If you run a business that buys products and resells them, then you most likely have a reseller's certificate. This certificate is required when buying items specifically at a resale price. As a registered seller, you can avoid paying sales tax as long as you have proper documentation. Resale certificates are provided in a “blanket” form. This means that every item purchased from the vendor will not be subject to tax.
The resale certificate states that the purchaser plans to sell the goods purchased, and therefore does not need to pay tax. There are also manufacturer reseller certificates that allow manufacturers to place products into other manufactured products. Most states allow for resale exemptions, but there are state-issued resale certificates and multi-state certificates available.
Reseller Certificate Requirements: What Do You Need to Get a Resellers Certificate
If you are applying for a reseller certificate, there are a few things that you need to have handy to be approved.
Make sure you meet all reseller certification requirements when filling out your application.
- Name and address of the purchaser
- Name and address of the seller
- Registration number of purchaser
- Description of property purchased for resale
- Reason for exemption
- A statement that if the property is put to use in a taxable manner that the purchaser will remit the consumer’s use tax
- Date and Signature and Title of the authorized individual at the purchase
What to Know About Resale Certificates
In forty-five US states and Washington DC, there are different sales tax rules and laws. This is why it is essential that you read the rules in your state for resale certificates. One example of the use of a resale certificate would be to purchase office paper or printer ink purchased in order to sell them at an office supply store.
If you were to purchase these for your tennis ball resale company, it would not be lawful because you would be using them for personal use. In the state of Florida it only costs $5 to register by mail, and it is free to register online.
Tips to Consider When Using a Resale Certificate
- Fill out the resale certificate completely before presenting it.
- If you improperly use your resale certificate the vendor will be the one in trouble. Some retailers may refuse to accept a resale certificate because of this.
- Big retailers (such as Target) are known for refusing resale certificates.
- You must pay “consumer use tax” on the taxable item if you do not resell it and use it yourself. This is paid when filing tax returns.
- 10 U.S states do not allow vendors to accept resale certificates from other states. Should you wish to sell in another state you will need to obtain a multi-state certificate or a new certificate for that state.
When do you need a Resellers Certificate?
If you wish to purchase items without paying sales tax, and then you intend to resell them and collect sales tax from buyers, you will need a resellers certificate. Once your business is registered with the state and you have obtained a Certificate of Authority, you then need to obtain a Resale Certificate. In most states, this should be done within 90 days of purchase, and you must provide the seller with a resale tax certificate.
If your business wishes to buy merchandise that you will use and consume for your business, you cannot use a resale certificate to purchase those items. Any merchandise obtained upon a resale certificate is subject to use tax if it is used or consumed by the purchaser. This must be reported and paid to the appropriate jurisdiction.
States that Do Not Accept Resale Certificates From Out of State
Reseller certificates that are permitted in some states may not be valid in other states. Make sure to check your state guidelines if you are going to be doing business outside of the state.
List of states that do no accept out of state resale certificates:
- Alabama
- California
- Florida
- Hawaii
- Illinois
- Louisiana
- Maryland
- Massachusetts
- Washington
- Washington D.C
How to get a Reseller's Certificate
Each state will have a different process for getting a resale certificate. Despite this, they are all somewhat similar. Typically you will begin by getting a sales tax permit from the state revenue agency. You should seek out the resale certificate and fill it out. Most often there will be a certificate provided by each state. In many cases, any form can be used as long as you provide the right information. The paper will be kept with the seller in case of an audit.
Some states created a situation to allow sellers to do business between states. This was made to simplify doing sales taxes and is called the Multistate Tax Commission (MTC). This commission developed a single resale certificate which is used within all of the participating states. It is called the “Uniform Sales & Use Tax Exemption Certificate”.
