What is a resale certificate?

A resale certificate, or reseller’s permit, is a signed tax document that allows a business to make tax-exempt purchases for its inventory. The document confirms that the buyer intends to resell the goods, and therefore should not be charged sales tax. A retailer usually must provide it to the wholesale dealer or any other suppliers.

Again, purchases made with a resale certificate are tax exempt. So your business saves money by using a resale certificate!

There are strict rules around when you can use a resale certificate for tax exemptions. You can only use it to buy items that you will resell to your customers.

• If you’re buying items to be used in the operations of your business, such as office furniture or other supplies, that’s disqualified.
• If you buy inventory that doesn’t end up reselling, then you’re legally required to pay use tax retroactively.

What does a resale certificate look like?

A resale certificate looks like an official form issued by a state government’s tax agency. The name of the state and tax department is listed at the top, along with any official government seal.

There are a few lines of legal language that “certify” and “authorize” your ability to make tax-exempt purchases for your business. The rest of the document is just information and details about your business, which you might have to fill in yourself. We’ll cover that in a later section!

Do all suppliers accept resale certificates?

No. Suppliers can use their discretion when deciding whether or not to accept resale certificates. It’s not illegal for a retailer to refuse to accept a resale certificate. However, most do accept them!

If your supplier does not accept resale certificates, you still have another option to save that money. You can sometimes reclaim the sales tax you paid on your next tax return, if you’re registered in the state.

Do I need a resale certificate to sell online?

It's a common question we get: do you really need a resale certificate if you're strictly selling online and stashing your stock in a digital warehouse? The answer, more often than not, is yes! Especially if you want to save money by not paying extra sales tax. To save that money, most states require a resale certificate if you're purchasing inventory that you’ll resell.

Most of the time, it’s possible to use the reseller’s permit from your home state if you’re purchasing goods from a supplier in a different state. That saves you from needing to apply for multiple tax resale certificates, which we’ll get into later.

The rules get tricky when it comes to sales tax collection. Each state has its own set of rules about when you're liable to collect sales tax from customers. It usually depends on whether you have a "nexus" in that state – fancy tax jargon for a significant business presence, like an office or storage facility or a high volume of local sales.

Learn how to check if you’re liable for collecting sales tax for selling online. If you’re a dropshipper, check out our guide to dropshipping and sales tax.

How to get a reseller’s permit

You can obtain a resale certificate through a simple online application process in most states. If you visit the state’s Department of Revenue website, search for a resale certificate form. It might be under the name “Certificate of Resale” or the more general “Sales Tax Exemption Certificate.”

Before you apply for a reseller’s permit in a new state, check to see if they accept out-of-state resale certificates! That could save you the hassle.

How to apply for a resale certificate in multiple states

Instead of applying in each state separately, there are two multi-state resale certificates you can leverage to make life easier! These forms allow you to apply for resale certificates in multiple states in one go.

The Streamlined Sales Tax Governing Board (SST) offers the Streamlined Sales Tax Exemption Certificate. Anyone can use this form for any SST member state—you don't need to register for sales tax through SST in order to take advantage of it.

The Multistate Tax Commission (MTC) offers a Uniform Sales & Use Tax Exemption Certificate that can be used for some MTC states. Check the link to get the full list of states that accept the certificate, and pay attention to the notes on pages 2-4 of the document.

Note: If you choose to apply through these multi-state resale certificate forms, take a close look at the completion instructions and each state's specific allowances.

Do resale certificates expire?

Yes. In most states, resale certificates come with an expiration date. You might need to renew them every one to five years. The expiration timelines vary by state, so be sure to keep track of your certificates and re-apply when necessary!

How to fill out a resale certificate

You might need to fill out your own resale certificate if the state sends you an empty template. Other states might send you an official certificate with all of your information already printed.

Resale certificates usually require the following information:

• Name and address of purchaser
• Name and address of seller
• Registration number of purchaser
• Description of property purchased for resale
• Reason for exemption
• 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 authorized person at the purchaser

Is a sales tax license the same as a resale certificate?

No, a sales tax license or seller’s permit is not the same as a resale certificate. Your sales tax license is a basic registration that allows your business to legally collect sales tax in a particular state. All businesses must register for one in the states where they’re physically located and wherever else they have sales tax liabilities. A seller’s permit is about your sales to customers.

Meanwhile, a resale certificate is a specialized tax document only for businesses that purchase goods they’ll directly resell to other customers. The document allows businesses to make these purchases tax free. In this sense, a reseller’s permit is about your purchases from suppliers with intent to (re)sell to customers.

You usually need a sales tax license first to even apply for the resale exemption. If you’re unfamiliar, learn how to register for a seller’s permit in the US.

Is a tax exemption certificate the same as a resale certificate?

No, they aren’t the same but they’re closely related! A resale certificate is one type of tax exemption certificate available in the United States. Tax exemption certificates can cover a wider range of scenarios, like buying raw materials for manufacturing, but a resale certificate strictly deals with items for resale.

Still have questions about sales tax?

After ten years of helping business owners navigate the sales tax system, we know how confusing (and frustrating!) it can be. Check out our comprehensive guide to how US sales tax works for online businesses.

If you know your sales tax liabilities already – and you're looking for a way to automate the process – then why not try our sales tax compliance software? Start a free trial of Quaderno today.