Reseller License and Resale Certificate: How to Get One in Every State

How a resale certificate works

Sales tax is meant to be paid once, by the final customer. A resale certificate is how the chain skips the middle steps. Say you run an online shop:

1. You buy $1,000 of stock from a wholesaler and give them your resale certificate. They don't charge you sales tax.
2. You sell that stock to customers for $2,000 and charge them sales tax on it.
3. You file a return and pay that tax to the state.

Without the certificate, you'd pay tax on the $1,000 and your customers would pay it again on the $2,000. The wholesaler is also protected: when a seller accepts a valid resale certificate in good faith, it doesn't owe the tax on that sale.

Who can use a resale certificate

You can generally use one if you buy goods to:

• Resell as they are, in a store, online or at markets.
• Build into a product you make and sell. California, for example, treats a component that becomes part of a manufactured article as bought for resale.

You need to be registered to collect sales tax, because the certificate asks for your permit number. A business that never makes taxable sales (a consultant, say) usually has nothing to buy for resale.

How to get a reseller license, step by step

1. Form your business and get an EIN if you need one. You can register as a sole proprietor, but many sellers form an LLC first. See our LLC formation guides.
2. Register for a sales tax permit with the tax agency in each state where you have to collect, usually your home state first. Of the states that publish a fee, 18 charge nothing and 13 charge between $12 and $100. Some, including California, Colorado, Nevada and Texas, may also ask for a security deposit or bond. The table below links to each state's registration page.
3. Get your permit number. The state gives you a permit or account number when it approves your registration. That number goes on every resale certificate you issue.
4. Fill out a resale certificate for each supplier. Use your state's form (in Texas, the Resale Certificate, Form 01-339), or a multistate form your supplier's state accepts. A few states, like Florida, issue the certificate to you instead.
5. Give it to the supplier before or when you buy. Until a supplier has a valid certificate from you, it has to charge you sales tax.
6. Collect and file. Charge sales tax on your taxable sales and file returns on the schedule the state gives you.

What a valid resale certificate includes

Most states have their own form, but they ask for the same core details. California's tax department says any document can work as a resale certificate if it shows:

• The buyer's business name and address.
• The buyer's seller's permit number, or why they don't need one.
• A description of the goods being bought.
• A statement that they're bought "for resale". Words like "nontaxable" or "exempt" don't count.
• The date.
• The signature of the buyer or an authorized employee or representative.

Use your state's official form when there is one. It has the right wording, and suppliers recognize it.

What you can't buy with a resale certificate

California's guidance lists four cases where a buyer shouldn't use a resale certificate. Don't use one for a product you'll:

• Use rather than sell.
• Use in your business before you sell it.
• Use for a personal purpose.
• Hold as an investment, to sell later.

So shelving, computers, cleaning supplies and samples you give away are all taxable, even for a shop. If you buy something tax-free for resale and then use it yourself, you owe tax on it. In California, that means reporting and paying use tax, with added penalties if you don't.

If you're the seller accepting certificates

Wholesalers and manufacturers carry the risk when a certificate is wrong. To protect yourself:

• Get the certificate at or before the sale. California calls this accepting it in good faith and in a timely manner.
• Check that it's complete and that what's being bought makes sense for the buyer's business.
• Verify the permit number where the state offers a lookup. California does, through its permit verification page.
• Keep it on file with your records. Without a valid certificate, you can be held liable for the tax on the sale.

Buying from suppliers in other states

If your supplier is in another state, or ships from one, their state's rules decide what they can accept. Two multistate forms help:

• The Multistate Tax Commission's Uniform Sales & Use Tax Resale Certificate. The MTC says 36 states have indicated they accept it, each with its own notes on the form. Some accept it with your home-state registration number; others want a number from their own state.
• The Streamlined Sales Tax exemption certificate (Form F0003). Accepted in the Streamlined member states and some others. In our check, 24 states accept it.

States can change what they accept without telling the MTC, so confirm with the state before relying on a multistate form. The table below shows what each state's own site or the official form says.

After you're registered

A sales tax permit comes with ongoing duties: filing returns on the schedule the state gives you, keeping your details current, and closing the account if you stop selling. If you start selling into other states, you may need permits there too. Our sales tax nexus guide shows each state's threshold, and the sales tax calculator has every state's rate.