A Certificate of Authority is a document issued by a state government to a foreign corporation confirming its authorization to do business there. It helps the business comply with state business laws.
Understanding a Certificate of Authority
A state-issued certificate of authority allows a business to collect sales taxes, use sales tax proceeds, and file tax returns.
A certificate of authority from the state comptroller makes an entity state-recognized.
Businesses that sell goods or services or engage in retail must obtain a certificate of authority before collecting sales tax. A certificate of authority does not authorize the business to transact or collect taxes; it only provides return filing instructions.
Getting an Authority Certificate
Two steps are required to obtain an authority certificate. To obtain a Sales & Use Tax Identification Number, the business must register with their state Department of Revenue. Next, the business must request an authority certificate from the same office. State requirements vary, but usually include the business’s legal documents, financial statements, and product and service list.
Certificate of authority applications take 1-2 weeks. The state issues a certificate of authority after the application is approved, allowing the business to file sales & use tax returns.
Value of a Certificate of Authority
A certificate of authority is credible. Customers trust businesses with a certificate of authority to follow state laws.
Additionally, a certificate of authority usually exempts a business from pre-certification sales tax liability. Voluntary disclosure agreements can reduce or eliminate unpaid tax penalties and fines for businesses.