How to Fill Out the Colorado DR 5002 Resale Certificate

The Colorado DR 5002 resale certificate is the one-page form a business gives to a supplier so it can buy inventory without paying sales tax at the point of purchase. You fill it in, sign it, and hand it to the seller. It never goes to the Colorado Department of Revenue. The seller keeps it on file as proof the sale was properly exempted, and the tax obligation shifts to the end customer who eventually buys the product at retail.1Colorado Department of Revenue – Taxation. DR 5002 – Declaration of Wholesale or Entity Sales Tax Exemption

What You Need Before You Start

You need an active Colorado Sales Tax License before you can use the DR 5002. Colorado law makes it illegal to sell at retail without first obtaining one from the Department of Revenue, and the account number on that license is what you’ll put on the form to prove your resale authority.2FindLaw. Colorado Revised Statutes Title 39 Taxation 39-26-103 If you don’t have a license yet, apply through Revenue Online. The standard license covers two years and requires a security deposit held by the state.

Pull this information together before you open the form:

  • Your legal business name, trade name if different, mailing address, and phone number.
  • Your 8-digit Colorado sales tax account number. This is the number on your license. Do not use the 12-digit location ID.3Colorado Department of Revenue. DR 5002 Declaration of Wholesale or Entity Sales Tax Exemption
  • The license expiration date. An expired license invalidates the exemption.
  • A plain description of what you sell in the ordinary course of business.

Know what qualifies. The exemption covers tangible personal property you plan to resell, either as-is or as an ingredient or component of something you manufacture.4Justia. Colorado Code 39-26-713 Items your business consumes itself — office furniture, cleaning supplies, computers for your own staff — do not. Claiming a resale exemption on things you use internally is where businesses run into trouble with auditors.

Filling Out the Form

Download the current version from tax.colorado.gov.1Colorado Department of Revenue – Taxation. DR 5002 – Declaration of Wholesale or Entity Sales Tax Exemption It is one page. A few fields trip people up.

Start with the purchaser block. Enter your legal name, any trade name you operate under, mailing address, and phone number. The form asks for the purchaser’s information only. There is no field for the seller’s name or address. Enter your 8-digit Colorado sales tax account number, Colorado as the issuing state, and the license expiration date.3Colorado Department of Revenue. DR 5002 Declaration of Wholesale or Entity Sales Tax Exemption

Pick the right exemption box. Check “Purchase for Resale” if you are buying inventory you plan to sell in an unaltered or unused state. If you are buying raw materials or components that become part of a manufactured product, use the wholesale or manufacturing exemption option instead.

Describe your business specifically. “General merchandise” invites questions during an audit. “Women’s athletic footwear” tells the seller and any future auditor exactly what you do and makes it easier to see that the goods you are buying tax-free line up with what you actually sell.

Sign and date the bottom. The signature block contains a declaration that the purchases qualify for exemption and that you are the purchaser or are authorized to sign on the purchaser’s behalf.3Colorado Department of Revenue. DR 5002 Declaration of Wholesale or Entity Sales Tax Exemption It is a legal declaration. Knowingly filing a false one can trigger back-tax assessments and penalties.

Giving the Form to Your Supplier

Hand, mail, or email the completed form to the seller. Do not send it to the Department of Revenue.1Colorado Department of Revenue – Taxation. DR 5002 – Declaration of Wholesale or Entity Sales Tax Exemption In a physical retail setting, present a printed copy at the register before the transaction is rung up. For phone or online orders, a scanned or digital copy sent by email works.

Once the seller accepts the form, they should leave sales tax off the transaction. The form becomes their legal justification for not collecting and remitting tax on that sale. If the seller has doubts about the form or your license status, they can collect tax anyway. You would then need to file a refund claim with the Department if you believe the exemption was proper.5Colorado Department of Revenue. 1 CCR 201-4 – Documenting Exempt Sales

One Form Can Cover Recurring Orders

You do not need to complete a new DR 5002 for every order from the same supplier. The form can be applied to multiple purchases by the same purchaser claiming the same exemption.3Colorado Department of Revenue. DR 5002 Declaration of Wholesale or Entity Sales Tax Exemption This “blanket” use is common with regular wholesale vendors. One signed form on file covers qualifying purchases going forward.

Colorado does not set a hard expiration on the DR 5002 itself. The certificate remains valid as long as your underlying sales tax license is current. When you renew your license or get a new account number, send the supplier an updated form. Sellers are expected to periodically verify your license has not lapsed, so keeping them current avoids problems on future orders.

If You’re Buying From Colorado but Based Out of State

You do not need a Colorado sales tax license to claim a resale exemption from a Colorado seller. The state allows sellers to accept a valid sales tax license or resale certificate issued by another state.6Colorado Department of Revenue. GIL-13-006 – Colorado Taxes For documentation, the Department recommends out-of-state purchasers use the DR 0563 (Sales Tax Exemption Certificate: Multi-Jurisdiction) rather than the DR 5002.5Colorado Department of Revenue. 1 CCR 201-4 – Documenting Exempt Sales

When You Pull Resale Inventory for Your Own Use

This is the trap that catches businesses off guard. You buy a case of product tax-free on a resale certificate, then pull a few units off the shelf for your own purposes: a sample for a trade show, a gift to an employee, a replacement for something broken in the office. The moment that item leaves resale inventory for business or personal use, you owe consumer use tax on it.7Department of Revenue – Taxation. Consumer Use Tax for Businesses

The state consumer use tax rate is 2.9%, the same as the state sales tax rate. Filing frequency depends on how much you owe:

  • Under $300 per year: file an annual return by January 20 of the following year.
  • $300 or more cumulative at the end of any month: file by the 20th of the following month.7Department of Revenue – Taxation. Consumer Use Tax for Businesses

File online through Revenue Online or by paper using the Consumer Use Tax Return (DR 0252). Local jurisdictions may impose additional use tax on top of the state rate, so check whether your city or county has its own requirement. Ignoring this obligation is one of the most common audit findings for retailers. The Department knows what you bought tax-free and will look for the corresponding resale.

Keep Your Copy

Keep a copy of every DR 5002 you issue, along with the matching purchase records, for at least three years. Colorado law requires every business liable for state taxes to preserve the books, accounts, and records needed to determine its tax liability for that period.8Justia. Colorado Code 39-21-113 – Reports and Returns – Rule If a supplier loses their copy and an auditor comes calling, you want to be the party that still has the paperwork.