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.

Key takeaways

• A resale certificate lets you buy inventory without paying sales tax, because the final customer pays it instead.
• It is not the same thing as a sales tax permit. The permit covers your sales, the resale certificate covers your purchases.
• You can only use it for goods you will genuinely resell. Anything your business consumes is disqualified.
• Most states expire certificates after one to five years, so they need tracking and renewal.
• Two multijurisdiction forms cover several states at once, but neither is accepted everywhere.

What a resale certificate is, and what it is not

Purchases made with a resale certificate are exempt from sales tax, which is real money saved on every inventory order. The rules around when you can use one are strict, though: it covers items you will resell to your customers, and nothing else.

• 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.

That second point is where most businesses get into trouble, and it is covered in more detail further down.

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. Nexus is tax jargon for a significant business presence, such as an office, a 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

You don't always have to apply everywhere separately. If you buy from suppliers across the country, one of the two multistate resale certificates may cover most of your purchases with a single form. The next section explains how they work.

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!

Multijurisdiction resale certificates: one form for many jurisdictions

A multijurisdiction tax exemption certificate is a single form that a group of jurisdictions has agreed to accept in place of their own. You fill it in once, list the places you buy into, and give it to your supplier. There are two multistate resale certificates, and each covers a different group.

Form	Issued by	Where it works	What it covers	How long it lasts
Certificate of Exemption (Form F0003)	Streamlined Sales Tax Governing Board	All 24 Streamlined members	Resale, plus the other exemptions on the form where allowed	Until you cancel it, if purchases are no more than 12 months apart
Uniform Sales & Use Tax Resale Certificate (Multijurisdiction)	Multistate Tax Commission	36 participants, several with conditions	Resale, plus ingredients or components of a product you resell	Until you cancel it in writing, or it is revoked

The Streamlined Certificate of Exemption

The Streamlined Sales Tax Certificate of Exemption is often called by its form number, F0003. According to the Governing Board, all 24 Streamlined members accept it, and the same page keeps the current member list. You don't need to register through the program to use the certificate. Our guide to Streamlined Sales Tax explains how the program works.

The ID number you enter depends on where you're registered:

• Registered where you claim the exemption: enter that registration number.
• Not registered there: enter a sales tax ID number issued anywhere else you are registered.

So a seller registered in only one place can often use the same number across every member.

Leave the single-purchase box unchecked and the form becomes a blanket certificate. It stays valid until you cancel it, as long as your purchases are no more than 12 months apart, unless a longer period is allowed.

The Uniform Sales & Use Tax Resale Certificate

The Multistate Tax Commission's Uniform Sales & Use Tax Resale Certificate has been accepted by 36 participants, according to the Commission. They are listed on the first page of the form itself.

Acceptance is subject to the instructions and notes that follow the list, and those notes are where the conditions live. For example, Colorado, Hawaii, Illinois and New Mexico don't accept it for buying a taxable service for resale.

The registration rules also vary more than on the Streamlined form. The Commission's instructions explain that some participants require you to be registered where you make the purchase. Others accept a registration number issued elsewhere, such as where your business is based.

When you still need a local form

A multistate certificate doesn't replace every local form. You still need the specific one when:

• The jurisdiction isn't on the list. Neither form covers everywhere that charges sales tax, so check the list on the form first.
• You're claiming something other than resale on the Uniform certificate. Its instructions say that if you buy tax free "for a reason other than resale, ingredient or component exemption", you can't use the form and need the specific certificate for that exemption.
• The jurisdiction wants its own registration number and you don't have one. Our registration guides cover the rules for each one.

Keeping multistate resale certificates in order

Whichever form you use, the paperwork matters as much as the form:

• Keep a copy of every certificate you issue. The Streamlined form tells purchasers to send it to the seller "and keep a copy for your records". Don't send it to the Board or to the tax authorities.
• If you're the seller, get the certificate on file. Under the Uniform certificate's instructions, a seller without one must collect the tax where the property or service is delivered. The Streamlined form protects the seller from the tax only when the "fully completed exemption certificate is provided to the seller at the time of sale or within 90 days subsequent to the date of sale".
• Update your certificates when you register somewhere new. A new registration number can change what belongs on the form.
• Recheck the lists once a year. The Uniform form reminds buyer and seller that they "have the responsibility to determine the proper use of this certificate under applicable laws", which "may change from time to time."

If your situation involves several exemptions or drop shipments across many jurisdictions, talk to a tax advisor before relying on a single form.

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

What happens if you use a resale certificate incorrectly

Misusing a resale certificate is the single most common resale certificate problem, and it is rarely deliberate. The usual pattern is a business that buys mixed orders from one supplier, some for resale and some for its own use, and applies the exemption to the whole invoice.

When that happens, you owe use tax on the items you consumed rather than resold. Use tax is the counterpart to sales tax: it applies when you acquire something tax free and then use it yourself. States can add penalties and interest on top, and repeated misuse can cost you the certificate.

Two habits keep you clear of it. Separate resale purchases from operational purchases, ideally on different orders, and keep the records that show which was which. If you discover a mistake, you can usually self-report and pay the use tax owed, which costs far less than being assessed for it later.

Accepting resale certificates from your own customers

If you sell wholesale, the certificate arrives from the other direction and the risk shifts to you. When a customer hands you a resale certificate and you stop charging them sales tax, you are the one an auditor asks about that untaxed sale.

Practical rules for accepting one:

• Collect it before or at the time of sale, not after an auditor asks. A certificate produced late is worth much less.
• Check it is complete. A missing registration number or signature can invalidate it.
• Confirm the goods make sense. A certificate does not cover a purchase the buyer plainly will not resell.
• Keep it for as long as the audit window runs, commonly three to four years and longer in a few places.
• Watch expiry dates. An expired certificate on file does not protect a current sale.

Accepting a certificate in good faith generally protects you, but good faith has to be demonstrable. If you cannot produce a valid certificate for an untaxed sale, the assessment usually lands on the seller, not the buyer.

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. Exemption certificates cover a wider range of scenarios, and a resale certificate is the specific one that deals with goods bought for resale.

Other exemption certificates in common use include:

• Manufacturing or ingredient exemptions, for raw materials that become part of a finished product.
• Agricultural exemptions, for qualifying farm equipment and supplies.
• Nonprofit or government exemptions, based on who the buyer is rather than what the goods are for.
• Direct pay permits, which let a large buyer pay sales and use tax straight to the state instead of to each supplier.

The naming is genuinely inconsistent from one state to the next, which is where much of the confusion comes from. Some call their resale document a certificate of exemption, others a certificate of resale, and the two multistate forms use different words again: the Streamlined form is a certificate of exemption, while the MTC form is a resale certificate. Read what a form covers rather than trusting its title.

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.

Once you know your sales tax liabilities, the next step is registering correctly. See how to register for a sales tax permit.

Resale certificates are one piece of sales and use tax compliance, and the piece that trips people up is rarely the paperwork. It is knowing where you owe tax in the first place, then charging the right rate on every sale. Quaderno handles that automatically across every state you sell into, and flags a new threshold before it becomes a liability. Start a free trial and see your whole tax position in one place.