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The purpose of a resale certificate--also known as a tax exemption certificate--is to allow you to buy goods through your business without paying local sales tax.
When doing this, it's your responsibility to collect the tax from the customer when you sell the item.
The wholesaler that you purchase the goods from will request to see your resale certificate as proof that the property is being purchased for resale.
A resale certificate typically includes:
Without a resale certificate, a business or individual is typically required to pay sales tax on all purchases. Thus, a resale certificate can be beneficial to your business by allowing you to avoid sales tax and pass the savings on to your consumer. It can also allow you to buy more merchandise in order to grow your business.
Please note that if you intend to make multiple purchases from the same vendor, you can usually provide your resale certificate only once to that vendor and the vendor will keep it on file.
A business owner can typically apply for a resale certificate with his/her state tax department. Once you receive your resale certificate (or tax exemption certificate), the state will start sending you monthly or quarterly statements.
The physical location of your business is what determines where you apply for the resale certificate, rather than the state in which you formed the company. Therefore, if you sell merchandise in more than one state, you will need to apply for resale certificates in the all states in which you operate—it does not matter where your business was incorporated.
One of the requirements for a resale certificate is to be qualified in your state to do business. If your company is physically operating in a state outside the state of formation, you will need to complete the process of Foreign Qualification, which enables a company to transact business in a jurisdiction other than where it was formed.
For more information on obtaining a resale certificate, aka tax exemption certificate, consult your local state department.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.
There are 20 comments left for What Is a Resale Certificate?bushta said: Sunday, April 7, 2019
hello . i need to resell online and i need resale certificate but i have no idea what i have to do after i get it and after i start sellingHBS Staff replied: Thursday, April 11, 2019
Bushta, the Resale Certificate or Business license is typically obtained where the company is actually physically operating. If you need any assistance obtaining the required business licenses, many of our clients have worked with David Calabrese at DCalabrese@licenselogix.com or 800-292-0909 x 353 at LicenseLogix.Ray Anding said: Monday, March 18, 2019
I am opening up my second location same name same everything. Do I need a different resale certificate for that location or can I use the same one?HBS Staff replied: Tuesday, March 19, 2019
Ray, you may be able to use the same certificate but we typically recommend that clients reach out the county in the jurisdiction in which they operating to determine if they need to do anything additional.Joe said: Tuesday, November 6, 2018
thanks for your feedback, my location is in Delaware, from where can I request the reseller certificate in Delaware?HBS Staff replied: Wednesday, November 7, 2018
Delaware does not have any sales tax, so no resale certificate is available or needed if you are operating within the state.Joe said: Tuesday, November 6, 2018
Hi, I have an LLC in Delaware, I want to sell goods online dropshipping and wholesalers request reseller certificate, how can I issue a reseller certificate in Delaware?HBS Staff replied: Tuesday, November 6, 2018
Joe, The physical location of your business is what determines where you apply for the resale certificate, rather than the state in which you formed the company. You can typically apply for a resale certificate with the state's tax department.Jessica Gonyap said: Friday, August 31, 2018
Hello, where do I send my resale certificate when I finish filling it out?HBS Staff replied: Wednesday, September 5, 2018
Typically, you can apply for your certificate through your state's tax department. The process can vary from state to state, so we recommend you visit your state's website for additional information.