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What is a Resale Certificate?

A business may use a resale certificate when purchasing goods it intends to resell.
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  • Written By: N. Madison
  • Edited By: Bronwyn Harris
  • Last Modified Date: 18 August 2014
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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 this document in hand, however, a business can buy wholesale goods and some services without paying the taxes typically required in the area. To purchase goods and services without paying the normal tax amount, a business must typically present the 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 document on hand for some period of time after the sale, often several years.

The form that this document 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. Most places do 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.

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In some places, the certificate must include a description of the goods or services that the buyer plans to purchase. These documents 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 document in lieu of adding specific products to it. The items that are intended for resale must be marked as such on each purchase order, however.

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learley22
Post 5

In the State of NY, as a subcontractor, does a Resale Certificate from a client mean that they are not charged tax on materials purchased for the project or they are tax exempt for the whole project?

elizabeth23
Post 3

@anon90722, I think that means you need to consult someone about the tax laws in Kentucky. While you might not need a new license, they might require you to get a Kentucky state resale certificate to go along with the one you likely have from Florida if you want to do business in a way involving both states. However, there might also be ways around it, like certain limits of quantity that you can send from state to state without paying a fee. Like I said, you should consult a taxation expert who can tell you each state's policies and how they connect.

anon90722
Post 1

Say, for an example, I have a reseller certificate issued by the state of FL. I provide my reseller certificate to my wholesaler. I now purchase a product from my wholesaler and have them ship the product to not my FL address (bill-to address) but to KY.

In this case, can I buy the product at tax-exempt from my wholesaler? Also, since the product was shipped to KY address, do I need to pay taxes to KY DOR?

How does this work? Can you please let me know.

Thanks, Laxmi

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