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How To Get A Resale Certificate

How To Get A Resale Certificate

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How To Get A Resale Certificate

Resale certificates allow the tax-free purchases of merchandise to be resold. Learn more about the certificate, why it’s needed, and how to get one. 

What is a resale certificate?

A resale certificate (depending on the state, it may be called a reseller permit, sales tax exemption license, or resale license) is a document that allows resellers to purchase tangible personal property (aka the goods you plan to resell and, in some states the equipment used to produce goods that are resold) from a vendor, wholesaler, or supplier without paying sales tax.  The reseller, which is often the retailer, sells the product to the end-user of the product and collects sales tax. 

Manufacturers will also use resale certificates to purchase the supplies or services needed for the products they make. Depending on the state, a resale certificate may be called a reseller’s permit, reseller’s license, sales tax license, sales tax exemption certificate, seller’s permit, or something similar.

Why is a resale certificate needed?

When a wholesaler makes a sale to a retailer, the wholesaler doesn’t charge the retailer sales tax.  The state, of course, wants to be paid the sales tax.  The resale certificate provides documentation about the reseller and their business.  Each state’s Department of Revenue (or similarly named revenue agency) will occasionally audit businesses making tax-exempt sales to ensure they are making sales to businesses that are in the business of reselling the merchandise being sold.  If there is an audit and a wholesaler is making tax-free sales without the proper documentation or selling to businesses that don’t reasonably appear to be in the business of selling the products being purchased, the wholesaler can face fines and be charged the full amount of tax on the sale.

What information is needed on a resale certificate?

The information needed to fill out a resale certificate varies by state, but resale certificates typically require:

  • Business name
  • Reseller’s name, address, phone number
  • Reseller’s sales tax permit number
  • Description of the reseller’s business
  • Description of the merchandise sold

Additionally, some certificates ask whether the certificate should be treated as a blanket certificate or if it will be for a one-time transaction.  A blanket resale certificate is one where the reseller expects to make recurring purchases with the vendor over an extended period of time.

How to apply for a resale certificate

Each state has a different process for getting a resale certificate. Still, the process is one where the reseller will first obtain a sales tax number from the state revenue agency and then fill out a resale certificate.  A certificate is typically provided by each state, however, in many cases, as long as the required information is included, any form can be used.  The certificate isn’t filed with any agency. Instead, it is kept on file with the seller in case of an audit.

Since businesses are increasingly doing business over state lines, several states joined together to simplify sales taxes.  The Multistate Tax Commission (MTC) developed a single resale certificate used among the participating states called the Uniform Sales & Use Tax Exemption Certificate or Streamlined Sales Tax Project.

Click on your state below to see more information on registering for a resale certificate in each state.

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Get A Resale Certificate

How To Get A Resale Certificate

8 Responses

  1. I work for a used furniture store. A lot of motel owners come in to buy furniture for their motels. They shouldn’t be charged tax as the furniture will be taxed as room rentals. Is the motel required to provide a tax exemption form to the furniture store? Thank you for any help you can give. A lot of motel owners seem to scoff at the thought of filling out the form. Am I doing something wrong?

    1. Hi Michael

      You will want to check with your state’s taxation agency, but the motel owners should be paying sales tax on this furniture. Since they are not reselling the furniture and in fact, are the end users, I believe most states, if not all, are going to require charging them sales tax.

      If you have any customers that won’t fill out the form, for your protection, you need them to fill it out. If the state comes to audit you and you don’t have this documentation, you will likely be the one paying the sales tax.

      Hope this helps.

      Thanks!
      Greg

  2. Hello! My company is in Delaware, but there is no resale certificate in Delaware, .but a resale certificate is required to register a wholesaler account. What should I do?

    1. That’s a great question! For a business that operates in a tax-free state, like Delaware, the wholesaler won’t charge sales tax on the purchase. This eliminates the need for a resale certificate.

  3. Do I need a resale certificate when buying for major retailers? I run a gift basket business and plan to use a combo of wholesale/retail. For small things I go to Target, World Market or Home Goods etc for little odds and ends , even those these places aren’t known for wholesale no talk about how to register. Is it needed for places like that? Would that mean I need a resellers certificate for Target, World Market and every separate major retailer I use?

    1. Awesome question! No, you don’t have to get a resale certificate, but I generally recommend getting one; unless the dollar savings are so small, it isn’t worth the effort.

      There are a lot of people who buy stuff from retailers to resell, sometimes to add to finish off a product like you are, and others who buy on clearance to resell. There is no guarantee the retailer will take it, but most will. The first time, they will get your information and enter it in the system. After that, every time you go to checkout, you will say the sale is tax-exempt, and it’s done.

      If you aren’t able to purchase tax-free for whatever reason, keep track so you can deduct the sales taxes you paid so sales tax isn’t being paid twice (once on the purchase of inventory and then again when you charge the customer)

      Hope this helps, but if you have more questions, please let me know!

      Greg

  4. How would this all work if I sell through eBay? eBay already collects sales tax from the buyer but I’d like to still purchase products without paying a sales tax on the item with a resale certificate

    1. Even though eBay takes care of the sales taxes, you’ll still need a seller’s permit (or similarly named certificate, depending on the state) as you are physically operating a business there. Your sales tax filings will be $0 from the eBay sales, and after getting the seller’s permit, you will be able to get the resale certificate.

      Hope this helps!
      Greg

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