State By State Guide To Resale Certificates

In the vast landscape of ecommerce, retail is one of the most fundamental approaches to conducting business. Most retail businesses purchase wholesale inventory or materials and sell them to customers for profit. If you are a business that resells products, the supplier requires a resale certificate if you want to avoid paying sales tax on the products or items purchased.

Sales tax exemptions are tempting and complicated at the same time. Resale certificates help ensure that businesses comply with tax regulations. By understanding resale certificates and their requirements, businesses can avoid legal issues and penalties related to tax evasion.

In this guide, we have explained a state-by-state breakdown of rules for resale certificates to make it easy for you to navigate.

 

What is a Resale Certificate?

A resale certificate is a document that exempts registered businesses from paying sales tax on items that are purchased or intended for resale, as the end customer will pay the sales tax.

These items could be materials used to create or make the finished product. For example, if an ecommerce business sells clothes, they can buy tax-free clothes from a wholesale supplier by showing a resale certificate.

A resale certificate is often called a reseller permit. It is entirely different from a seller’s permit and is required only by registered businesses that purchase qualifying items from suppliers for resale.

A resale certificate confirms that the buyer intends to resell the purchased goods, which exempts the transaction from sales tax. Therefore, they are not responsible for collecting or remitting sales tax to avoid double charging sales tax on a single item.

 

How to Get a Resale Certificate?

Every state has its own rules regarding issuing resale certificates to eligible retailers. Here’s how you can get one:

1. Understand the resale certificate requirements in the state where you have a physical nexus and the states where your vendors are located.
2. Apply for a sales tax permit in the state before getting a resale certificate (if applicable).
3. Fill out the application form specified by your state’s Department of Revenue.
4. Provide the required documents and wait for the verification process.

If you purchase products from suppliers in multiple states, you might be allowed to use an out-of-state resale certificate for those states. In addition, the District of Columbia and twelve other states need you to obtain their seller’s permit to receive a resale certificate.

 

What are Multistate Resale Certificates?

Multistate resale certificates allow you to simultaneously get sales tax exemption for multiple states. There are two multistate resale certificates available that businesses can use:

• Streamlined Sales Tax (SST) Exemption Certificate 
• Multistate Tax Commission (MTC) Uniform Sales and Use Tax Exemption Certificate

You can apply for any of these certificates to avoid applying for a new resale certificate in each state. Although, be reminded that not all states accept these certificates. You can only use these certificates in a state that allows and accepts multistate resale certificates.

 

How to Use a Resale Certificate?

Once you fulfill the requirements for your state and get a resale certificate, you can provide it to your vendor/supplier to avoid paying sales tax on items you intend to resell.

However, these certificates make you liable for sales tax collection in your respective state. Sometimes suppliers may refuse to honor a resale certificate because they are responsible for the uncollected sales tax if the certificate has expired.

If you don’t get a tax exemption from a seller, you can request a refund from the tax authorities if you resell the products and can provide evidence of that.

 

Difference Between a Reseller Permit and Sales Tax Exemption Certificate

A reseller permit and a sales tax exemption certificate are different documents for different purposes. Here is the difference between these documents. 

• A reseller permit is a type of exemption document issued by the government allowing a business to purchase goods, without paying sales tax, for the purpose of reselling to a customer. This does not exempt you from products or items you buy from vendors for use in your business (i.e., office supplies, computer equipment). 
• A sales tax exemption certificate is a broader term referring to a document that allows individuals and businesses exemption from paying sales tax on all items and products. It is only issued to specific organizations that qualify for sales tax exemption in that state, such as a nonprofit (i.e., 501(c)(3) organizations). Each state has requirements for organizations that qualify for sales tax exemption certificates. For example, in Florida, government entities are exempt from sales tax.

 

State-by-State Guide 

Some form of resale certificate is required in all states where you have vendors except those with no sales tax, whether an out-of-state resale certificate or a state-specific one.

Below is a state-by-state breakdown of resale certificate requirements.

