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

Instead of applying in each state separately, there are two multistate resale certificates you can use to make life easier. Both are single forms accepted by a group of states.

The Streamlined Sales Tax Governing Board offers the Streamlined Sales Tax Certificate of Exemption, sometimes referred to by its form number, F0003. Anyone can use it in any Streamlined Sales Tax member state, and you do not need to register for sales tax through the program first.

The Multistate Tax Commission offers the Uniform Sales & Use Tax Resale Certificate, which covers a different group of states. It was previously called the Uniform Sales & Use Tax Exemption Certificate, so you may still see the older name in circulation. Check the current list of participating states on the form itself, and read the notes on pages 2 to 4: several states accept it only with conditions attached.

Note: Neither multistate form is accepted everywhere, and acceptance is not the same as unconditional acceptance. Before you rely on either one, read the completion instructions and confirm the specific allowances for each state you plan to buy from.

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

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.