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What is a Resale Certificate?

A Resale Certificate, also known as a Reseller's Permit, Resale License, or Sales Tax Exemption Certificate, is a document that allows businesses to make tax-exempt purchases of tangible goods that will be resold to customers. The purpose of a Resale Certificate is to provide evidence to suppliers or vendors that the purchased items will be resold, and therefore, sales tax should not be applied to the transaction.

Here are key points about Resale Certificates:

Tax Exemption: The Resale Certificate serves as a declaration by a business that it intends to resell the purchased items and collect sales tax from the end consumer. As a result, the business is exempt from paying sales tax on the items it acquires for resale.

Verification of Intent to Resell: When a business buys goods for resale, it typically provides the Resale Certificate to the supplier or vendor at the time of purchase. The certificate verifies the business's intent to resell the items and informs the supplier not to charge sales tax on the transaction.

Specific Information: A Resale Certificate typically includes specific information, such as the business's name and address, its sales tax permit or identification number, and a statement indicating that the items being purchased are for resale. The exact information required can vary by jurisdiction.

Valid for Certain Transactions: The validity and use of a Resale Certificate depend on the rules and regulations of the specific state or jurisdiction. Some jurisdictions may issue a single-use certificate for a specific transaction, while others may issue a blanket certificate that covers multiple transactions over a specified period.

Verification of Validity: Suppliers or vendors who accept Resale Certificates should verify their validity and may keep a record of the certificates for their own records. It's important for businesses to provide accurate and up-to-date information on the certificate.

Not for Personal Use: A Resale Certificate is specifically for business-to-business transactions and is not intended for personal use. It applies to purchases made by businesses for the purpose of resale in the normal course of business.

Compliance with State Laws: The rules and requirements for Resale Certificates vary by state, and businesses should comply with the specific laws of the state in which they are operating. Failure to comply with state regulations may result in penalties and fines.

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