A document that allows a business to purchase goods tax-free if those goods are intended for resale; used to avoid paying sales tax on inventory purchases.
What is a Resale Certificate?
A Resale Certificate, also known as a reseller’s permit or sales tax exemption certificate, is a form issued by a business to a supplier or wholesaler, stating that the business is purchasing goods for resale, not for personal or end-use consumption. By presenting a valid resale certificate, the buyer is not charged sales tax at the time of purchase, because the final customer (not the reseller) will be responsible for paying sales tax when the item is sold.
In the U.S., sales tax is only meant to be applied once—at the point of final sale to the consumer. The resale certificate prevents double taxation by exempting the resale business from tax on inventory it will later sell. To use one, the business must be registered with the state where the certificate is being issued and must typically hold a valid sales tax permit or license.
Resale certificates are most common in wholesale, retail, and e-commerce models, including dropshipping. For example, if you run a U.S.-based online store and buy t-shirts in bulk from a wholesaler to sell to end customers, you can provide a resale certificate to avoid paying tax on the wholesale purchase. You then collect and remit sales tax (where applicable) when selling to customers.
Each state has its own format and rules, but most require that the certificate include:
- The buyer’s business name and address
- Sales tax permit or resale number
- A signed statement that the goods are for resale
It’s important to note that resale certificates generally can’t be used for purchases of equipment, software, or services that will be used by the business itself. Misusing a resale certificate can lead to penalties, interest, or back taxes.
In some states, businesses must periodically renew or update resale certificates—for example, Florida resale certificates expire annually and must be renewed each year. But in other states, like Texas or California, the sales tax permit remains active as long as the business complies with reporting requirements, and resale certificates can be used as needed without formal renewal unless information changes.
For non-U.S. founders, resale certificates are particularly useful when setting up a U.S. e-commerce company that buys products from U.S. vendors or participates in dropshipping. Some suppliers require a resale certificate to do business. However, foreign-owned companies must usually register for a state sales tax license first, which may be more complicated without a physical presence. Still, once properly set up, resale certificates can save money and streamline inventory purchases.
In cases where a business operates in multiple states, it may need to register in each state where it has sales tax nexus and obtain a resale certificate in each. Some states accept multi-state resale certificates, such as the The Streamlined Sales Tax Exemption Certificate or the Multistate Tax Commission (MTC) Uniform Sales & Use Tax Resale Certificate, which simplifies purchases across participating states. However, acceptance of these forms varies, and not all states recognize it. Therefore, businesses operating across state lines must carefully track their registration and filing obligations to remain compliant and avoid improper use of resale privileges.
