Year-end cleanup for New York sellers: are your exemption certificates in order?

Sellers who make tax-free sales to resellers, contractors and exempt organizations are relying on a piece of paper that someone else filled out. If that paper is missing, incomplete or out of date when the Department asks about it, the tax that was not collected becomes the seller's problem. The end of the year, with a quiet week or two between the holidays, is a good time to sort the file. Here is a checklist built from what the exemption certificates page sets out from Tax Bulletin TB-ST-240.

Start with an inventory

List every customer you sold to without tax this year and match each to a certificate on file. Then check that the form fits the purchase:

• ST-120, Resale Certificate for property or services the purchaser will resell in the ordinary course of business.
• ST-120.1, Contractor Exempt Purchase Certificate for property to be incorporated into real property. ST-120 is off-limits to construction contractors, who use ST-120.1.
• ST-121, Exempt Use Certificate for purchases for a use the law exempts.
• ST-119.1, Exempt Organization Exempt Purchase Certificate for organizations that already hold an ST-119, which carries a six-digit exemption number.

A certificate issued by another state or country carries no weight in New York. A resale certificate valid in New Jersey or Connecticut does not exempt a New York sale, so a customer who sent you one needs to send the New York form.

Check the timing: 90 days

The purchaser must give the seller a properly completed certificate within 90 days of the purchase, and the Department says the time of sale is better. If a sale from this fall has no paper yet, the 90-day window is a deadline for you to chase it. A sale made on October 12, for example, reaches the 90th day on January 10, 2027. Miss the window and both the purchaser and the seller can end up responsible for tax that was never collected.

Know what you are entitled to refuse

A seller can refuse any exemption certificate, even a correct one, and if it does, it must charge tax. The purchaser can seek a refund afterward using Form AU-11. That is a legitimate option when a certificate looks doubtful, but it is the seller's decision for every sale, not only the questionable ones.

Good faith is narrow

A seller who accepts a properly completed certificate in good faith is protected from liability for tax not collected. Good faith means no prior knowledge that the certificate was false or fraudulent, and ordinary care in accepting it. If you already knew the purchase was not for an exempt purpose, the paperwork does not protect you. Year-end is a good time to look for patterns that would be hard to explain: a customer claiming resale on items they plainly use in their own business, for instance.

Retention: three years from the return

Keep each accepted certificate, attached to the record of the purchase or clearly linked to it, for at least three years from the due date of the sales tax return on which the last sale made under that certificate was reported. The clock starts at the return, not the date the certificate was signed. For a sale reported on the quarterly return due December 21, 2026, three years from that due date is December 21, 2029, and any later sales under the same blanket certificate extend it.

Blanket certificates: refresh them

A purchaser who buys the same category of exempt goods from you repeatedly can mark the blanket-use box on an eligible certificate (ST-120 and ST-121 both allow it). The blanket certificate covers similar purchases going forward until the purchaser's details change or you ask for an update. You can ask for a refreshed certificate at any time, and the purchaser must supply one if anything on file has changed, including an address or identification number. A year-end reminder letter to your blanket customers is a low-cost way to catch changes.

Registered purchasers need a Certificate of Authority

Most resale purchases require the purchaser to hold a Certificate of Authority, unless it is an out-of-state business. If a customer gave you a resale certificate and you have never seen their number, it is worth confirming their registration. The Certificate of Authority page explains what the certificate is and how registration works.

A closing checklist

1. Match every tax-free sale to a certificate.
2. Confirm each is the correct New York form for the purchase.
3. Chase any sale more than 90 days old with no certificate.
4. Ask blanket customers to confirm or update their details.
5. Label files with the due date of the return so the three-year period is easy to compute.

Willful or knowing misuse of certificates can carry fines or a jail sentence on top of the tax. Rules change, so confirm with the New York State Department of Taxation and Finance.