What is a Resale Certificate?
A resale certificate is a document a registered business uses when it purchases goods it intends to resell. This document serves as a written statement that the business owners and operators won't use the goods purchased for personal use instead of selling them. It is also intended to show that the business will not use the goods before reselling them. It may also be used when purchasing certain services for resale.
Without a resale certificate, a business or individual is typically required to pay sales tax. With a resale certificate in hand, however, a business can buy wholesale goods and some services without paying the sales tax typically required in the area. To purchase goods and services without paying the normal sales tax, a business must typically present a resale certificate to the seller before purchasing the items or within a reasonable amount of time thereafter. The seller is typically required to keep a copy of the certificate on hand for a period of time--often years.
The form a resale certificate must take depends on where the business is owned and operated. In some places, there may be an official form to fill out while other jurisdictions will allow letters or notes. Some even allow memorandums. However, most places require the form or letter to include the name of the purchaser and his address as well as the number of his seller's permit.
In some places, the certificate must include a description of the goods or services the buyer plans to purchase. These certificates typically also include a written statement that the business will only acquire the property for resale. Often, very specific wording, such as “for resale” may be required as well. The certificate must be dated and signed by someone authorized to make the purchase for the business.
For buyers who want to make multiple purchases from particular vendors, there is no need to complete a resale certificate each time. Instead, the seller can keep one certificate for the business on file. If the business uses a purchase order, a representative can write "see purchase order" on the resale certificate in lieu of adding specific products to the certificate. The items that are intended for resale must be marked as such on each purchase order, however.
Written by N. Madison
