What is a Tax Exempt ID Number?

Let’s say that you purchase products just to resell them. If you purchase something for $100 and pay sales tax, then the customer purchases it from you and pays sales tax, it means that sales tax was paid twice on a single product. To avoid this type of situation, businesses who are resellers are usually considered to be tax-exempt. That doesn’t have to be large items, either. If you’re a snack store and you’re reselling something as simple as a candy bar, you still should only have sales tax collected once. But how is a Tax Exempt Number different from a Tax ID Number?

A tax exemption can be acquired through your sales tax agency. Some states aren’t going to be able to provide a tax exemption for a simple reason: they don’t collect sales tax. There is also one state that collects general excise tax, instead. But you will need to apply for tax exempt status to show that your company is reselling the products that it’s purchasing.

Additionally, this does mean that you’re going to need to collect sales tax from your customers, and you’re going to have to report how much sales tax you’ve acquired, either on a monthly or quarterly basis.