How to Get Sales Tax Exemption for Your New York Business
How to Get Sales Tax Exemption for Your New York Business
Are you a business owner in New York State looking to cut costs and streamline your operations? Understanding when and how to claim a sales tax exemption on your purchases is crucial for improving your bottom line.
Unlike non-profit organizations, businesses do not receive a blanket organizational exemption. Instead, they qualify for exemptions based on the use of the items or services they purchase. This guide focuses on the most common tax-exempt scenarios for New York businesses and the essential forms you need to succeed.
🎯 The Core Exemption: Goods for Resale
The most common sales tax exemption for businesses in New York applies to inventory purchased for resale. Since you, the business, will collect the sales tax from the final consumer, you are exempt from paying it when you purchase the item from your supplier.
Key Form: ST-120, Resale Certificate
This is the foundational form you'll need to purchase inventory tax-free.
Who Uses It?
Retailers, wholesalers, online sellers, and temporary vendors buying tangible personal property or services for resale.
Purpose
To certify to your supplier that the goods you are buying will be resold to customers.
How to Use
Complete and present the form to your supplier/vendor. You must be a registered NYS sales tax vendor (have a Certificate of Authority).
Submission Rule
Must be given to the seller no later than 90 days after the sale.
Step-by-Step for Resale Exemption
Obtain Your Certificate of Authority: Before you can legally issue a Resale Certificate, you must be registered with the NYS Department of Taxation and Finance (DTF) to collect and remit sales tax. This is often referred to as your Certificate of Authority.
Download Form ST-120: Access the form and its instructions directly from the NYS DTF website.
Complete Purchaser Information: Fill in your business name, address, and your valid New York State Certificate of Authority number.
Select Certificate Type: Choose between a Single-Use Certificate (for a one-time purchase) or a Blanket Certificate (for multiple purchases of the same kind from the same seller). A blanket certificate simplifies the process for ongoing vendors.
Certify and Sign: Sign the form, certifying that the purchases listed are for resale.
Present to Seller: Give the completed form to your vendor. They keep it on file to protect them from liability for not collecting sales tax on your purchase.
🏭 Other Major Business Exemptions (Exempt Use)
Beyond resale, New York offers exemptions for specific types of property used in certain industries. You must use the property directly and predominantly (more than 50% of the time) for the exempt purpose.
1. Manufacturing and Production
This is a powerful exemption for businesses that create, process, or assemble tangible personal property for sale.
Exempt Items: Machinery, equipment, parts, tools, and supplies used directly and predominantly in the production phase.
Exempt Services: Services to install, repair, or maintain that exempt production machinery and equipment.
Key Form: ST-121, Exempt Use Certificate. (Use this form to purchase qualifying production items tax-free).
2. Contractors and Real Property Improvement
If you are a contractor purchasing materials to permanently install into real property, you need a specific form.
Exempt Use: Purchasing materials that will be physically incorporated as part of a capital improvement project (e.g., lumber, wiring, fixtures used to build an addition).
Key Form: ST-120.1, Contractor Exempt Purchase Certificate. This form may only be used by contractors who have a valid Certificate of Authority.
3. Utilities (Gas, Electric, Steam)
Manufacturers and processors may qualify for a sales tax exemption on the portion of utilities used directly and exclusively (100% of the time) in the production phase.
How to Apply: This often requires a formal energy study to calculate the exact percentage of your utility usage that qualifies as exempt production use.
Key Form: ST-121, Exempt Use Certificate.
🚫 Critical Warning: Misuse is Serious
Misusing any sales tax exemption certificate is a grave mistake that can lead to severe penalties from the NYS DTF.
DO NOT use a Resale Certificate (ST-120) to buy office supplies, furniture, vehicles, or any other items your business will use or consume rather than resell.
Penalties: Misuse can result in fines equal to 100% of the tax due, a substantial penalty for each fraudulent certificate issued, and even criminal prosecution.
Always ensure the item you purchase fits the exact purpose stated on the exemption form.
Ready to optimize your business purchases? Start by confirming you have your Certificate of Authority and then download the appropriate exemption form (ST-120 or ST-121) from the NYS DTF website!