A Maryland Resale Certificate, also known as a resale license or reseller’s permit, is a document that allows Maryland businesses to avoid paying state sales tax on products that are purchased from wholesalers or manufacturers to resell them to customers.
To purchase tax-free, the retailer will need to provide a Maryland Resale Certificate to their vendor.
Learn more about how the Maryland Resale Certificate works, how to get one, and more.
How does a Maryland Resale Certificate work?
When retailers purchase products to resell, they often don’t pay sales tax to the supplier to purchase tangible personal property. The sales tax will still be paid, but instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise.
For instance, when an electronics store in Maryland buys a batch of laptops to sell in their store, by having a resale certificate, the electronics store owner usually won’t pay sales tax on the purchase of inventory. When a customer comes into the store and buys one of these laptops, the retailer will charge the sales tax to the customer based on the full price of the laptop. Then, usually, at the end of each month, the electronics store sends the accumulated sales tax to the Comptroller of Maryland.
It’s important to know that the sales tax exemption is only intended for inventory that will be resold and not for the tax-free purchase of items used in normal business operations, such as paper, pens, etc.
How to Prepare a Resale Certificate
Before a business starts selling products or providing taxable services, it must first get a Maryland Sales Tax License (sometimes called a seller’s permit or sales tax number) from the Comptroller of Maryland. After registering for the license, a sales and use tax registration number will be issued, which will be needed to fill out a certificate.
While there is no official state Resale Certificate, the Comptroller of Maryland has a suggested blanket certificate available for download.
The Resale Certificate should include the following information:
- A signed statement that the purchase is intended for resale,
- The purchaser’s name and address; and,
- The purchaser’s Maryland sales and use tax registration number.
Maryland Resale Certificate FAQs
How much does a Maryland Resale Certificate cost?
There is no cost for a Resale Certificate in Maryland.
Does a Maryland Resale Certificate Expire?
While sales tax numbers can become inactive or revoked if not used, resale certificates will not expire. To ensure the buyer’s information is up-to-date, the state of Maryland recommends that certificates be updated at least every three years.
How often is Maryland sales tax due?
Most new businesses are set up to file and pay sales and use tax quarterly, but depending on the amount of tax collected, your business may have a different filing frequency.
Where do I file the Maryland sales tax exemption certificate?
In Maryland, the certificate is not filed with any government agency. Instead, it is kept by the seller (the business selling the merchandise for resale).
Is a Resale Certificate the same as a Sales Tax License?
The Sales Tax License and Resale Certificate are commonly thought of as the same thing, but they are actually two separate documents. The Sales Tax License allows a business to sell and collect sales tax from taxable products and services in the state, while the Resale Certificate allows the retailer to make tax-exempt purchases for products they intend to resell.
These are two of several registrations your business may need. To learn more, check out our guide to Maryland business licenses.
What steps should a business take to accept a resale certificate?
When a business is presented with a resale certificate, the seller has the burden of proof to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may result in the seller being liable for Maryland sales taxes.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
– Verify the purchaser’s Maryland account ID or Maryland resale number is valid and active by visiting the Maryland Tax Account Number Verification page on the Comptroller’s website.
– Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership but wants to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates.
