Resale Certificate: What It Is, How to Get One and Use It

Quick answer: A resale certificate is a form a registered business gives its supplier to buy goods tax-free because it will resell them. The buyer lists its sales tax permit number and signs that the items are for resale; the supplier keeps the certificate on file instead of collecting sales tax. Tax is then collected once, from the final customer.

If you buy inventory to sell, paying sales tax at purchase and then collecting it again from your customer would tax the same product twice. A resale certificate, sometimes called a reseller permit, resale license or reseller certificate, prevents that. This guide explains who qualifies, how to get and use one, what sellers must check before accepting one, and how to show a resale sale correctly on an invoice made with our free invoice generator.

Important: This is general information, not tax or legal advice. Sales tax is set state by state, and resale rules differ in the details, so confirm with your state tax agency.

What a resale certificate does

Sales tax in the US is designed to be paid by the final consumer. A wholesaler selling to a retailer is not selling to the consumer, so the sale is exempt if the retailer proves it will resell the goods. The resale certificate is that proof.

In practice it does three things:

• For the buyer: it removes sales tax from inventory purchases, improving cash flow.
• For the seller: it documents why no tax was charged. Under the Streamlined Sales and Use Tax Agreement, a seller that obtains a fully completed certificate within 90 days of the sale is relieved of the tax.
• For the state: it moves tax collection to the retail sale, where the reseller charges the customer and remits it.

A resale certificate is a type of sales tax exemption certificate, but the two are not interchangeable. Exemption certificates also cover nonprofits, government buyers, manufacturers and farmers, each claiming a different reason for exemption.

Resale certificate vs seller's permit vs exemption certificate

Document	Issued by	Purpose	Who holds it
Seller's permit (sales tax permit)	Your state tax agency	Registers you to make sales and collect sales tax	You, the business
Resale certificate	You fill it in (state or multistate form)	Buy goods tax-free for resale	Your supplier keeps it
Exemption certificate	Buyer fills it in, sometimes with a state-issued exemption number	Claim other exemptions: nonprofit, government, manufacturing, agriculture	The supplier keeps it

The confusion is understandable because some states call their seller's permit a "resale license." The key point is that the permit comes from the state, and the certificate is a form you complete and hand to suppliers.

Who can use a resale certificate

You can generally issue a resale certificate if you:

• Are registered to collect sales tax in at least one state (or your state's rules allow a valid out-of-state number).
• Are buying tangible goods you will sell in the regular course of business, either as-is or as a physical part of a product you sell.
• Actually intend to resell the specific items at the time you buy them.

Typical users include retailers, ecommerce and marketplace sellers, wholesalers and distributors, restaurants buying food they serve, and makers buying raw materials that become part of a product. Our guide to ecommerce invoicing on Shopify and WooCommerce covers how online sellers handle tax on the sale side.

You cannot use a resale certificate for things your business consumes: office supplies, cleaning products, tools, computers, display fixtures or packaging you do not pass to the customer as part of the sale. Those are taxable to you.

How to get a resale certificate

1. Register for a sales tax permit in the state where you have sales tax nexus. This is usually done online through the state's revenue department, and you may need an EIN (see how to get an EIN).
2. Find the right form. Many states have their own resale form, for example California's CDTFA-230 General Resale Certificate or Texas Form 01-339. In Streamlined member states you can use the multistate Streamlined certificate of exemption.
3. Complete it for each supplier. Enter your business name and address, permit number, a description of the goods and a statement that they are bought for resale. Date and sign it.
4. Choose single-purchase or blanket. A blanket certificate covers ongoing purchases from one vendor; a single-purchase certificate covers one order.
5. Send it to the supplier before you are invoiced, and keep a copy. The Streamlined Sales Tax organization says purchasers should give the certificate to their supplier, not to the state.
6. Review it periodically. Update suppliers when your permit number, address or the type of goods you buy changes.

What a valid certificate contains

California's tax agency does not require a specific form, but says a valid resale certificate must include the purchaser's name and address, seller's permit number, a description of the property, a statement that it is purchased for resale, the date and the purchaser's signature. It also warns that words like "nontaxable" or "exempt" alone are not acceptable. Most states expect similar elements, so these make a good checklist anywhere. See the CDTFA Publication 103 on sales for resale for California's full guidance.

Multistate resale: the Streamlined certificate

Selling or buying across state lines adds complexity. The Streamlined Sales Tax exemptions page states that its certificate of exemption is accepted by all 24 Streamlined member states. On that form, resale is one of the listed exemption reasons, and the buyer gives an ID number for the state where the exemption is claimed. If you are not registered in that state, the form allows a sales tax ID issued by another state. Sellers generally do not have to verify the number, though the page notes Georgia as an exception.

