How to Get a Resale Certificate: The Steps, State by State

What a resale certificate does

A resale certificate is a form the buyer gives the seller. It says the items are bought to resell, so the seller does not charge sales tax. The tax is collected later, when you sell to your own customer. For the seller, the certificate is the record that explains why no tax was collected: Texas tells sellers to keep each one for four years, and New York for at least three.

California's Publication 103 lists the usual uses: finished items you will resell, materials that become a physical part of an item you sell, and items held only for demonstration or display while they are for sale. It also lists what a certificate cannot cover: things you will use rather than sell, things you use before you sell them, personal purchases, and items held as an investment.

The order: EIN, sales tax registration, then the certificate

1. Get the EIN, if your business needs one. A corporation, a partnership, an LLC with more than one member and any business with employees needs one, and a single-member LLC usually wants one for its bank account. See do I need an EIN. A sole proprietor without employees can use a Social Security number; see EIN for a sole proprietor.
2. Register for sales tax with your state. This is the seller's permit, sales tax permit or Certificate of Authority, depending on the state. The application asks for your federal number, and the permit gives you a state number that is separate from the EIN. See sales tax permit and state tax ID vs federal EIN.
3. Fill in the resale certificate. Use your state's form, or a multistate form if you buy from sellers in other states. Enter your permit number, describe your business and the items you are buying for resale, and sign it.
4. Give it to each supplier. Do not send it to the state. Texas says on its form that the certificate goes to the supplier, and the Streamlined Sales Tax board says the same of its certificate.

What the sales tax registration asks for

This is where the EIN comes in. The states read for this guide ask for it this way:

• California: the online registration asks for a FEIN from a partnership, corporation, LLC, limited partnership, trust, estate and other entities, and for a Social Security number or ITIN from an individual. CDTFA says there is no charge for a seller's permit, it may ask for a security deposit, and it may be able to issue the permit the same day.
• Florida: Form DR-1 asks for the FEIN. If the IRS does not require you to have one, it asks for your Social Security number, or a visa number if you are not a U.S. citizen and have no SSN.
• Texas: the online application asks for the sole owner's Social Security number, the SSN or EIN of each partner, and a corporation's Texas Secretary of State file number. Texas says to allow 2 to 3 weeks to receive the permit.
• New York: you register through New York Business Express at least 20 days before you begin business, and the state sends a Certificate of Authority that must be displayed at your place of business.

The state number you get back is what people mean by a "reseller tax ID number." It is a state number, not the EIN. The difference is laid out in state tax ID number and business tax ID number.

The resale certificate in five states

Texas

A purchase for resale is tax free when the seller accepts a properly completed Form 01-339. The Comptroller is clear that a copy of your sales tax permit is not a substitute for the certificate. You can issue one for items you will resell in the United States or Mexico, and if a purchase mixes items for resale with items you will use, you must tell the vendor which is which.

California

On CDTFA-230 you certify that you hold a valid seller's permit, what you sell, and what you are buying for resale. If the item is not something your business normally sells, CDTFA tells sellers to ask for a certificate that lists that specific item, or to charge tax.

Florida

Florida does not use a buyer-completed form. Every business registered to collect sales tax gets an Annual Resale Certificate, and you give the seller a copy. Certificates for the next year go online each November. A seller can also check your certificate number by phone, online or in the state's app and get a transaction authorization number.

New York

Part 1 of Form ST-120 is for New York registered vendors, with the sales tax identification number from the Certificate of Authority. Part 2 is for buyers registered in another state who are not required to register in New York. Contractors cannot use ST-120 for materials and supplies.

Illinois

You can use Form CRT-61 or make your own certificate, and give a copy to the retailer. The Department of Revenue says certificates should be updated at least every three years.

Buying from sellers in other states

Two forms are built to work in more than one state. Check that your seller's state accepts the one you use.

• Streamlined Sales Tax Certificate of Exemption. Accepted by all 24 Streamlined member states, including Georgia, Indiana, Michigan, Minnesota, New Jersey, North Carolina, Ohio, Washington and Wisconsin, with Tennessee as an associate member. You do not have to register through the Streamlined system to use it.
• Multistate Tax Commission Uniform Sales & Use Tax Resale Certificate. The Commission says 36 states have indicated it can be used as a resale certificate, each subject to notes on the form. California, Florida, Illinois and Texas are on its list. New York is not. The certificate stays valid until the buyer cancels it in writing or a state revokes it.

What the states say about misuse

• Texas: giving a resale certificate for items you know you will use is a criminal offense, from a Class C misdemeanor when the tax evaded is under $20 to a second-degree felony at $20,000 or more. If you pull an item out of inventory and use it, you owe tax on it.
• California: misuse can be a misdemeanor, and a person who misuses a certificate to evade tax owes the tax plus 10 percent of the tax or $500 per purchase, whichever is more.
• New York: a penalty of 100 percent of the tax due, $50 for each fraudulent certificate, possible felony prosecution, and revocation of your Certificate of Authority.
• Florida: criminal and civil penalties for fraudulent use. If you buy an item tax free and then use it in the business or personally, you report and pay use tax on your sales and use tax return.

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