Sales Tax Considerations in the New Customer Acceptance Process

​​​​​​Rödl & Partner Tax Matters Vol 2015 – 5, republished in July 2024​

a. Add language to your sales order confirmation, general terms which form the agreement with the customer (contract), and your general terms on the sales invoice, (often on the back of the sales invoice), indicating:

“We are not subject to sales tax collection, reporting and remittance requirements in the delivery state of this order. Customer should determine and is responsible for remitting any sales and / or use tax which may be imposed by the delivery state on the transaction.”

b. In addition to adding the above language to the sales order, contract, and general term on the invoice, it is also common to request your customers provide you one of the items listed in point 3. This can serve to mitigate some risk if a state were to successfully assert you were subject to their sales and use tax collection, reporting and remittance requirements, and you have not previously collected and remitted sales tax on the transactions and filed the relevant sales tax returns.

a. As part of your customer acceptance procedures, request one of the following:

i. Exemption certificate which covers the intended product sales (e.g. manufacturing exemption)

ii. A resale certificate, which is applicable when the sale is deemed wholesale (i.e. not to an end user)

iii. A self pay permit, which many states grant to companies, whereby the buyer self assesses and remits the appropriate tax, based on their determination

b. If you do not obtain one of the items outlined above or you do not have a copy on file, then you are required to charge sales tax on the components of the transaction. Certain types of sales, such as services, are potentially not subject to sales tax and we can assist you in making this determination. The sales tax rate to be charged is based on the delivery address and varies by state, county, city, or other determination.

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