Some states outside the Streamlined group accept a uniform multistate certificate or out-of-state numbers in certain cases; others insist on their own form. When in doubt, ask the supplier which forms they accept, since they carry the audit risk.

Drop shipping

Drop shipping creates a three-party sale: you sell to the customer, and your supplier ships directly to them. The Streamlined Agreement requires member states to let a drop shipper accept a resale certificate from its reseller customer. Outside those states, the supplier may ask for a certificate valid in the delivery state or may charge tax. This is one of the most common sales tax headaches for online sellers, so document it carefully.

Accepting resale certificates as a seller

If you sell wholesale, accepting a certificate shifts tax responsibility to the buyer, but only if you accept it properly. Follow these rules:

• Get it on time. California says the certificate should be taken before you bill, within your normal billing cycle or before delivery. Streamlined states give sellers 90 days after the sale to obtain a complete certificate.
• Check it is complete. Missing permit numbers, signatures or descriptions can make it invalid.
• Use good faith. A certificate is presumed taken in good faith if it contains the essential elements and appears valid. Do not accept one if you know the goods are not being resold, such as a dental office "reselling" office chairs.
• Verify where you can. Many states, including California, offer an online tool to verify a seller's permit.
• Keep it. The Texas Comptroller requires sellers to keep resale certificates for four years; other states set their own periods. Our guide on how long to keep invoices covers general retention.
• Accept blanket certificates sensibly. Texas allows a blanket resale certificate only from a customer who buys exclusively for resale.

Worked example: a gift shop buying inventory

A Texas gift shop with a sales tax permit buys 200 ceramic mugs from a wholesaler at $6.00 each and gives the wholesaler a completed Form 01-339. Its location has a combined 8.25% sales tax rate (Texas allows up to 6.25% state plus 2% local).

Step	Calculation	Amount
Inventory purchase	200 x $6.00	$1,200.00
Sales tax avoided at purchase	$1,200 x 8.25%	$99.00
Retail sales of 190 mugs	190 x $15.00	$2,850.00
Sales tax collected from customers	$2,850 x 8.25%	$235.13
10 mugs taken for the staff kitchen: use tax on cost	10 x $6.00 x 8.25%	$4.95
Total tax the shop remits	$235.13 + $4.95	$240.08

The shop never pays $99 upfront, and the state still receives tax on every mug, either as sales tax from the customer or as use tax on the 10 the shop used itself. That is the system working as intended. Use our sales tax calculator for quick checks like these, or the sibling guide on how to calculate sales tax for the formulas.

Resale certificates for makers and service businesses

Resale is not only for shops that buy finished goods. A furniture maker buying lumber, hardware and finish that become part of the table it sells is generally buying for resale, because those materials pass to the customer as part of the product. The same maker buying saw blades, sandpaper and a dust extractor is not, because those are consumed in production.

Service businesses are trickier. A photographer who sells printed albums may be able to buy album materials for resale if the album is sold as a taxable item. An interior designer who buys furniture and bills it to the client as a separate line may qualify, depending on the state. Contractors who install materials into real property are often treated as the final consumer of those materials and pay tax when they buy them, though some states take a different approach. If your work mixes labor and goods, read your state's guidance for your industry before issuing a certificate, and show goods and labor as separate lines on your invoices.

Common resale certificate mistakes

• Using it for business supplies. Printer paper, equipment and cleaning products are consumed, not resold.
• Not paying use tax on withdrawals. Inventory you give away, use as a display or take home becomes taxable at cost.
• Letting the permit lapse. A certificate citing a closed or revoked permit is invalid.
• Ignoring state differences. A certificate that works in a Streamlined state may not satisfy a supplier in a non-member state.
• Losing the paperwork. In an audit, a seller without a certificate is usually treated as having made a taxable sale and must pay the tax itself.

Showing resale sales on your invoices

Your invoice is the second half of the audit trail. When you sell to a reseller who has given you a certificate:

1. Set the sales tax rate to zero for those lines or the whole invoice.
2. Add a note such as "Exempt: sale for resale. Resale certificate on file," and include the buyer's permit number if your state expects it.
3. Keep the certificate and invoice together, filed by customer.

Our guide to writing a tax-exempt invoice has sample wording, and sales tax on US invoices covers how to show tax on taxable lines. Wholesale invoices benefit from a clean, formal layout such as the classic invoice template.

Bill resale customers correctly

A resale certificate lets registered sellers buy inventory without sales tax, as long as the goods are truly for resale and the certificate is complete, timely and kept on file. Buyers need a valid permit and must pay use tax on anything they pull for their own use; sellers need good faith, good records and zero-tax invoices that note the exemption.

Create a US invoice with exempt line items and a resale note, or open the free invoice generator to bill your next wholesale order in minutes. When your invoice looks right, download it as a PDF and send it straight to your client.