If you run an Ecommerce or CPG business in Utah, securing a Utah Resale Certificate is a smart move to protect your margins and streamline operations.
This certificate allows you to purchase inventory, 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 Utah sales tax laws.
Understanding Resale Certificates in Utah
What is a Utah Resale Certificate?
In Utah, a Resale Certificate, specifically documented through forms like the Utah Sales Tax Exemption Certificate (Form TC-721), is a document issued by the Utah State Tax Commission that allows businesses to:
- Purchase goods without paying sales tax, as long as they intend to resell those goods to customers during regular business operations.
- 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 Utah resale certificate is not a blanket exemption from all sales tax obligations. Businesses must still collect and remit sales tax on taxable sales to final consumers.
Why do you need a Resale Certificate in Utah?
Obtaining a resale certificate in Utah 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 Utah’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 Utah market. This can be a crucial advantage, especially in price-sensitive industries. 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 Utah’s sales tax laws and regulations to avoid penalties such as unpaid tax, interest, and fines.
In Utah, the specific form required for a resale certificate for multiple and recurring purchases is the Utah Exemption Certificate (Form TC-721). While TC-721 is used for resale exemptions, there are other types of sales tax exemption certificates in Utah used for different purposes, such as:
- TC-721A – Sales and Use Tax Exemption Affidavit for Exclusive Use Outside Utah (motor vehicles and boats)
- TC-721DP – Sales and Use Tax Exemption Certificate for Direct Payment Permit
- TC-721G – Exemption Certificate for Governments & Schools
- TC-721NR – Sales Tax Exemption Certificate for Non-Utah Retailers Accepting Merchandise Delivery in Utah
- TC-73 – Sales Tax Exemption Contract (for religious and charitable organizations)
- TC-719 – Sales and Use Tax Exemption Affidavit for Authorized Interstate Carriers
When filling out Form TC-721, a purchaser must include their Utah Sales Tax License Number to identify that they are registered with the Utah Division of Taxation and authorized to make tax-exempt purchases for resale.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
A Utah Sales Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. A Utah 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 Utah?
Businesses that purchase goods for resale can use a Utah Exemption Certificate. To do so, the business must actively sell taxable tangible products and hold a valid Utah Sales and Use Tax License.
How to Get a Resale Certificate in Utah: A Step-by-Step Guide
Getting a resale certificate in Utah 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 Utah State Tax Commission. Only businesses with a valid Utah Sales and Use Tax License can use a resale certificate.
2. Get a Utah Sales Tax Permit: If you don’t already have one, apply for a Utah Sales and Use Tax License through the Utah Taxpayer Access Point (TAP) website. You need this permit before you can use a resale certificate. Need help? Read our blog: How to Get a Seller’s Permit in Utah
3. Gather Your Business Information: You’ll need basic business details to complete the resale certificate, including:
- Your business name, address, and contact information
- Your legal name
- Your seller’s name
- Your Utah Sales Tax License Number
- Your authorized signature and date of issue
- Your reason for exemption (select Resale or Re-lease)
4. Complete the Form TC-721: Download and fill out the Utah Exemption Certificate from the Utah State Tax Commission website. You’ll present this form to your suppliers when making tax-exempt purchases.
5. Submission: No submission required in Utah. You don’t submit the exemption 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 Utah Exemption Certificate (Form TC-721), but you’ll need a valid Utah Sales and Use Tax License.
7. Understand Renewal Requirements: While the Utah Exemption Certificate (Form TC-721) itself doesn’t specify an expiration date, it remains valid only as long as your sales tax permit is active and in good standing. Also, it will be valid as long as a recurring business relationship between you and the seller exists.
Suppliers may, however, periodically request an updated form (e.g., every few years) to ensure their records are current.
Your Utah Sales and Use Tax License remains valid for as long as the business exists, provided it continues to meet all state tax obligations and there are no significant changes to its ownership, legal structure, or operational activities that would require re-registration.
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 TC-721.
How to Use a Resale Certificate in Utah
To properly utilize your resale certificate in Utah when making tax-exempt purchases for resale, you’ll need to present a valid copy of your Utah Resale Certificate to your supplier at the time of purchase.
Utah generally does accept resale certificates issued by other states. However, there might be specific conditions:
- Good Faith Acceptance: Vendors in Utah 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 may be based on reciprocal agreements with the state that issued the certificate. Additionally, Utah participates in the Streamlined Sales Tax Agreement (SSTA), which facilitates acceptance of a uniform certificate such as the Streamlined Sales Tax Exemption Certificate.
Multi-Jurisdictional Resale Certificates
A multi-jurisdictional resale certificate simplifies tax-exempt purchases for businesses that buy goods for resale across state lines.
Unlike a single-state resale certificate, a standardized multi-jurisdictional form allows multiple states to recognize the purchase as tax-exempt because it’s intended for resale.
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 Utah 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). Utah allows this certificate to be used to claim a resale exemption and also accepts it for certain other specific exemptions as indicated on the form. 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 Utah became a full member of the Streamlined Sales Tax on October 1, 2012. As such, it accepts the SST Certificate of Exemption for qualifying resale purchases. Businesses using either certificate must ensure they meet all Utah-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 Utah 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 Utah
Buyer Responsibilities
If you use a Utah resale certificate, ensure it’s only for tangible personal property you plan to resell. Using it for personal or business items, like office supplies or equipment, is illegal and may result in penalties. It can lead to unpaid tax liability, interest, and other applicable penalties.
- Utah-based buyers: Provide a fully completed Form TC-721 to your suppliers for qualifying purchases.
- Out-of-state buyers: Utah vendors will accept out-of-state resale certificates, such as the Uniform Sales and Use Tax Certificate – Multijurisdiction Form and the Streamlined Sales Tax (SST) Certificate of Exemption, provided that they are properly completed and comply with Utah’s requirements.
Seller Responsibilities
As a Utah seller, you must verify and keep documentation for tax-exempt sales using a resale certificate. Also, 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.
Frequently Asked Questions About the Utah 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.
A seller or certified service provider doesn’t have to collect sales tax if they obtain a properly completed Form TC-721.
However, tax authorities may still hold sellers liable if they knowingly accept false information or try to evade tax. Also, a buyer who submits a false resale certificate to a seller is liable for any resulting taxes and penalties.
Always use Form TC‑721 correctly and only for qualified resale purchases to avoid issues.
Does a Utah Resale Certificate Expire?
The Utah Exemption Certificate (Form TC‑721) remains valid as long as a recurring business relationship is maintained. It means that it does not expire if no more than twelve months elapse between transactions.
The certificate doesn’t expire, but sellers may request an updated one to keep records accurate and up to date. The state also recommends updating your Certificate of Resale.
How Do I Verify a Utah Resale Certificate?
If you’re a seller in Utah, online verification is not available. Utah allows sellers to accept resale certificates in good faith.
To validate a resale certificate, request a completed Form TC-721 and ensure it’s filled out correctly and in good faith.
How TaxHero Can Help
Managing sales tax compliance and resale certificates in Utah doesn’t have to be complicated. TaxHero simplifies the process, from keeping your Utah Sales and Use 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 Utah resale certificate process today!