If you are a domestic retailer or wholesaler of used phones and you are purchasing from a US based supplier, the chances are that you will need to provide your supplier with a resale certificate. Be careful not to confuse a resale certificate with a seller’s permit. A seller’s permit is a document that allows retailers to collect sales taxes and sell goods legally in their state. You do not actually need a resale certificate to sell online or in your store. While a seller’s permit may be required when you sell goods, a resale certificate is often required when you buy goods. In this post, we explain what a resale certificate is, who needs one, how to get one, and why they ultimately benefit you.
What Is a Resale Certificate?
A resale certificate (sometimes called a resale license, nontaxable transaction certificate, sales tax exemption certificate, reseller’s license, reseller’s certificate, sales tax permit, or sales tax ID) is a state-issued tax exemption certificate that allows resellers to purchase products to sell without paying state or local sales taxes. Taxes are still collected, but only when the reseller sells the goods they purchase to the end customer. This prevents sales tax from being collected twice.
Resale Certificates are a Must for Most Domestic Buyers
Many suppliers — including WeSellCellular — won’t sell goods to domestic retailers or wholesalers without a resale certificate. There are two reasons for this. They don’t want to be responsible for collecting sales taxes and they want to protect themselves from future tax liability if their customer does not submit the required sales taxes to the government.
If you yourself are a domestic wholesaler that plans to sell to another reseller, then it is even more important that you understand how a resale license works. Sales taxes are only paid once on goods, and retailers will charge the end consumer that tax. Given that, wholesalers with a resale tax certificate can avoid having to deal with taxes altogether, though it’s important to note that those wholesalers will both have to present a resale certificate to buy inventory and collect reseller certificates from their customers when they sell that inventory.
Requirements for International Buyers and Domestic Buyers in Tax Free States
Domestic buyers located in Alaska, Delaware, Montana, New Hampshire, and Oregon do not have to present a resale certificate when purchasing inventory because these states do not have sales tax. Retailers selling in these states are typically issued some type of business license that serves as proof that they aren’t required to collect taxes from the end consumer.
International buyers are responsible for paying taxes in their own countries and do not need to show a resale certificate to have inventory shipped abroad. They do need to show freight forwarding documentation if they plan to ship inventory within the United States before it is exported to another country, or they otherwise have a US shipping address.
For instance, a Brazilian buyer with an office in Miami might ship inventory to Miami first and then forward it to Brazil through Portugal. Their freight forwarding certification serves as proof that they aren’t planning to sell to buyers in the United States and so do not have to collect sales tax.
Obtaining a Resale Certificate
Resellers who want to learn how to obtain a resale certificate sometimes have trouble finding a straight answer. That’s because every state has different regulations concerning resale licenses.
In some states, a business’ resale certificate ID number is the same as their sales tax registration number, while in other states it is a separate number. The laws for how to get a resale certificate vary from state to state. Obtaining a resale certificate is typically a matter of applying with the state’s tax agency, which can usually be done online. The easiest way to find out how to get a resale certificate in any given state is to reach out to that agency directly.
Generic Multi-State Forms vs. State Specific Resale Certificates
Depending on what state you are shipping to, suppliers may accept generic tax exemption forms rather than state specific forms. The two main generic tax exemption forms available are the UNIFORM SALES & USE TAX EXEMPTION/RESALE CERTIFICATE — MULTIJURISDICTION form and the Streamlined Sales Tax Agreement Certificate of Exemption. You should always ask about a supplier’s requirements so that you fill out the correct form.
One final complicating factor is that some suppliers may need a resale tax certificate issued by the state in which that supplier is located. That’s because the following states do not allow suppliers to accept out-of-state resale certificates:
- Washington D.C.
At the end of the day, the US tax code is complicated, so if you are confused, don’t worry! At WeSellCellular, we make it easy for our customers to provide the right resale certificate or generic multistate tax exemption form by asking for the specific forms required during the customer setup process. We have also published a list of what documentation is necessary if you are shipping to different states so there’s never any confusion.