To get a resale certificate, register for a sales tax permit with your state’s department of revenue, then complete your state’s resale certificate form using the permit number you receive and hand that form to each supplier at the time of purchase. The permit is issued by the state; the certificate itself is a form you fill out and give directly to vendors, not something the state mails to you. Most states charge nothing for the permit, and online applications typically produce a permit number within a few business days to two weeks.
The Permit and the Certificate Are Two Different Things
People routinely confuse these, and the confusion stalls applications. The sales tax permit (sometimes called a seller’s permit) is your state license to collect and remit sales tax on the sales you make. The resale certificate is a form you give to your suppliers so they don’t charge you sales tax on inventory you’re going to resell. You need the permit first, because the certificate requires your permit number to be valid.
A resale certificate exists so tax doesn’t stack at every step of the supply chain. When you buy inventory for resale, you don’t pay sales tax to your supplier; instead, tax is collected once, from your end customer, when you make the retail sale.
You qualify only if you’re buying tangible goods you intend to resell in the normal course of business. Buying a printer for your back office on a resale certificate isn’t a gray area — states treat it as tax evasion. Some states also extend the exemption to taxable services that become part of a product you resell, such as paying a subcontractor to embroider shirts you then sell. Whether services qualify depends on your state’s tax law.
Five states do not impose a statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. If your business operates exclusively in one of those, a resale certificate is either unnecessary or works differently. Everyone else needs one.
What to Gather Before You Apply
Missing any of these will slow the application:
- Your legal business name, matching your Secretary of State registration exactly. Even a small discrepancy like “LLC” versus “L.L.C.” can trigger a rejection.
- A tax identification number. Corporations, LLCs, and partnerships need a Federal Employer Identification Number (EIN) from the IRS. Sole proprietors can use a Social Security number, though many get an EIN for privacy.
- Your business structure: sole proprietorship, partnership, LLC, or corporation.
- Product descriptions. Be specific. “Women’s athletic footwear” is better than “clothing,” which is better than “retail goods.” Vague descriptions invite follow-up questions.
- Your business address, mailing address, and a working phone number or email.
- Estimated monthly or annual taxable sales. This determines whether you’ll file monthly, quarterly, or annually.
If you don’t have an EIN yet, the IRS issues them online at no cost, and the number is available immediately after you finish the application.1Internal Revenue Service. Get an Employer Identification Number
Applying for the Sales Tax Permit
Nearly every state offers online registration through its department of revenue or tax commission website. Create an account, enter your business information, and submit. Online applications usually produce a confirmation or temporary permit within a few business days, and some states issue a permanent permit number almost immediately.
More than 40 states charge nothing for the permit. Where fees apply, they typically range from $10 to $100. A few states also require security deposits or bonds for certain seller categories, which can run considerably higher. Check your state’s revenue department website for the current cost.
Paper applications still exist, but expect several weeks. If you file on paper, send it by certified mail so you have proof of delivery.
Once the permit is approved, you’ll receive a permit number. In some states, the permit itself authorizes you to issue resale certificates. In others, you download or print a separate resale certificate form from the state’s website. Either way, you don’t wait for the state to mail you a certificate. You fill in the form yourself and give it to each supplier.
Filling Out the Certificate and Giving It to Your Supplier
The certificate goes to the supplier, not the state. Hand it over at or before the time of purchase. The supplier keeps it on file as proof that the sale was tax-exempt. Show up without one and the supplier is required to charge you tax; getting a refund afterward is messy and sometimes impossible.
Most certificate forms ask for your signature, your sales tax permit number, a description of the items you’re buying, and a statement that the purchase is for resale. Suppliers commonly run your permit number through the state’s online verification tool as a precaution, but they don’t need to verify anything beyond what’s on the form.
Blanket Certificate or Single-Purchase Certificate
If you buy from the same supplier regularly, issue a blanket certificate that covers all future purchases of the same type. It stays on file with that supplier until it expires, you revoke it, or your business information changes. This saves you from filling out a new form every time.
A single-purchase certificate covers one transaction. This fits situations where you’re buying something you don’t ordinarily resell, such as a bookstore purchasing a batch of tote bags for a one-time promotion.
The Multistate Tax Commission recommends updating blanket certificates at least every three years, and its uniform certificate sets a default validity period of four years.2Multistate Tax Commission. Uniform Sales and Use Tax Resale Certificate – Multijurisdiction Individual states may set shorter or longer periods.
Buying From Suppliers in Other States
If you buy inventory from suppliers in other states, you’ll need a resale certificate that the seller’s state will accept. Two multistate forms handle most of this.
The Multistate Tax Commission publishes a Uniform Sales and Use Tax Resale Certificate accepted by 36 states.3Multistate Tax Commission. Uniform Sales and Use Tax Resale Certificate – Multijurisdiction You fill out one form, check the box for each state where you’re registered, and provide the matching permit numbers. Suppliers in participating states will accept it in place of that state’s own form.
The Streamlined Sales Tax (SST) Agreement has its own exemption certificate accepted by its 23 full member states.4Streamlined Sales Tax. Streamlined Sales Tax If your supplier is in an SST state, either the SST or the MTC certificate should work. For states that participate in neither program, use that state’s own form.
Buyers making purchases for resale generally need to be registered as a retailer in states where they have sales tax nexus, meaning either a physical presence or enough sales volume to trigger economic nexus.2Multistate Tax Commission. Uniform Sales and Use Tax Resale Certificate – Multijurisdiction If you’re not sure whether you have nexus in a particular state, sort that out before you start buying inventory there.
If You Dropship
Dropshipping brings a third party into the transaction: you (the retailer), your supplier, and the end customer. Your supplier ships directly to your customer, but you make the sale. You still give your supplier a valid resale certificate so they don’t charge you tax on the wholesale purchase. If your supplier has nexus in the customer’s state but you don’t, the supplier may still be required to collect tax, and a resale certificate from a state where you lack nexus may not satisfy them. Sorting out who owes what in which state is the hardest part of dropshipping compliance, and it’s worth talking to a tax professional if your volume is significant.
Keeping the Certificate Valid
Resale certificates don’t all expire the same way. Some states issue certificates that never expire as long as your permit stays active and your information doesn’t change. Others require renewal every one to five years. A few automatically expire certificates that haven’t been used within a 12-month period. Check your state’s specific renewal schedule.
Update your certificate whenever something material changes: a new business address, a change in legal structure (converting from a sole proprietorship to an LLC, for example), or a new owner. Failing to update can void the certificate, and purchases made on the old one could become retroactively taxable.
Keep every resale certificate you issue for at least four years. Some states require longer retention. Digital copies are fine in most jurisdictions as long as they’re legible and show the signature, permit number, date, and item descriptions.
What You Can’t Use It For
The certificate covers goods you intend to resell to customers. It does not cover office supplies, equipment for your own use, personal purchases, or anything else that isn’t headed back out the door as inventory. If you use a resale certificate for a purchase you end up consuming in your business, you owe use tax on that purchase.
States catch misuse by comparing your reported taxable sales against your exempt purchases. If you bought $200,000 in tax-free inventory but reported only $80,000 in taxable sales, expect questions. At a minimum, you’ll owe the unpaid tax plus interest. Most states add a penalty, commonly 10 percent of the tax owed or a flat amount around $500, whichever is greater. Intentional or fraudulent misuse can push penalties to 25 percent, and deliberate, repeated misuse can be charged as a misdemeanor or, for larger-dollar schemes, a felony.