
3. Gather Your Business Information: You’ll need basic business details to complete the resale certificate, including:
- Your legal name and business address
- Your Minnesota Tax ID Number (Sales and Use Tax Account Number). This is the primary identifier for businesses making purchases for resale
- Your Federal Employer Identification Number (FEIN) if you have one
- Your type of business
- Your reason for exemption which will be “Resale”
- Your authorized signature and date of issue
4. Complete the Form ST3: Download and fill out the Minnesota Certificate of Exemption (Form ST3) from the Minnesota Department of Revenue website. You’ll present this form to your suppliers when making tax-exempt purchases.
5. Submission: No submission required in Minnesota. 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 ST3, but you’ll need a valid Minnesota Sales Tax Permit.
7. Understand Renewal Requirements: While the Minnesota Certificate of Exemption (Form ST3) itself doesn’t specify an expiration date, it remains valid only as long as your sales tax permit is active and in good standing and the information on the certificate remains accurate. Suppliers may, however, periodically request an updated form to ensure their records are current.
The Minnesota Department of Revenue recommends updating exemption certificates every three to five years. The Minnesota Sales Tax Permit stays valid if the business remains compliant and has no ownership or structural changes.
Registered retailers must stay current with sales tax filings and payments, and update suppliers if business or exemption details change. If there are any changes to your business details or exemption status, you should give your suppliers an updated Form ST3.
How to Use a Resale Certificate in Minnesota
To properly utilize your resale certificate in Minnesota when making tax-exempt purchases for resale, you’ll need to present a valid copy of your Minnesota Exemption Certificate to your supplier at the time of purchase.
Minnesota generally does accept resale certificates issued by other states. However, there might be specific conditions:
- Good Faith Acceptance: Vendors in Minnesota 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.).
- Streamlined Sales Tax Agreement (SSTA): Minnesota is a member of the Streamlined Sales Tax Agreement (SSTA), allowing businesses to use a standardized exemption certificate for eligible purchases across participating states. This helps simplify multi-state sales tax compliance.
- Confirmation with Vendor: Before making a purchase, be sure to check with the vendor to confirm whether they accept out-of-state exemption certificates.
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 Minnesota 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). Minnesota accepts this form, provided it is properly completed. For Minnesota-based buyers, it should include their Minnesota Sales Tax Identification number. Out-of-state purchasers should include either their state’s home state’s tax identification number, federal Employer Identification Number (EIN), or a valid state-issued driver’s license. You can find this form on the Multistate Tax Commission (MTC) website.
- Streamlined Sales Tax (SST) Certificate of Exemption: The state of Minnesota 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 Minnesota-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 Minnesota 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 Minnesota
Buyer Responsibilities
You are responsible for using a Minnesota resale certificate only for purchases of items or services you plan to resell. Using it for personal or operational items (like office supplies or equipment) is illegal and exposed to use tax liability, and may lead to additional tax, interest, and penalties.
- Minnesota-based buyers: Provide a fully completed Form ST3 to your suppliers for qualifying purchases.
- Out-of-state buyers: While Minnesota may prefer its own resale certificate form, Minnesota vendors will accept a valid resale certificate from your home state, under specific conditions, ensuring that tax-exempt purchases are properly documented and compliant with state regulations. You can also complete the Uniform Sales and Use Tax Certificate – Multijurisdiction Form or the Streamlined Sales Tax (SST) Certificate of Exemption instead of Form ST3.
Seller Responsibilities
As a seller in Minnesota, 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 of your transactions: A properly completed resale certificate is your official proof of why sales tax wasn’t collected. You must retain it in your records in case of a sales tax audit by the Minnesota Department of Revenue. Tax authorities recommend keeping sales tax records for at least 3.5 years from the return’s original due date.
Frequently Asked Questions About the Minnesota 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. The state may fine anyone $100 per transaction for improperly using an exemption certificate to avoid paying sales tax. Additionally, the purchaser will be liable for any use tax, interest, and other applicable penalties on the uncollected tax.
Always use Form ST3 correctly and only for qualified resale purchases to avoid issues.
Does a Minnesota Resale Certificate Expire?
The Minnesota Certificate of Exemption does not expire unless the information on the certificate changes. Form ST3 is valid only while the buyer continues to resell the items listed on the certificate. Though it doesn’t expire like a permit, the state recommends updating your exemption certificate every 3 to 4 years.
How Do I Verify a Minnesota Resale Certificate?
If you’re a seller in Minnesota, online verification is not available. Here’s how to validate a buyer’s resale certificate:
- Request and review a completed Form ST3 to ensure it’s filled out correctly and the purchase qualifies as a resale.
- Use the form to verify by calling the Minnesota Department of Revenue.
How TaxHero Can Help
Managing sales tax compliance and resale certificates in Minnesota doesn’t have to be complicated. TaxHero simplifies the process, from keeping your Minnesota 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 Minnesota resale certificate process today!