Sales Tax FAQs
1. Why are your billing procedures changing to include sales tax?
We are required to do this as a result of the recent U.S. Supreme Court decision (South Dakota v. Wayfair) which established new rules that require sellers to collect sales tax for states in which they have customers and a minimum amount of sales. Since the decision, many states have established requirements to collect tax if a seller has more than $100,000 in sales into the state during the year and Preferred Medical meets that standard in almost all states.
2. Will sales tax be applied if the product I’m buying is exempt from tax under my state’s law?
Preferred Medical is taking great care to help ensure this doesn’t happen. We recognize that some medical products are exempt from sales tax under state laws while others are not, and we are implementing sales tax software to help distinguish between taxable and exempt products. The software we are implementing is used by many companies and strives to reach the correct tax answer (taxable or exempt) for a particular product in every state.
3. What if I think the software has produced the wrong tax answer on a product that I purchase?
We do not expect this to happen, but if it does, please contact us and we will investigate whether a change in the tax answer is required in your case.
4. Will you bill me sales tax if I’m a tax-exempt customer?
No, but you must provide us with a valid state sales tax exemption certificate (from your state and any state you ship to) so that we can properly designate you as exempt.
5. What is an exemption certificate?
There are many different types of exemption certificates. For example:
- If you are reselling our products, please provide your state’s resale exemption certificate, including your sales tax registration number for that state.
- If you are a nonprofit organization, please provide your state’s nonprofit organization exemption certificate or a copy of the letter from the state granting you an exemption.
- Many states use the Streamlined Sales Tax exemption certificate form, or a Multijurisdictional Exemption Certificate and those are acceptable, too, as long as those forms are accepted by your state.
In Order for the certificate to be valid, these items must be present
- Seller Name
- Purchaser name
- Signature (handwritten, e-signatures, and stamped signatures will be accepted)
- Signature Date
- Description of purchaser's business activity
NOTE: We cannot advise you on what specific exemption certificate is right for you in your state, so you may want to discuss with your tax advisor to make sure you use the correct form. Whatever form is used, it is important to fill out all applicable information (name, address, type of business, exemption being sought, sales tax number, etc.) because an incomplete form may be rejected by the state.
6. Can I provide you with my Federal Employer Identification Number, W-9 or business license?
No, these are not valid exemption certificates.
7. Can I provide you with a copy of my IRS 501(c)(3) nonprofit organization exemption letter?
No, that is not a valid exemption certificate as it is a federal and not a state form. Also, not all states grant a sales tax exemption to organizations that are exempt from federal income tax. If your state exempts you from sales tax, we need the state exemption certificate or letter.
8. I am an exempt customer but didn’t send an exemption certificate in time, what should I do?
Please send your exemption certificate as soon as possible and if it is fully completed, we will designate you in our system as an exempt customer and stop adding sales tax to your invoices. You may also request that any tax billed previously be credited against future bills.
Resources from PwC: