The Simple Definition
A resale certificate (also known as a reseller's permit, resale license, or sales tax exemption certificate) is an official document that allows registered businesses to purchase goods intended for resale without paying sales tax at the time of purchase.
Instead of paying tax when you buy inventory, you collect sales tax from your customers when you sell the items. This prevents the same product from being taxed multiple times as it moves through the supply chain.
Important Note
Resale certificates can only be used for items you intend to resell. Using them for personal purchases is illegal and can result in penalties.
Sample Certificate
State of California
Who Needs a Resale Certificate?
Any business that purchases products to resell can benefit from having a resale certificate.
Retail Stores
Physical stores buying inventory from wholesalers and distributors.
E-commerce Sellers
Online sellers on Amazon, eBay, Etsy, Shopify, and other platforms.
Wholesalers
Businesses that buy in bulk and resell to retailers.
Dropshippers
Sellers who fulfill orders directly from suppliers to customers.
Resellers & Flippers
Individuals who buy products to resell for profit.
Flea Market Vendors
Vendors selling products at markets, fairs, and trade shows.
Benefits of Having a Resale Certificate
A resale certificate opens doors and saves you money.
Tax-Free Inventory Purchases
Save money by not paying sales tax on products you buy for resale. These savings go directly to your bottom line.
Access Wholesale Suppliers
Most legitimate wholesalers require a resale certificate before they'll do business with you. Get access to better pricing.
Legal Compliance
Operating with proper documentation protects you from legal issues and demonstrates your business is legitimate.
Competitive Advantage
Lower costs mean you can price competitively while maintaining healthy margins, giving you an edge over competitors.
How to Use Your Resale Certificate
Using your certificate is straightforward. Here's what you need to know.
Present to Suppliers
When making a purchase for resale, provide a copy of your certificate to the vendor.
Complete Their Forms
Many suppliers have their own exemption forms. Fill them out with your certificate info.
Keep Records
Maintain records of all tax-exempt purchases in case of audit.
Common Questions
How long does a resale certificate last?
In most states, resale certificates don't expire. However, you must keep your seller's permit active and maintain your business registration.
Can I use my certificate in other states?
Generally, you need a separate certificate for each state where you make tax-exempt purchases. Some states accept out-of-state certificates for occasional purchases.
What's the difference between a resale certificate and seller's permit?
A seller's permit allows you to collect sales tax from customers. A resale certificate allows you to buy inventory tax-free. You typically need both to operate legally.