US Resale Certificate: Business Necessity for Retailers

Tax is always taxing. With this blog, let’s learn how sales tax could be less taxing and more manageable through a US Resale Certificate.
US Resale Certificate

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Are you diving into the world of U.S. retail or reselling business? Here’s a little insider advice: don’t overlook getting a resale certificate. It’s not just paperwork—it’s your ticket to smarter finance management. With this certificate, you won’t have to pay sales tax on products you plan to resell. That means no sales tax at the time of purchase; instead, your customers handle the tax when they buy from you. You just collect it and pass it on to the government on schedule.

Let’s unpack how this handy document, the resale certificate, can streamline your operations and help you stay on the right side of tax laws. Ready to simplify your business setup and focus more on growth and customer satisfaction? Let’s dive into how US business can be less taxing with the right preparations. Let’s learn the concept of a US Resale Certificate for Business.

Sales Tax: A Short Overview

First, let’s briefly talk about sales tax—as it’s the center of the concept after all:

Sales tax is what you’re charged when you buy something, like a new phone or a coffee maker. It’s not the same everywhere; you could say, each state sets its own rate. If you run a business, understanding sales tax becomes crucial, especially if you’re planning to use a resale certificate.

This nifty document lets you buy products without paying sales tax at the time because you’ll collect it later from your customers when you sell those items. Also, there’s a term called ‘tax nexus’ you should know about. It means if your business has enough of a presence in a state, you’re supposed to collect sales tax from buyers there. Knowing all this can really help you manage your business’s taxes better.

What Is a US Resale Certificate?

A resale certificate is like a golden ticket for retailers or anyone buying goods to sell on. It’s proof that you’re in the business of reselling items. This certificate works almost like a special pass, letting you purchase products without paying sales tax right then and there. The thought behind this is that when you eventually sell these items, the final buyer will cover the sales tax. This setup helps businesses keep costs down initially and get a temporary sales tax exemption while making sure that taxes are ultimately paid at the point of final sale.

Spare a glance below to have a brief idea of a resale certificate:

  • To use a resale certificate, you generally need to be registered for collecting sales tax in at least one US state.

  • These certificates are known by various names, including “reseller’s permits” or “exemption certificates.”

  • Your resale certificate usually serves a similar purpose to your sales tax permit, which is often called a sales tax license.

  • In certain situations, however, a state might provide a retailer with a distinct “resale certificate” number.

  • Despite the term “certificate,” nowadays, a resale certificate isn’t always an actual piece of paper.

  • While some states still give out a specific resale certificate that retailers can show to their vendors, most states simply require you to provide certain details.

Note: Several states will allow you to use an out-of-state resale certificate to complete their documentation. But there are 12 states—including Washington DC—that require that you register for a sales tax permit first in their state to get a resale certificate.

Types of US Resale Certificates

If you’re setting up your retail shop or already running one, getting to grips with resale certificates can make a world of difference. These aren’t just bits of paper—they’re your way to bypass upfront sales tax when you buy products you plan to sell. This can seriously ease your cash flow, so let’s walk through what you might need:

  • General Resale Certificate: General resale certificate is the go-to or you could say the most common for businesses. It allows you to pick up goods without shelling out for sales tax since you’ll be collecting it from your customers when you make a sale.

  • Single-Use/Purchase Certificate: Need to make a big one-time purchase? Then a single-use resale certificate is perfect for you. It lets you avoid paying sales tax on that particular buy, which is great if you don’t usually need to stock up in bulk.

  • Blanket Certificate: This one’s a lifesaver if you’re dealing with the same supplier regularly. A blanket certificate covers all your purchases from them, so you don’t have to worry about a new certificate for every transaction.

  • Multistate Resale Certificate: A multi-jurisdictional resale certificate, also known as a blanket retail certificate or uniform sales tax certificate, allows you to simultaneously get sales tax exemption for multiple states. Two types of multistate resale certificates exist. They are-

    • Streamlined Sales and Use Tax (SST) Exemption Certificate: If your business spans several states that agree on tax simplification, this Streamlined Sales Tax (SST) Exception Certificate is what you need. It works across all these states, smoothing out the process significantly. Though, the SST Exemption Certificate only works in the 24 states that are members of the Streamlined Sales Tax Governing Board.

