Form ST-12: Exempt Use Certificate Filing, 90-Day Rule, and Penalties

New York’s exempt use certificate is Form ST-121, not “Form ST-12” — no form by that number exists in the state’s tax system. Registered businesses and organizations use Form ST-121 to buy tangible personal property or certain services without paying sales tax, provided the purchase serves a qualifying exempt purpose such as production, research and development, or the generation of utilities for sale.

What Purchases Qualify

The exemptions available through Form ST-121 come from New York Tax Law Section 1115(a). The most commonly claimed one covers machinery and equipment used directly and predominantly in the production of tangible personal property for sale. “Production” here includes manufacturing, processing, assembling, refining, mining, and extracting. The exemption also covers equipment used to generate gas, electricity, refrigeration, or steam for sale.¹

“Directly and predominantly” is the test that trips up the most buyers. Predominantly means the equipment is used more than 50% of the time in a qualifying production activity. Directly means it plays an immediate role in transforming raw materials into a finished product, including packaging the product for sale. Equipment used only for administration, storage, or distribution of finished goods does not qualify.²

Exemptions also apply to property used in research and development in the experimental or laboratory sense — purchases meant to develop new products or improve existing ones. Ordinary quality-control testing, efficiency surveys, management studies, consumer research, and promotional activities do not count.¹

One exclusion catches people off guard. The production machinery exemption does not cover parts with a useful life of one year or less, and it does not cover tools or supplies used in connection with qualifying machinery. Those items stay taxable even if the machine itself is exempt.¹

Picking the Right Part of the Form

Form ST-121 has three parts, each covering a different category of exempt purchase. You must check the correct box within the relevant part to identify the legal basis for your exemption. Checking the wrong box can invalidate the certificate.

Part 1 covers production-related exemptions: machinery, equipment, parts, tools, and supplies used in producing tangible personal property for sale, along with items used in film production, telecommunications or Internet access services, broadcasting, and utility pipeline operations. Fuel and utilities consumed in production also go here.³

Part 2 covers exempt services, including installation, repair, maintenance, and servicing of qualifying Part 1 production equipment. It also reaches fabrication and processing services for film and broadcast property, waste removal from regulated facilities, commercial fishing vessel property, pollution control equipment, aircraft maintenance supplies, and cargo-handling equipment at qualified marine terminal facilities in New York City. If none of the listed categories fits, Part 2’s Item U (“Other”) lets you describe your exempt use and cite the specific Tax Law section that applies.³

Part 3 covers other exemptions, including tangible personal property used in research and development, fuel and utilities consumed in R&D, and wrapping, packaging, and shipping materials.³

Single-Purchase vs. Blanket Certificates

At the top of page one, the form asks whether you are issuing it as a single-purchase certificate or a blanket certificate. It’s easy to overlook, but it matters.

A single-purchase certificate covers one specific transaction. A blanket certificate covers that first purchase plus every subsequent purchase of the same general type of property or service from the same seller. If you regularly buy exempt production supplies from one vendor, a blanket certificate spares you both the paperwork on every order.³

When a blanket certificate is on file, each later sales slip or purchase invoice must show your name, address, and Certificate of Authority number. The blanket certificate stays in effect until you give the seller written notice revoking it, the seller learns it is false, or the Tax Department notifies the seller you can no longer make exempt purchases.³

Filling Out and Signing the Form

You’ll need your business’s legal name, physical address, and the Certificate of Authority number issued by the New York State Department of Taxation and Finance. The seller’s name and address go on the form as well, creating a traceable link between both parties for audit purposes. Both pages one and two must be completed by the purchaser.³

After checking the correct exemption box and filling in your identification details, an authorized representative of the purchasing business must sign and date the form. The signature line includes a statement acknowledging that willfully issuing a false certificate to evade tax may be a felony or other crime, punishable by fines and possible jail time. Sellers typically reject unsigned or incomplete forms, and the transaction is then treated as taxable.³

The current version of Form ST-121 is a fillable PDF on the Department of Taxation and Finance website. Download the latest revision before you use it.

The 90-Day Delivery Rule

You must give the completed certificate to the seller within 90 days after the date of the purchase. The cleanest approach is to hand it over at the time of the first transaction. If the certificate is not provided within that 90-day window, both you and the seller can be held liable for the sales tax.⁴

A seller who accepts a properly completed certificate in good faith within that 90-day period is relieved of liability for not collecting sales tax on the transaction.⁵

How Long to Keep the Certificate

The seller must keep the completed exemption certificate on file for at least three years from the due date of the sales tax return on which the last sale covered by that certificate was reported. It is the seller’s legal justification for not collecting and remitting sales tax to the state.⁴

Keep a duplicate copy for your own records. If the Department audits either party, having the certificate handy is the simplest way to prove the transaction was exempt. Missing or incomplete certificates are one of the most common triggers for additional assessments during audits.

Penalties for a Bad Certificate

The consequences of issuing a false or fraudulent exemption certificate go well beyond paying back the tax. New York can impose a penalty of 100% of the tax that should have been collected, plus $50 for each fraudulent certificate you issued, in addition to the underlying tax owed.⁶

Even without fraud, if a use turns out not to qualify and tax goes unpaid, the standard late-payment penalty is 10% of the tax due for the first month plus 1% for each additional month, up to a maximum of 30%. Interest runs at 14.5% per year or the underpayment rate set by the Commissioner, whichever is greater.⁶

Where the failure to pay is due to outright fraud, the penalty jumps to twice the tax due, plus interest from the original due date. Criminal prosecution is also possible: issuing a certificate you know to be false can carry fines and jail time under Tax Law Sections 1801 through 1807.⁷

If the Exempt Property Later Changes Use

Buying something tax-free with Form ST-121 does not permanently shield it from sales tax. If you later divert that property to a non-exempt use, you owe use tax on it. This comes up more often than people expect. A manufacturer buys equipment for the production line, then shifts it to administrative or warehouse duties where it no longer meets the “directly and predominantly” test.

When that happens, you are responsible for self-assessing and remitting use tax, generally measured by the purchase price of the property, and reporting it on your regular sales tax return. Failing to do so carries the same penalties and interest described above. The Tax Department specifically looks for change-in-use situations during audits, so keeping internal records of how exempt equipment is deployed over time is worth the effort.

1
New York State Senate. New York Code TAX 1115 – Exemptions From Sales and Use Taxes
2
New York State Department of Taxation and Finance. Tax Bulletin ST-552 – Machinery, Equipment, Materials, and Services Used in Production
3
New York State Department of Taxation and Finance. Form ST-121 – Exempt Use Certificate
4
New York State Department of Taxation and Finance. Exemption Certificates for Sales Tax
5
New York Codes, Rules and Regulations. 20 CRR-NY 532.4 – Presumption of Taxability
6
New York State Senate. New York Code TAX 1145 – Penalties and Interest
7
New York State Department of Taxation and Finance. Sales and Use Tax Penalties