When do sales tax exemption certificates expire?

Expiration dates for sales tax exemption certificates and resale certificates vary by state, by situation, and, in some cases, by the type of certificate. Some exemption certificates are good for a year or two or four. Others remain valid as long as the information they contain is accurate and up to date. 

As a seller, it’s your job to ensure all your exempt sales are backed by a valid, up-to-date exemption certificate. Likewise, your vendors must validate your exempt purchases when you make exempt purchases.

Read on or jump to the question that interests you most.

• What are exemption certificates and why are they required?
• Do tax exemption forms expire?  
• What happens if an exemption certificate expires?  
• How do you renew sales tax exemption certificates?  
• How can I manage certificates more effectively?

An exemption certificate is a document that proves the holder of the certificate — the buyer — is permitted to purchase taxable tangible personal property or services tax free. Various exemption certificates explain why the buyer qualifies for tax-exempt status when a transaction isn’t automatically exempt by law.

For example, the buyer may be an exempt entity that qualifies for tax-exempt status, like the federal government. Many state and local governments are also exempt organizations, as are certain nonprofit organizations under Internal Revenue Code Section 501(c)(3). Alternatively, the buyer may be purchasing goods for resale or to be used in manufacturing.

A properly completed form accepted in good faith protects the seller from liability for the uncollected sales tax. 

As a seller, you’re responsible for collecting sales tax exemption forms from your customers and ensuring they contain accurate information. You’re also required to store documents that validate purchases by exempt organizations in a secure (but readily accessible) location and make sure they’re up to date; once they expire, tax exemption certificates are worthless for future transactions.

In most states, different forms are used to claim exemptions for different types of transactions, though you may be able to use a blanket certificate as long as the qualifying factors are the same. The Ohio blanket certificate is used to make a continuing claim of exemption on purchases from the same vendor, for instance, and the New York State Department of Taxation and Finance has several blanket certificate options.

To reiterate: If you don’t have the proper exemption forms on file to validate every tax-exempt sale of taxable tangible personal property or services, you could be found liable for the uncollected state sales tax (and applicable local sales taxes) during an audit.

Note: If you make tax-exempt purchases as well as exempt sales, you’ll need to give your vendors a valid exemption certificate or resale certificate.

They can. It depends on the certificate, buyer, the situation, the state, and other circumstances.

Some sales tax exemption certificates are intended to last for as long as there’s a business relationship between the buyer and the seller — provided the information on the document is accurate and up to date. 

Some certificates are project-specific and cease to be valid after the project is complete. 

And some sales tax exemption documents expire on a specific date or after a set amount of time has passed. For example:

• The Florida resale certificate for sales tax expires each year on December 31 and must be renewed annually.
• The Alabama certificate of exemption is valid for one year from the date of issuance.
• Massachusetts exemption certificates are generally valid for 10 years from the date of issuance.

Unfortunately, states don’t always make it easy to find exemption certificate expiration dates. The Illinois Department of Revenue doesn’t put that information on the forms itself, and different certificates in Illinois are valid for different lengths of time. According to the department, manufacturing exemption certificates in Illinois may be valid for five years but “Certificates of Resale should be updated at least every three years.” 

Does “should” mean “must”? Is it three years from the date of issuance? It’s hard to comply with unclear requirements. That’s one reason why exemption certificate compliance can be so challenging.

If a certificate expires or becomes invalid because information changes, the seller — not the buyer — could be held liable for the uncollected sales tax, plus interest and penalties.

Auditors typically scrutinize exempt transactions and check the status of certificates. This allows the tax authorities to monitor who’s buying and selling what, to ensure sellers have exemption certificates on file for all tax-exempt sales, and to confirm businesses charge sales tax on taxable goods as required by law.

“You don’t want an auditor to discover expired exemption certificates before you do,” explains Silvia Aguirre, CEO of Tax CSA and former VP of Certificate Management at Avalara. 

Missing, outdated, or invalid certificates could put you on an auditor’s watch list, which generally isn’t a fun place to be. 

“State sales tax audits typically focus on two things: tax-exempt sales and use tax,” says Andrew Quirk, Product Solution Consultant at Avalara. “Every day I talk to businesses that are dealing with a state audit and regret not having an automated exemption certificate process in place.”

The only way for a seller to renew a sales tax exemption certificate is to contact the buyer and ask them to provide an up-to-date document. Most buyers won’t send their vendors a new certificate unless asked. It’s not top of mind, and frankly it doesn’t need to be: The buyer isn’t on the hook for the sales and use tax; you (sellers) are.

Note: This is something to keep in mind when your vendors request certificates from you.

There are several ways for sellers to handle certificate renewal. The most labor intensive is to manage exemption certificates manually. This typically entails requesting new certificates from customers by email, snail mail, or phone, then requesting them again if the first request goes ignored. And again. 

It’s best to start the renewal process well before a certificate expires. If you don’t have a new certificate on file when the old one expires, you’ll need to charge your buyer sales tax. They probably won’t like that and may request a sales tax refund, so this could start a time-sucking back-and-forth.

It’s essential to develop a certificate management or inventory system that works for you. For some businesses, that may entail tracking expiration dates in Excel, setting reminders to renew certificates before they expire, or establishing a review system to ensure the active forms you have are all up to date. For others, automation is key.

Even the most well-run organizations will usually need several different systems to manage certificates manually: a spreadsheet, an ERP system, and a sales system (or CRM). In the best-case scenario, that could be kind of a nightmare.

Tax and finance teams that rely on manual processes are least likely to describe themselves as efficient in this area, according to a survey conducted by Hanover Research in June 2023. They’re also more likely to have IT teams working toward automating exemption certificate management.

The most effective way to keep track of exemption certificate expiration dates is to use software designed for that purpose. Automating certificate management reduces both the headache and the risk of noncompliance. 

“Having one source of truth to automate the process of collecting, validating, and maintaining your exemption certificates is paramount in compliance,” says Quirk. “It also frees hours of time for your staff.”

“We have seen many accounting departments able to redirect their staff to focus on more profitable areas for the company,” adds Matthew MacNeil, Director of Technical Consulting for Exemption Certificate Management at Avalara. “Automation can reduce this burden down to just a few hours of compliance review each month.” 

Avalara offers three levels of exemption compliance document management so you can choose the option that best suits your business needs:

• Avalara Exemption Certificate Management (ECM) Essentials 
• ECM Pro 
• ECM Premium

And as a purchaser, Avalara Vendor Exemption Management helps ensure your vendors have up-to-date exemption and resale certificates from you. Remember, your vendors are required to charge you sales tax if they don’t have a valid certificate from you in hand (or in the cloud).

Contact Avalara to start streamlining exemption certificate management.