    • Multistate Tax Commission (MTC) Uniform Sales and Use Tax Exemption Certificate: The Multistate Tax Commission AKA MTC has crafted a Uniform Sales & Use Tax Resale Certificate to streamline the resale process across states. This certificate is recognized by 36 states as a valid resale certificate. It includes detailed instructions on how to properly fill it out, specifies which states accept it, and outlines the conditions and limitations for its use. This uniform approach helps simplify the sales and use tax obligations for businesses operating in multiple states.

  • Others/Industry or Product-Specific Certificates: Sometimes, specific industries or products require particular resale certificates. For example, there are unique certificates available for items like building materials or manufacturing components.

    It’s important to use these certificates correctly. They’re not for personal purchases—doing so can land you in trouble with tax penalties. Make sure you document each purchase clearly and use the certificates as intended to keep your business compliant and running smoothly.

Note: You can apply for a multistate resale certificate to avoid getting a new one for each state. If you register for either SST (Streamlined Sales Tax) or the MTC Exemption Certificate, you will be liable for collecting sales tax in multiple states.
However, remember that not all states accept these certificates; you can only use them in states that allow multistate resale certificates.

Who Are Eligible for a US Resale Certificate?

Resale certificates are like the unsung heroes for anyone in the buy-and-sell game. They let you purchase inventory without shelling out for sales tax at the point of sale. This is a big deal if you’re watching your startup costs. Here’s who are eligible for resale certificates:

  • Retailers: Own a boutique or an e-shop? A resale certificate means you don’t pay sales tax when you stock up on goods you plan to sell. It’s like a pause button on taxes until your items actually sell.

  • Wholesalers: If you deal in bulk goods to other businesses that will resell them, this certificate keeps your purchase tax-free, which can really help your budget.

  • Manufacturers: If you’re creating products from scratch, sometimes you can apply this certificate to raw materials—if those materials end up in your final products.

  • Dropshippers: Dropshippers themselves usually don’t use these certificates directly, but they often need the retailers they work with to have them. It keeps things simpler tax-wise.

  • Seller: If you’re selling items that others will resell, it’s wise to accept resale certificates. By doing this, you won’t need to collect sales tax on these transactions. Not only does this simplify your accounting, but it also ensures you’re not gathering tax unnecessarily, keeping things straightforward for everyone involved.

  • Purchaser: As a buyer, using a resale certificate means you can purchase goods without paying sales tax right at the counter. You’ll handle the sales tax later on, once you sell the items.

  • Lessor: For those leasing or renting out equipment or other goods, using a resale certificate can cut down your upfront costs. You won’t have to pay sales tax on these items at the start, which can ease financial pressure.

  • Others: It’s not just businesses that can benefit from resale certificates. Non-profits and government agencies sometimes use them too, especially when they’re dealing in goods they’ll eventually sell. But keep in mind, that the specifics can differ widely depending on state laws, so it’s worth checking the details where you operate.

Using a resale certificate wisely means less hassle at tax time and more control over your business finances every day. It’s a simple document that packs a punch, keeping your costs down and your business flowing smoothly.

How to Get a Resale Certificate?

Getting a resale certificate varies by state, each with its own guidelines. Sounds tough, right? Don’t worry; Here’s a brief discussion on how to get yours:

  1. Start by understanding the resale certificate requirements in both your state and any state where your vendors operate, particularly where you have a physical presence.

  2. Before applying for a resale certificate, you might need to obtain a sales tax permit from your state.

  3. Fill out the specific application form provided by your state’s Department of Revenue.

  4. Submit all required documents and patiently wait for the verification to complete.

If you buy products from suppliers across different states, you may be allowed to use an out-of-state resale certificate. Additionally, remember that the District of Columbia and twelve other states require you to have their specific seller’s permit to get a resale certificate.

Note: Some states require an application fee to obtain a resale certificate, such as Arizona, Arkansas, Colorado, Connecticut, Florida, Georgia, Hawaii, etc. Some states don’t require any fee. Those are Alabama, California, Mississippi, New Jersey, New York, Pennsylvania, Texas, etc. To learn more, visit our blog Resale Certificate in the USA: How to Get One’s section “Required fee for Applying for a Resale Certificate.”

