If you want to purchase a tangible product for resale, chances are you’ve heard that you need a California resale certificate. Read this article to determine whether you need a California resale certificate and to learn about the process of getting one.
Why Are Resale Certificates Required?
Whenever you buy personal property for resale, the transaction will not be subjected to sales tax as long as the transaction is documented properly. However, you can expect the supplier to ask for a resale certificate to confirm that you purchased the property for resale. The certificate needs to be taken on time, and it needs to include the right information.
What Information Must a Resale Certificate Include?
The resale certificate can come in any form, such as a memorandum, note, or letter. However, the resale certificate must include the following information:
- Your name and address
- The number of the seller’s permit that you hold
- A description of the property you’re purchasing
- A statement that the property being described will be purchased for resale
- The date of the document
- The signature of the purchaser or an individual approved to act on your behalf.
It is essential that the certificate states that the property is for resale or will be resold. It is not acceptable to use terms, such as “exempt” or “nontaxable” to describe the property.
The Board of Equalization does not offer resale certificate forms. However, it is possible to find certificates in many stationery stores and office supply stores. You should make sure that the certificate forms you buy are designed to include the information discussed above.
You should keep in mind that some businesses do not need to hold a seller’s permit. For example, a business may not sell products in the state, or it may sell property that is not subject to sales tax whenever it is sold at retail. If you are not required to hold a seller’s permit, but you want to buy products using the resale certificate, you will need to indicate on the resale certificate that you do not hold a seller’s permit as well as the reason why you don’t need a permit.
What Are the Penalties for the Illegal Use of a Resale Certificate?
If you offer a resale certificate to buy property that you know will not resell in the regular course of business, you will be liable for any tax that you would not have had to pay if you had not used the certificate.
A California resale certificate enables you to sell items purchased from suppliers at the retail or wholesale level. For more information about when you need a California resale certificate, don’t hesitate to contact us.