North Carolina Resale Certificate: Why They Matter
Buying a home is an investment -- and a North Carolina resale certificate is key when dealing with HOAs and communities within the state. It’s a complex transaction, so there’s a lot of paperwork involved. If the home you are buying is in a managed community, there’s an additional element to that paperwork: a resale certificate. Also called a closing certificate, estoppel, dues statement or paid assessment letter, the resale certificate provides you with important financial information about your home and the community it is in.
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What is the law about resale certificates in North Carolina?
In the state, the North Carolina Condominium Act, also known as Chapter 47C, defines state law regarding condominiums and community associations formed after 1986. It sets out how condominiums handle all sort of activities, from their initial setup and what insurance coverage they must carry to fines for violations and meetings. In terms of resale certificates, the state’s law is one of the simplest. It states that the unit owner must provide a prospective buyer a statement of the monthly assessment fees charged by the association and any other fees that unit owners must pay, and that it must be provided before the property is transferred.
How does the buyer get a resale package?
There’s no definite answer to that. In NC, the seller is required by law to provide the information to the buyer, so either the seller or their agent requests the package. It’s the same in Virginia. In New Jersey and New York, the buyer most often requests the package. Anyone involved in the purchase can buy the package: buyer, seller, realtor, closing agent, lender or attorney. Sometimes the lender will order it. But some states require that a specific party in the transaction order the resale package.
If you are Presented with a North Carolina Resale Certificate
If you’re a seller with nexus in the state and a buyer provides North Carolina Sales and Use Tax Agreement Certificate of Exemption to purchase items for resale, you’ll need to make sure the buyer has completely filled out and signed the form. If the Resale box is checked as their Reason for Exemption you’ll need to double check that they’ve provided a sales and use tax account id number.
If the buyer is out-of-state and does not have a seller’s tax account number, they’ll need to provide their home state’s seller’s permit number or a statement indicating the out-of-state buyer is a seller who is not required to hold a permit.
Make sure that you file away every such certificate your business receives for audit purposes. The good news is that the state does not have sellers “on the hook” if the resale certificate is fraudulent, provided that the certificate is complete and you accepted it in good faith.
About the Process
When you buy items with the intent to resell them, you are usually exempt from paying sales tax as long as you present the seller with a NC Streamlined Sales and Use Tax Agreement Certificate of Exemption. Follow this process for obtaining and using the certificate:
- Create an account with the North Carolina Department of Revenue.
- Register your business with the department by supplying your business name, EIN, Social Security number, address, phone number and basic business information.
- Wait to receive your tax ID within five business days.
- Print form E-595E, the state's Streamlined Sales and Use Tax Agreement Certificate of Exemption.
- Present a new copy of the resale certificate to every vendor that sells your company products destined for resale.
There is no fee to register your business or use the resale license, but companies must keep a copy of your certificate on hand, so make sure to fill out your information completely.
Who Needs a Resale Certificate?
Every business needs to register if it meets any of these criteria:
- It sells goods or maintains a place of sales.
- It operates an office or official location of the business.
- It utilizes contractors, employees or any other official business representatives.
In addition to registering, any business owner in NC who buys goods intending to resell them needs a document. A seller cannot let you buy items without paying tax unless you supply a certificate for the seller's records. This helps them be prepared in case of an audit and protects your business too.
Accepting a Certificate in the State
If you operate a business in North Carolina, the chances are good that you will receive a North Carolina resale certificate from a customer at some point. This is true even if you don't operate a wholesale business because another business might buy resale goods from you when they run out or cannot find them elsewhere.
When you accept this document, ensure that all the fields are filled out, particularly the tax ID number field. To be extra cautious, look up the tax ID number to ensure it is legitimate. Maintain a file dedicated to storing resale certificates and back up these files digitally in case of an audit.
Finding a Tax ID for your North Carolina Resale Certificate
If you lose your Tax Identification Number, you can find it by logging on to your account with the Department of Revenue. You can also locate your tax ID through searching the online Registry of Sales and Use Tax Numbers that is maintained by the Department of Revenue. When you search for your business name, the search result includes your tax ID number. Use this same method to search for other businesses to verify their certificates.
If you lose your document, you can print another through the Department of Revenue's website. Search for form E-595 E, and you are soon ready to fill out a new one for your next resale purchase.
Connect With Us To Receive Support
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Our team has been managing HOAs, condominiums, high-rise buildings and more for years! Our experienced team can help you establish a plan of action when it comes to staying ahead of important property management trends.