Required Information to Get a Resale Certificate

Most states require certain information for the resale certificate to be valid. These information are included but not limited to:

  • Personal Information.
  • Personal Identification Number (ITIN/SSN).
  • Business Information.
  • Business Identification Number (EIN).
  • US Phone Number.

The required information could vary from state to state. Just pay attention and do your thorough research on your desired state for a resale certificate.

Where Can I Use a Resale Certificate?

Typically, resale certificates are used to exempt registered businesses from having to pay sales tax on items intended for resale. You can say it’s all about avoiding double taxation—you won’t have to pay sales tax when you buy items, and that’s a big deal because it saves you from getting taxed again when those items are sold to your customers.

Let’s say—you can imagine if you want—you run an online boutique where you sell custom-made clothing. With a resale certificate, you can pick up all your fabrics and supplies without the burden of sales tax, trimming down your costs and helping you keep your prices attractive.

It’s pretty standard to whip out your resale certificate when dealing with wholesalers or distributors; It Keeps things simple by confirming that you shouldn’t be charged sales tax for these resale items, and it shows your suppliers you mean business.

You might hear people call a resale certificate a “reseller’s permit.” It often comes as a “blanket” certificate and applies to all your purchases from one vendor, cutting down on paperwork. What a relief! Right? After all, who really wants extra paperwork?

Just a heads up, though: the specifics can differ from state to state. Some states require a certificate they’ve issued themselves, while others are cool with a multi-state certificate that works across borders. It’s smart to brush up on the rules in the states where you operate to make sure you’re using your resale certificate correctly.

How to Use a Resale Certificate?

Got your own resale certificate? Great! Now you can present it to your suppliers to skip paying sales tax on items you’re going to resell. As we mentioned earlier, a resale certificate is like a magic pass that keeps your upfront costs down.

But remember—as French author Voltaire said—with great power comes great responsibility. This certificate makes you the one who has to collect and pay sales tax when you sell these items. Also, keep in mind that suppliers might be a bit cautious about accepting your certificate, especially if it looks out of date. They could get stuck with the tax bill if they accept an invalid certificate.

And here’s a quite useful tip: if you ever pay sales tax by mistake—the mistake could be yours or the other party’s—on an item you resell, you can actually ask for a refund from the tax authorities. Just make sure to keep proof of the sale, because you’ll need to show it to get your money back.

How to Accept a US Resale Certificate from a Buyer

If you’re an online seller, it’s inevitable that you’ll eventually sell to someone who wants to buy your products for resale. Here’s how to accept a resale certificate properly and protect yourself from any future sales tax issues:

  1. Check the Details: Ensure every resale certificate you accept is fully and accurately filled out, including a signature. This detail is crucial because it’s something auditors will closely examine if they check your records.

  2. Verify Legitimacy: Use your state’s online system, if available, to check that the resale certificate your customer has given you is real and up-to-date.

  3. Good Faith Verification: If something seems off—like someone buying bedroom furniture for a pet store—trust your instincts. You’re not required to investigate like a detective, but you must make a reasonable effort to ensure the purchase makes sense for resale. If it doesn’t, it’s okay to decline the certificate.

  4. File It Away: Keep resale certificates for at least five years, depending on your state’s requirements. This practice will be your backup to show why you didn’t collect sales tax from a particular customer if you’re ever audited.

These steps will help you handle the resale certificate process smoothly, keeping you clear of any potential tax complications.

How to Verify a Resale Certificate?

The verification process or steps of a resale certificate varies based on state. So, here maybe we can give you a state’s (New York, perhaps?) process on the resale certificate verification as an example. And where to get the rest? Don’t worry; we will eventually cover all of the states one by one. Just keep an eye on our blog page.

One thing, before discussing the New York Resale certificate verification process, here are a few important notes for you regarding a resale certificate:

  • When verifying a resale certificate, different states might use different terms. Usually, they’re checking for your customer’s state sales tax ID number. Some states might let you use a Federal Employer ID Number (FEIN) or another business ID number, but it’s crucial to verify that the business is registered to collect sales tax.

