Sales Tax Exemption Certificates

Announcements
1

The next time you buy hops on LEx, you might be asked to fill out a sales tax exemption certificate. Without this required documentation, you must pay sales tax. And you should never pay sales tax, as brewery raw materials are always sales tax-exempt when backed up with the right paperwork (sales tax is paid when someone buys your beer). Our process complies with changing state tax regulations resulting from South Dakota v. Wayfair. The requirements (and therefore your experience) vary significantly by location (destination of hops).

Here’s what BUYERS should know about how we manage exemption certificates:

  • It’s Hassle-free: We’ll only ask you to provide a certificate when absolutely necessary and as infrequently as allowed by (your) state law…which is typically only once every 1-3 years!
  • Save time & money: Whenever you purchase hops outside of LEx, you’re required to supply a separate sales tax exemption certificate (or pay sales tax) to every seller/vendor; however, because LEx is considered a marketplace facilitator, you are allowed to submit a single, blanket exemption that covers all of your purchases on LEx, from all sellers.
  • No guessing: Our system guides you to the exact form required by your state. :male_detective:
  • It’s fast: Our system prefills as much info as possible on your certificate, which means you can click through in < 1 minute in most cases.
  • :point_right: What you’ll need: Your state sales tax account number. Please double-check this number, as it will be verified against your state’s database. :point_right: IMPORTANT: If the tax ID you provide doesn't match your company name & address or isn't found in your state's database, your sales tax exemption certificate will be rejected, which will delay your orders. And if you’re shipping hops into New Mexico, you’ll need this additional information.
  • It’s required: If you’re asked to fill out an exemption form, your order won’t ship until you do so. All hop merchants have this same requirement (it’s the law).
  • Requirements vary by state: Many states only require you to do this once, some states require a new certificate each year, and a few states don’t require anything. We don’t make the rules, we just help you comply with them as conveniently as possible.
  • Free audit support: What? That’s right, if you get audited and need any legal support related to your LEx transactions, our hired tax experts are at your disposal. Who else gives you free tax audit support? Nobody. :exploding_head: BTW, many states currently have budget shortfalls due to COVID-19…what’s one way they can increase revenue? More tax audits. :thinking: Be prepared!
  • We want your feedback: If you find anything about this process confusing or difficult, please let us know so we can make it better!

Here’s what SELLERS should know:

  • The law: If you sell hops outside of LEx (ie on your website, the BA forum, or directly to the brewery down the street), you are required to either collect (and validate!) sales tax exemption certificates from every single buyer or charge, report, and remit sales tax in each buyer’s state. And every state has different requirements. If you get audited by any state and can’t provide valid exemption certificates, you’ll be on the hook for sales tax (and penalties) for all of those transactions. :grimacing: but…
  • Good news: After South Dakota v. Wayfair, each state created its own marketplace facilitator rules (designed to target Amazon, eBay, etc.). For transactions routed through marketplace facilitators, these rules shift the burden described above from individual marketplace sellers (you) to the marketplace facilitator (us). So, for all of your sales on LEx, this entire burden becomes ours and you have zero requirements or liability. :beach_umbrella:
  • Sleep easy: While, this is entirely our burden, perhaps you’d have more peace of mind if we gave you access to all exemption certificates related to your transactions? You know, in case you need to show them to an auditor? No problem - for all future transactions, you’ll be able to download certificates directly from the order details page.
  • Free audit support: What? That’s right, if you get audited and need any legal support related to your LEx transactions, our hired tax experts are at your disposal. Who else gives you free tax audit support? Nobody. :exploding_head: BTW, many states currently have budget shortfalls due to COVID-19…what’s one way they can increase revenue? More tax audits. :thinking: Be prepared!
2

We’ve now successfully collected (and validated!) hundreds of sales tax exemption certificates, less than 2 weeks after launching this feature. It looks like most buyers were able to fill out their certificates in a matter of minutes :partying_face: (our goal = speed + accuracy + convenience + security). If you are one of these buyers and there’s anything you didn’t like about the process - we’d certainly like to hear about it so we can improve it! After monitoring the performance of the AI certificate validation, as well as the scenarios in which we had to do manual reviews, I have one major takeaway for all buyers:

Please double-check your state sales tax account number before filling out a sales tax exemption certificate! (This is NOT your Federal EIN)

About 10% of buyers supplied their FEIN instead of their state sales tax account number. Our system takes the account number you provide and crosschecks it against your state’s database. If the number you provide doesn’t match the number in your state’s database, then your certificate gets rejected, which will DELAY YOUR ORDER and/or any future orders until you resubmit your correct state sales tax account number.

If that happens, please be on the lookout for an email like this:

image
image1288×1466 258 KB

Finally, there are a couple of edge cases that we are still working on but will have resolved very soon:

  1. You are exporting the hops you purchase (ie via a domestic shipping consolidator)
  2. You are dropshipping the hops you purchase to a state ≠ your brewery’s state (ie for contract brewing or a collab)

If you find yourself in either of those situations, please drop us a quick heads-up on the HELP DESK and we’ll walk you through a quick workaround until we get our code updated to streamline those workflows as well. Thanks! (and BTW never let anyone charge you sales tax for hops that you’re going to turn into beer!)

3

Hi, we have purchased hops here before without problems. Since we live in the border with US, we usually purchase hops, have them shipped to Calexico (US border), make all the paperwork and finally legally import them into Mexico. Now, we can not complete the tax exemption certificate, as we are a mexican company and no longer purchase hops at lupulineexchange

4

@isladelmuerto We need to set up your account for export, and get you to complete the required paperwork. Essentially, you just need to fill out a form stating that the hops will be exported, then you have to submit BOLs for each order via our Exemption Certificate Management System (ECMS). We have several Mexican brewers who do this regularly. I see that you also submitted a support ticket, so we’ll follow up with next steps there.