STATE HOW TO APPLY ACCEPTING OUT-OF-STATE Resale Permit? RENEWAL MORE INFO Alabama Exemption Application  No Doesn’t expire  Alabama Department of Revenue Alaska Some localities allow certain businesses to apply for tax-exempt status. n/a n/a Exemption Certificate Directory Arizona  Resale Permit Form 5000A  Yes Every 12 months  Arizona Department of Revenue Arkansas Exemption Certificate   Yes Every 12 months  Department of Finance and Administration California  General Resale Permit No Doesn’t expire California Department of Tax Colorado Multijurisdiction Sales Tax Exemption Certificate  Yes Doesn’t expire Colorado Department of Revenue Connecticut Sales and Use Tax Resale Permit Yes Every 3 years Connecticut State Department of Revenue Services Delaware Sales tax exemption certificates and reseller certificates are not applicable  n/a  n/a Division of Revenue Florida Register with the state to receive your annual Resale Permit No Every 12 months Florida Department of Revenue Georgia  Georgia Certificate of Exemption Yes Doesn’t expire Department of Revenue Hawaii Resale Permit General   No Doesn’t expire Department of Taxation Idaho Sales Tax Resale Exemption Certificate  Yes Doesn’t expire Idaho State Tax Commission Illinois Certificate of Resale No Every 3 years Illinois Department of Revenue Indiana General Sales Tax Exemption Certificate Yes Doesn’t expire Indiana Department of Revenue Iowa Tax Exemption Certificate Yes Every 3 years Iowa Department of Revenue Kansas  Resale Exemption Certificate  Yes It doesn’t expire as long as a recurring business relationship exists Kansas Department of Revenue Kentucky  Resale Permit Yes Doesn’t expire Kentucky Department of Revenue Louisiana Register with the state No Every 2 years  Louisiana Department of Revenue Maine Resale Permit Yes Every 3 years Sales Tax Guide Maryland  Resale Permit No Doesn’t expire Resale Permit FAQs Massachusetts  Resale Permit No Doesn’t expire Sales and Use Tax Guide Michigan  Tax Resale and Exemption Certificate Yes Every 4 years Michigan Department of Treasury Minnesota Exemption Certification Yes Doesn’t expire Minnesota Department of Revenue Mississippi You need a sales tax permit to get tax exemption. Yes  n/a Department of Revenue Missouri  Exemption Certificate Yes Every 5 years Missouri Department of Revenue Montana  Since the state doesn’t have a general sales tax for transactional sales, providing a Montana Business Registry Resale Certificate to your vendor should suffice. n/a n/a Montana Department of Revenue Nebraska  Resale or Exempt Sale Certificate Yes It doesn’t expire as long as a recurring business relationship exists Nebraska Department of Revenue Nevada  Resale Permit Yes Doesn’t expire  State of Nevada Department of Taxation New Hampshire The state does not issue Certificates for Resale or Tax Exemptions n/a n/a NH Department of Revenue Administration New Jersey Resale Permit Yes Doesn’t expire New Jersey Division of Taxation New Mexico  Multistate Tax Commission’s Uniform Sales and Use Tax Certificate Yes Valid for only one vendor NM Taxation and Revenue Department   New York Resale Permit Yes Doesn’t expire  Department of Taxation and Finance North Carolina SST Certificate of Exemption Yes It doesn’t expire as long as a recurring business relationship exists  Department of Revenue North Dakota  Resale Permit Yes Doesn’t expire Sales and Use Tax Information Ohio  Exemption Certificate Yes Doesn’t expire Department of Taxation Oklahoma SST Certificate of Exemption Yes Doesn’t expire  Oklahoma Tax Commission Oregon  The state uses the Oregon Business Registry Resale Certificate for Oregon buyers who buy goods outside of the state and then resell them in Oregon.  n/a n/a Oregon Department of Revenue Pennsylvania  Resale Exemption Certificate Yes Doesn’t expire  Department of Revenue Rhode Island Resale Permit Yes Doesn’t expire Division of Taxation Department of Revenue South Carolina Resale Permit Yes Doesn’t expire  Department of Revenue South Dakota SST Certificate of Exemption Yes Doesn’t expire  Department of Revenue Tennessee SST Certificate of Exemption Yes Doesn’t expire  Department of Revenue Texas  Resale Permit Yes Doesn’t expire Sales and Use Tax FAQs Utah  Exemption Certificate Yes It doesn’t expire as long as a recurring business relationship exists  Sales and Use Tax FAQs Vermont  Exemption Certificate Yes Doesn’t expire  Department of Taxes Virginia  Resale Permit Yes Doesn’t expire Department of Taxation Washington  SST Certificate of Exemption No Every 4 years Department of Revenue West Virginia  SST Certificate of Exemption Yes Doesn’t expire  West Virginia Tax Division Wisconsin  Exemption and Resale Permit Yes Doesn’t expire  Wisconsin State Legislature Wyoming Exemption Certificate Yes Doesn’t expire  Department of Revenue

 

How long should you keep the resale certificates on file?

As a purchaser, you should keep the resale certificate as long as they are valid. As a seller, you must keep the resale certificates as long as the statute of limitation on purchase is valid to avoid penalties. The statute of limitation or the timeframe for sales tax assessment varies among states.

 

Do all sellers accept resale certificates?

No, not all sellers accept resale certificates. The seller is responsible for any uncollected sales tax, which may result in a legal penalty. Therefore, if a seller is unsatisfied with a resale certificate, they may not honor it. If your seller does not accept your resale certificate and you resell products, you can request a refund from the state tax authority for the sales tax you paid to the seller.

 

Want to Streamline Your Resales Tax Operations? Let’s Connect

Every state has rules, regulations, and requirements regarding issuing and using resale certificates. Let our Certified Public Accountants at TaxHero help you get a comprehensive solution for all your sales tax exemption needs.