  • Not all states provide a public method to verify a resale certificate. In such cases, make sure your buyer completely and accurately fills out the correct sales tax exemption form to prevent fines and penalties in case the certificate is later found to be fraudulent.

Keep in mind that 10 states—some references say, it’s 14 states—do not accept out-of-state resale certificates. So, if your business is in one of these states, you’ll need to ensure that your buyer’s resale certificate is issued from the same state as your business.

Now, let’s briefly talk about how to verify a New York state resale certificate:

That’s it!

What if the Buyer’s Resale Certificate Is “Not Found” or “Inactive”?

If the resale certificate is “not found”: Sometimes a buyer’s tax ID might not show up due to non-fraudulent reasons, like mixing up their Federal Employer Identification Number (FEIN) with their sales tax ID number. Double-check that you’re using the correct ID on the state’s website. If that doesn’t resolve the issue, ask your customer to confirm the ID number they provided. If verification still fails, it’s safer to charge sales tax on the transaction to avoid complications.

If the resale certificate is “inactive” or “expired”: This usually means the buyer’s sales tax license has expired or been canceled. Check again with the buyer to ensure the correct number was given. They might have switched license types or started a new business. If the buyer cannot provide a valid sales tax ID or business registration, it’s best not to accept the resale certificate.

What If I Accidentally Accepted an Invalid Resale Certificate?

In some states, if you—as a supplier—unknowingly accept a fake or fraudulent resale certificate, you could be the one facing fines. These states expect you to use available tools to check if a buyer’s resale certificate is legitimate. If it’s not, you might be responsible for paying the sales tax that was skipped, and you could even get hit with additional fines.

On the other hand, in states where there isn’t an easy way to verify certificates online, the burden usually shifts to the buyer. If you’re a seller and you take a resale certificate that’s fully filled out and seems legit, under what’s called “good faith,” any penalties for fraud will generally fall on the buyer if the certificate turns out to be fraudulent.

What Could Be Done if a Supplier Won’t Accept a Resale Certificate?

It might surprise you, but suppliers aren’t legally required to accept resale certificates—even valid ones. If you’re facing this issue, it’s probably for one of these reasons:

  1. Misunderstanding about In-State Certificates: Some suppliers think you need a separate certificate for every state they operate in. However, many states actually accept out-of-state resale certificates, so this is often just a misunderstanding.

  2. System Limitations: Other suppliers might have system restrictions that only allow them to manage sales tax if you have resale certificates for all the states where they have tax obligations. It simplifies their processes but can be a hassle for you.

If your supplier won’t accept your resale certificate, you’re in a tough spot. Since suppliers bear the risk of facing penalties if they accept an invalid certificate, they might err on the side of caution. Unfortunately, there’s not much recourse if they decide not to accept your certificate due to these concerns.

Sales Tax Returns and Resale Certificate

If you already have a resale certificate, you are required to file sales tax return after a certain period of time—based on the state, the filing frequency could be monthly, quarterly prepay, quarterly, monthly, fiscal yearly, semiannually, or annually. These returns report the sales tax you collected from your customers, not the tax you avoided on wholesale purchases using your resale certificate.
Confused? Seems complicated? You can have free suggestions if you want!

Penalties of Non-Compliance

If a purchaser misuses a resale certificate for items they don’t intend to resell, they are responsible for:

  • Paying the original sales tax due, plus
  • Interest on that tax from the purchase date.

Additionally, misusing a certificate can lead to severe consequences, including:

  • Possible revocation of the seller’s permit.
  • A penalty of either 10 percent of the tax or $500 (whichever is greater) per fraudulent purchase, or
  • A 25 percent penalty if the misuse was intended to evade tax.

Moreover, under Revenue and Taxation Code section 7153, using a resale certificate falsely is a misdemeanor. If proven that the buyer knew the items would not be resold at the time of purchase, they could face fines between $1,000 and $5,000, up to one year in prison, or both.

Note: The abovementioned penalties are of California state. The other states have their own rules and regulations in case of Resale certificate non-compliance penalties. For example: In Florida, there are civil and criminal penalties for intentional misuse of an Annual Resale Certificate. A resale fraud is a third-degree felony that is subject to a 200 percent penalty.

