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Intro to Resale Certificates
Resale certificates can go by a number of different names: Reseller‘s Permit, Resale License, Resale Exemption Certificate, etc. Whatever name the document goes by, the function of it is to allow retailers to buy products without paying sales tax. Resale certificates cannot be used for items that will be used or consumed by the purchaser in their normal course of business.
The seller is responsible for ensuring the certificate is valid when they accept it from the purchaser. If the seller collects an invalid certificate, they may be on the line to cover the taxes. As with everything pertaining to sales tax, each state is different. It is up to the seller to know the rules for the states they are doing business in. The following are general guidelines for a seller to follow:
- Ensure the certificate is completely filled out- The seller’s name and address as well as the purchaser’s name and address, the purchaser’s state registration number(s) and any applicable expiration dates, the purchaser’s signature and date, description of items purchased, and description of the customer’s type of business.
- Verify the purchaser’s registration number- Each state’s department of revenue has an avenue for the seller to verify if the purchaser’s resale certificate number is valid. Most states now have an online verification system.
- Keep the certificate on file- If the seller gets audited, they are responsible to provide the resale certificate to the state to prove that sales tax was not required for a particular purchaser.
- Make a judgement call- It is up to the seller to question whether the buyer is truly purchasing for resale. For example, if the buyer is purchasing office supplies but they are in the business of selling furniture the resale certificate would not apply. The seller would need to charge the applicable sales tax.
Tips for the Taxpayer
Become familiar with the regulations concerning resale certificates for the state(s) you do business in.
Determine which states’ Department of Revenue has an online verification system to ensure the validity of a certificate.
If possible, digitally store the exemption certificates your business collects from customers. It can save time and money in an audit situation.
For More Information
If you are interested in learning more about this topic or other tax topics, please visit our Tax Publications under News and Events at www.allynintl.com.
How Can We Help?
Allyn’s tax team is staffed with seasoned tax professionals and consultants experienced in all aspects of Federal, multi-state, and local tax compliance and consulting for large US and global corporations. We use that experience to your advantage.
Allyn manages exemption and resale certificates in every applicable state. Allyn offers web-based software that conveniently stores exemption certificates in an easy to access platform. Allyn’s Tax team reviews each certificate for validity and accuracy upon receipt and ensures certificates are maintained, renewed, and audit ready.
Contact us and we can provide a customized cost-effective solution to meet your company’s needs. For further information on Allyn Tax services, please contact: email@example.com.
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