What is a Resale Tax Certificate and Why Do I Need One for My Business?

If you are a jewelry designer, retail jewelry store, or any business that buys product from another company and resells it, you will need to get a resale tax certificate. Why? Holding one allows you to purchase goods without paying a local sales tax. The customer you resell the product to will cover the sales tax for you.  Not only will it save you money, but it can help grow your business since you can purchase more products and pass the savings on to your customers.

What is a resale tax certificate?

A resale tax certificate, also known as a tax exemption certificate, allows a business owner to buy products and goods through their business without paying local sales tax.  If you have a resale tax certificate, you are responsible for collecting tax from your customers.  Wholesale companies (like Best Beads) require customers to submit their resale tax certificate as proof that the items they buy are for resale.  If you do not have a resale tax certificate, you are required to pay sales tax on all purchases made from wholesale companies.

What’s on a resale tax certificate? It will have a description of the items you plan on purchasing (jewelry, etc.) and a statement that the items will be purchased for resale.   The certificate will also include the name and address of the buyer and the reseller’s permit number.

Why should you get one? Save money! If you have a resale tax certificate, you avoid paying tax, and subsequently, will be able to buy more products and pass the savings on to your customers. 

Where do I get a resale tax certificate?

Each state is different when it comes to acquiring a resale tax certificate, because each state has varying rates.  The easiest thing for you to do is to search online how to acquire a resale tax certificate in your specific state.  You will register through your state’s Department of Revenue.  If you plan on selling in multiple states, you will need to apply for a resale tax certificate in each state. If you are in Alaska, Montana, Delaware, New Hampshire or Oregon…LUCKY YOU! These states do not have sales tax and do not require one. 

Is it the same as a reseller’s license?

Yes, it is.  There could be some confusion regarding the name of this certificate.  Depending on where you do business it can be called a reseller’s permit, reseller’s license, sales tax permit, sales tax ID, resale license or reseller’s certificate.

I have an EIN number…is that the same as a resale tax certificate?

No! We get this question a lot at jewelry shows.  Your federal EIN number for your business simply identifies your business and your dealings with tax agencies.  It does not mean that you have a certificate stating that you plan on reselling product and thus do not have to pay sales tax.  State Governments are responsible for resale tax certificates, while the Federal Government is responsible for your tax ID.

I gave you my resale tax certificate when I registered…why do you need another copy at shows?

If you plan on buying from the same vendor multiple times, they will typically keep your resale tax certificate on file to make it easier for you to purchase in the future.  We do that here at Best Beads.  However, this only applies to your online account with us.  If you are a customer and visit us at a jewelry show, we will require a copy of your resale tax certificate.  Every purchase at a show needs to be accounted for with a corresponding resale certificate for filing purposes. 

Okay…you decide you need a resale tax certificate for your business.  Here are some tips to get started!

Get your documents in order.  You will need:

Personal identification: social security number, date of birth, driver’s license or state issued id

Business information: You’ll need to provide information on your business, whether it is a LLC, sole proprietor, general partnership.  Gather these documents, including your FEIN number.  You will also need your bank account number, the location and name of your intended suppliers, and your estimated sales figure for each month.

Next: Figure out how to apply for one in your state.

For example, if you live in California, you can search “apply for a resale tax certificate in California” online and you’ll find your destination. You will most likely be able to register online, in which case you’ll receive your resale number right away.  Or you can apply in person at your local tax office or through the mail. Keep in mind; most states require a small fee for a resale tax certificate, sometimes around $50.

Hope this article helps you! Good luck on your business endeavors!