Differences and Similarities: Sales Tax License Vs. Resale Certificate

This topic has appeared because sometimes people get confused between these two documents, and incorrectly refer to a sales tax permit as a resale certificate. But to be honest, a resale certificate and a sales tax permit or license are the same—or almost the same. However, in some cases, you might need both.

A seller’s permit is a state-issued license that lets you sell goods wholesale or retail and issue resale certificates to your suppliers. With a resale certificate, you can purchase items for your business without paying tax upfront to suppliers.

Keep in mind, that you need a unique resale certificate for each seller you deal with, unlike a sales tax permit, which is a single document you maintain and display as needed. For specific procedures in your state, it’s best to contact your state’s tax department directly to understand their requirements.

Interested? Let’s Get You One!

At this point, we can assume that some of you are quite intrigued about getting your own resale certificate; but have second thoughts because of all the hassle related to getting one. Never worry; Business Globalizer is at your service! With our customized resale certificate service, you can get a resale certificate with proper compliance. So, grab yours. However, if you are confused, we can talk!


Q1: Which ten states don’t allow retailers to accept out-of-state resale certificates?

Answer: Those 10 states are:

  • Alabama.
  • California.
  • Florida.
  • Hawaii.
  • Illinois.
  • Louisiana.
  • Maryland.
  • Massachusetts.
  • Washington.
  • Washington DC.

Q2: What happens if I buy something for resale but can not sell it?

Answer: In most cases, if you do not resell an item, you must pay use tax. Use tax is the amount of sales tax you would have paid on the item if you had purchased it at a store. Use tax is usually remitted with your state income tax return.

Q3: Can I purchase office or shipping supplies using a resale certificate?

Answer: No. You can only purchase items you intend to sell. Items such as packing materials and office supplies used to run your business are not considered items to be resold.

Q4: As a purchaser, what can I buy tax-free with a resale certificate?

Answer: You can use a resale certificate to buy the following items tax-free:

  • Taxable items you plan to resell in the same condition or as part of other products.

  • Items you buy to lease or rent to customers.

  • Services performed on items in your resale inventory.

  • Items used in performing a taxable service when you transfer them to your customer.

If you use these items yourself (like using a broom you bought for resale to clean your store), you’ll owe tax on them. Pay this tax either on the rental value or purchase price by including it in the “taxable purchases” line of your return.

Q5: Do I have to submit a resale certificate every time I buy something?

Answer: Yes, unless you always buy items for resale. In that case, you can use a blanket resale certificate stating that all your purchases are for resale.

Q6: What information is included on a resale certificate?

Answer: A resale certificate usually includes your business name, address, and tax ID number. It might also list the types of products or services you sell and the states where you operate.

Q7: How often do I need to renew my resale certificate?

Answer: The renewal frequency for US resale certificates depends on your state. Some states require annual renewals, while others require them every two years, or not at all. Find out your state’s resale certificate renewal requirements by visiting their tax authority website.

Q8: What if I think someone is using a fake resale certificate?

Answer: If you suspect someone is using a fake resale certificate, report it to your state’s taxing authority right away. It’s illegal and can lead to serious fines and penalties for everyone involved.

Q9: I received a multijurisdictional uniform sales and use tax certificate from my customer. Now what?

Answer: First, review and accept the certificate. Then, keep it on file according to your state’s laws, usually where you’re located or where the sale occurred.

Q10: Who should use a multijurisdictional uniform sales and use a tax certificate?

Answer: If you’re registered in a state listed on the resale certificate, you might be able to use it for tax-exempt purchases of items or services you plan to resell. Each state has its own rules, so check with the revenue department in your state to see if you’re eligible.

Final Words

Sales tax can be a real headache to handle, but a US Resale Certificate can make it so much easier. This certificate is not just a piece of paper or document, it’s your free pass to smarter finances and smoother business operations. Whether you’re a retailer, wholesaler, or manufacturer, a resale certificate helps you save money and keep things simple.

Staying compliant with state laws is a must to avoid any penalties, but you don’t have to tackle it alone; Business Globalizer is here! We will help you get your resale certificate without the hassle. Let’s simplify your sales tax journey and focus on growing your business together. Ready to make things easier? Let’s get started!

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