This is a complete guide to Resale Certificate. Know which states that do not allow to accept out-of-state resale certificates.

The Basics of Resale Certificate 

A resale certificate, also known as a reseller’s permit and reseller’s license, is basically a signed document that helps the reseller buy goods from a wholesaler without paying sales tax. 

The resale certificate makes it the retailer’s responsibility to collect the sales tax from the customer on the sale of the goods. Without the resale certificate, the buyer will have to pay sales tax on the items they want to resell.

A simple online store purchases goods from wholesalers and sells them online, for this type of business model, sales tax is usually complicated. Pay sales tax on items they intend to resell, such online store owners should have a resale certificate.

Producers and manufacturers also use a resale certificate to purchase equipment and services used in the manufacturing of goods.

states that do not allow to accept out-of-state resale certificates

Is a resale certificate the same as a sales tax ID?

These two forms are often incorrectly referred to as the same thing, but they are two separate documents. The Sales Tax Permit provides a business to sell and collect sales tax from taxable products. On the other hand, a Resale Certificate helps the retailer buy goods from a wholesaler without paying sales tax. 

How to Use a Resale Certificate

If you are a retailer and you buy goods from wholesalers for reselling and your business operates solely in one state, So you only need to get Resale Certificate from your state.

But If you are planning to make a purchase outside your home state, then you have to keep in mind that the sales tax rate set by your state does not apply there. 

Almost all the states except a few states allow retailers to accept out-of-state resale certificates. For example, You are the owner of a clothes shop and you do business in Florida and so you are registered to collect sales tax in Florida. You go to Nevada where you buy twelve T-shirts from the wholesale shop for resale. Nevada tax law allows a seller located in Nevada to accept your Florida -issued resale certificate as confirmation of your intention to resell.

However, You are the retailer and you do business in Nevada and you have a Resale Certificate of Nevada and you visit a wholesale shop in Florida to buy something to resell, you must need to be registered to collect sales tax in the state of Florida to use a resale certificate with a Florida wholesaler because Florida is one of the few states that does not allow to accept out-of-state resale certificates.

States that Do Not Allow to Accept Out-of-State Resale Certificates

Ten states do not allow to accept out-of-state resale certificates.

  1. Alabama
  2. California 
  3. Florida
  4. Hawaii
  5. Illinois
  6. Louisiana
  7. Maryland
  8. Massachusetts
  9. Washington
  10. Washington D.C.

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The Information You Need For a Reseller Certificate:

The information required for a resale certificate differs from state to state. Most probably, the information needs:

  • Reseller’s name, address, phone number.
  • Reseller’s sales tax permit number.
  • Description of the reseller’s business.
  • Description of the merchandise sold.
resale certificate sample

How to Apply for Reseller Certificate

The process for applying for a resale certificate is varied from state to state. You can apply for a resale certificate through your state’s tax department.

Learn more about how to apply for a resale certificate in each state 

Conclusion

In this guide, I will tell you what is Resale Certificate, what it is used for, and which states that do not allow to accept out-of-state resale certificates. I hope this guide finds helpful for you.