If you are preparing to become a domestic retailer or wholesaler, obtaining a resale certificate is a must—in most cases. In case you are unfamiliar with what this certificate is, how to get one, and what to do once you have yours, this guide to how to use a resale certificate will set you on the right path.
Do I Need a Resale Tax Certificate?
If you’re about to begin selling used mobile inventory, you probably need a resale tax certificate.
This state resale certificate is not just a formality. In most cases, you’re not going to find sellers that are willing to sell products to you unless you present your certificate. Although a domestic retailer or wholesaler of goods can sell to you without a resale certificate, they are required to collect sales tax.
There’s another exception here. Domestic buyers located in states without sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon) may be permitted to show suppliers their business licenses in place of a resale certificate. International buyers are not required to show resale certificates to make purchases.
What Is a Resale Certificate?
If you’ve been building up your business plan, there’s a good chance you’ve seen or heard mentions of resale certificates. You shouldn’t think of this certificate as a burden. Rather, it’s there to protect you from being improperly taxed on items you buy and sell. In short, this is a tax-exemption certificate that protects you from paying sales tax twice. As a buyer, you will submit a certificate to the seller to let them know that you intend to resell the goods you’re buying.
Sellers are responsible for collecting taxes and submitting them to the state. A certified seller who can produce a sales tax resale certificate can purchase products without paying state and local taxes at the time of purchase. The certificate provides a legitimate way for tax burdens to be pushed off your plate because you are not technically the end-user of products you intend to sell.
It helps to understand the tax life cycle of a product to fully understand how to use resale certificates. By law, sales tax only needs to be paid a single time for a product. Retailers are obligated to charge buyers appropriate sales tax amounts. If you’re a certified reseller, you don’t have to pay sales taxes. But, you must collect taxes when you sell to an end-user. And, if you participate in business-to-business sales, you will need to request proof of resale certificate whenever you sell to other resellers.
Many states have their own resale certificates. There are 12 states (plus Washington, DC) that require you to register for a sales tax permit in their state to get a resale certificate. Two of the most common resale certificates accepted by multiple states are: 1) a Uniform Sales & Use Tax exemption Resale Certificate and 2) a Streamlined Sales Tax Agreement Certificate of Exemption.
Uniform Sales & Use Tax Exemption Resale Certificate and Streamlined Sales Tax Agreement Certificate of Exemption: What Are the Differences?
The Uniform Sales & Use Tax Resale Certificate is recognized by 36 states. You’ll need to contact the revenue department of your state to determine if this certificate will be appropriate for you. Keep in mind that you’ll need to register for any state where you have a sales/use tax nexus. All registrations must be done separately by state. If you’re doing business in one of the 26 member states recognizing the Streamlined Sales Tax Exemption Certificate, you can use this form. While some states overlap, you’ll need to look at state-to-state requirements to see what applies based on where you and your supplier are located.
How to Get a Resale Certificate
You’ll need to apply with your state tax agency to obtain a resale certificate. Policies vary quite a bit by state. You may learn that your business resale certificate ID is the same as your sales tax registration number in some states. In other states, you’ll need to go through a formal application process to obtain a separate certificate.
The Last Big Thing to Know: Some Suppliers Will Require Something Extra
If you’re purchasing from suppliers in some specific parts of the country, you may be asked to show certificates for the states where those suppliers are located. This requirement may apply when purchasing from suppliers located in California, Hawaii, Illinois, Maryland, Massachusetts, Washington, and the District of Columbia.
Ask a supplier about their certificate requirements. Then, obtain any certificates necessary to complete your transaction.
Final Thoughts on Getting Your Resale Certificate
If you plan to buy and sell used mobile devices, a sales tax resale certificate needs to be on your mind. In some cases, sellers don’t need to worry about this requirement because they are operating in states without sales tax. However, even a seller in a tax-free state may need to obtain a certificate when purchasing from a supplier in a taxed state. Ultimately, there are many wildcards with certificate requirements that make it necessary to defer to the instructions given when you contact your state’s revenue department. Here’s a list from the IRS that will allow you to find contact information for every state’s tax office.