General Sales Tax Information
- Sales tax is a destination tax in the United States. The ship-to-state on the order determines the sales tax rate.
- The states of Alaska, Delaware, Montana, New Hampshire, and Oregon do not levy a sales tax.
- Because of the legal obligation to the states, DocShop Pro must collect sales tax on all customer orders. Sales tax does not have to be collected if proper documentation exempting the customer from sales tax is provided, or if the product or service sold is exempt for the ship-to-state.
- A State-Specific Exemption Certificate is a form issued by the state.
- Please note that business licenses or business permits are not considered acceptable documentation to exempt purchases from sales tax.
Types of Sales Tax Certificates
There are two general types of sales tax certificates:
- Reseller certificate. These are the type in which, as described above, the products are purchased as wholesale and resold at retail. In some cases, a business buys products that are used in a product being sold. Building contractors are a common example; they buy building materials used in construction. The purchase of these materials might qualify for a reseller's permit.
- Exemption certificate. A sales tax exemption certificate is for an exemption from sales tax for a specific type of product. For example, some states exempt the purchase of computers for resale.
States vary in the products and services that may be considered exempt from sales tax. Some states, like California, distinguish between reseller certificates and exemption certificates.
How to Apply for a Sales Tax Certificate
- You must apply to your state revenue department for a sales tax certificate. (If you are lucky enough to have a business in Alaska, Delaware, Montana, New Hampshire, or Oregon, you don't need to pay sales tax at all.)
- First, go to your state's tax department website. When you get to this site, you may have to do some searching to find the name used in this state for the sales tax certificate.
Look for the types of products and services that might qualify for a sales tax certificate. Not all products are eligible in all states.
- To complete the form you will be asked about your business and about the reason for the exemption. In Iowa, for example, you must first provide basic information about your business (name, address, etc.). Then you are asked to select your business type from a list. Finally, you are asked to check the reason for the exemption, from the list of allowable reasons.
In other states, like California, you complete the application form by inserting your own description of the products being requested as being exempt.