If your business sells or rents goods at retail or performs retail services, you must also collect and remit retail sales tax on the total charge for each sale, unless a specific exemption applies. The taxable amount includes charges for permits and other fees, labor, profit, materials, and charges for any subcontractors, even if they are billed separately.
Itemizing sales tax
All sales documents must state sales tax as a separate item. If your sales documents state only a lump sum price, then the sales tax has not been stated as a separate item. When sales tax is not separately stated, the Department presumes that the buyer did not pay, and that you did not collect the sales tax.
Note: You are liable for remitting sales tax to the Department of Revenue even if you do not collect it from your customers.
Determining local sales tax rates
To determine the correct local retail sales tax rate, you must consider:
type of transaction, and
where delivery was made or work was performed.
If you need to check on the local retail sales tax rate for a particular location, you can use our Tax Rate Lookup Tool. You can find the tax rate for a location by entering the physical address or by using a map.
Delivery of goods:
When retail goods are delivered to the customer, the sales tax rate is determined by the location where the customer receives the goods.
"Receipt" and "receive" mean taking possession of tangible personal property and making first use of services. "Receive" and "receipt" do not include possession by a shipping company on behalf of the purchaser.
Installation, construction, and other retail services:
When goods are installed, or when construction, repair, or other retail services are provided, the sales tax rate is determined by the location where the installation, construction, or other retail services are primarily performed.
Leases and rentals:
Lease or rental of tangible personal property depends on the following:
- If a single payment is made and the person renting the equipment (lessee) picks up the equipment at the location of the business renting the equipment (lessor), then the lessor’s location determines the code and local tax rate.
- If a single payment is made but the equipment is delivered to the lessee at another location, the code is determined by the location where the lessee receives the equipment.
- If the item is leased for a length of time and periodic payments are made, the first payment is coded to the location where the lessee receives the equipment, normally the lessor’s business location. All subsequent payments are coded to the location where the equipment is primarily used by the lessee.
Purchases/sales for resale
If you purchase goods for resale, the purchases are exempt from retail sales tax. You must provide the seller with a reseller permit documenting that the sale is exempt from sales tax. When you sell the goods, you must either collect sales tax from your customer or receive a reseller permit from them.
If you purchase goods for resale only, and later remove the goods from inventory for use in your business (such as for displays, office furniture, etc.), you must pay use tax on those goods.
Obtaining a Reseller Permit
Effective January 1, 2010, the resale certificate was replaced with a reseller permit issued by the Department of Revenue. Reseller permits are issued to businesses that make wholesale purchases. The Department will issue reseller permits based on specific criteria. Businesses that don’t automatically receive a reseller permit may apply directly to the Department. The application is available on our web site.
If your primary business activity is construction as determined by your NAICS code on file with the Department of Revenue, then you will be required to complete the contractor’s application for the reseller permit. Reseller permits for the construction industry are only valid for 24 months.