What Is a Resale Certificate Number and How to Get One?

A resale certificate number is a unique identifier that allows businesses to purchase goods or services without paying sales tax, provided those items are intended for resale. This prevents double taxation, where sales tax would be paid both when the business acquires the item and again when they sell it to a customer. It shifts the obligation to collect and remit sales tax to the final consumer who purchases the goods for their own use.

Understanding Resale Certificates

A resale certificate is a document used by businesses to declare that goods or services they are purchasing are intended for resale and are therefore exempt from sales tax at the time of purchase.

It is important to distinguish a resale certificate from a sales tax ID number or seller’s permit. A sales tax ID number, also known as a seller’s permit or sales and use tax permit, is a unique identification number issued by a state’s tax authority to businesses that are required to collect and remit sales tax from customers. This ID number authorizes a business to collect sales tax on behalf of the state. In contrast, a resale certificate is the specific document used to claim the sales tax exemption for purchases made with the intent to resell. While a sales tax ID number is often a prerequisite for obtaining a resale certificate, the certificate itself is the form used to claim the exemption at the point of purchase. States may use varying terminology for these documents, with terms like “resale license” or “seller’s permit” sometimes referring to the sales tax ID number rather than the exemption certificate.

Obtaining a Resale Certificate

To obtain a resale certificate, businesses typically need to gather specific information before applying. This includes the business’s legal name and address, its Federal Employer Identification Number (EIN), and its state sales tax ID number, if applicable and required by the state. A clear description of the type of goods or services being purchased for resale is also necessary, along with a confirmation that the business genuinely intends to resell these items.

The application process generally involves registering with the state’s Department of Revenue or an equivalent tax authority. Many states offer online portals for this registration, where businesses can access the appropriate forms. While some states provide a specific resale certificate form to print, in many cases, providing all the required information to the vendor in any clear format, such as a letter or purchase order, may be acceptable.

A completed resale certificate typically includes the purchaser’s name and address, the seller’s name and address, and the purchaser’s sales tax registration number. It also contains a description of the property being purchased for resale and a clear statement indicating that the property is being acquired with the intent to resell it. Additionally, the document usually includes a declaration concerning taxable use, stating that the purchaser will remit use tax if the property is used in a taxable manner, along with the date and signature of an authorized individual from the purchasing company.

Applying Resale Certificates in Transactions

When a buyer uses a completed resale certificate during a transaction, they present the certificate to the seller at the point of sale. This documentation serves as the buyer’s declaration that the items are exempt from sales tax because they are intended for resale. Buyers should ensure all required information, including their business details and sales tax permit number, is accurately filled out on the certificate.

Sellers have specific responsibilities when presented with a resale certificate. They must verify the certificate’s validity, checking for completeness, accuracy, and any expiration dates. Sellers are generally required to retain a copy of the certificate or a transaction authorization number as evidence for not collecting sales tax. This record-keeping is important for audit purposes, typically for a period of four years. If a seller fails to collect sales tax without a valid certificate on file, they could be held liable for the uncollected tax.

The application of resale certificates can vary by state, which adds a layer of complexity for businesses operating across multiple jurisdictions. Some states issue annual or “blanket” certificates that cover multiple purchases from the same supplier, while others may require a specific certificate or transaction authorization number for each sale. While many states accept out-of-state resale certificates, some do not, making it important for businesses to confirm reciprocity rules. Misusing a resale certificate, such as purchasing items for personal use without paying tax, can result in penalties, interest charges, and potential audits by state tax authorities.