A California Resale Certificate Is One Of The Best Things You Can For Your Business
The average business in California will one day need to either accept or give a tax resale certificate. The process can often be confusing for even the savviest small business owners. That is why we at Tax Resale Certificate want to make sure that you understand this often confusing process.
What is A California Tax Resale Certificate?
It is critical that you understand that tax resale certificates can also be used on items that will be resold. Office supplies, such as new computers for your employees, would not fall under the category of retail. It would be considered fraud not to pay sales tax on these items. In California, the State Board of Equalization, known as the BOE or the SBE, imposes sales tax on the sale at retail of tangible personal property.
If this is confusing for you, just think of tax resale certificates as state tax exemption certificates. Some states actually call them exemption certificates or reseller’s permits. Purchasers who are engaged within the business of selling tangible personal estate may issue resale certificates when purchasing items they’re going to sell within the regular course of their business operations. When a seller accepts a legitimate resale certificate that is presented in good faith and during the proper time period, the seller does not owe tax on that sale. CDTFA-230, General Resale Certificate, is often issued by purchasers when purchasing goods they’re going to resell within the regular course of their business operations.
Generally, resale certificates are used:
- When purchasing finished items that are for resale.
- When buying materials which will become a physical part of an item that will be held for resale.
- When purchasing items which will be solely for demonstration or display while holding them for sale in the regular course of business operations.
Purchasers can not use a resale certificate when buying a product they will:
- Use rather than sell*,
- Use in their business before they sell it,
- Use for a personal purpose, or
- Hold as an investment for appreciation in value and for sale in the future.
Is The California Resale Certificate The Same As A Seller’s Permit?
Even though tax resale certificates are called reseller’s permits in some states, it is important not to confuse them with seller’s permits. A seller’s permit allows a retailer to charge tax on items that they are going to sell to a customer. A tax resale certificate allows you to buy items that are intended for resale without paying a sales tax on those items. Before a business starts selling products or providing taxable services, they must first get a California Seller’s Permit from the California Department of Tax & Fee Administration. The Seller’s Permit is sometimes referred to as a sales tax permit, sales tax number, or sales tax license.
Guidelines For California Resale Certificates
California as a state actually requires business owners to provide their own tax resale certificates. This can be printed in any type of formats such as a memorandum or a form letter. However, the following must be included in order for it to be accepted:
- The name and address of the purchaser.
- The purchaser’s seller’s permit number. If you aren’t required to carry a seller’s permit number, you’ll state that on the resale certificate and explain why. For instance, you’ll purchase products in California, buy sell them in other states where you don’t have nexus. Or you may purchase products that would require sales tax if sold individually but don’t call for it due to the way you use them. For example, you’ll purchase twine to use on your canned foods items, which you sell tax-free.
- A description of the product you are purchasing.
- A statement that the product is for resale or that it will be resold. The California Board of Equalization will only accept a statement containing these exact words. It will not accept statements that contain the words “nontaxable” or “exempt” instead.
- The date of the certificate, plus the signature of the purchaser or someone who can legally act in their place. The BOE will accept digital signatures as long as it’s unique to the person using it, it can be verified, it’s under the control of the person using it, it conforms to the Secretary of State regulations, and it’s “linked to data in such a manner that if the data are changed, the digital signature is invalidated.” In addition, the California Secretary of State provides a list of approved digital signature certification authorities.
- If you make multiple purchases from the same vendor, you can request that they keep your resale certificate on file rather than asking for a new one every time.
Does A Vendor Have To Accept My Tax Resale Certificate?
It is extremely important to a retailer’s bottom line that they do not pay sales taxes on goods if there is a possibility that the tax can be exempted on a state level. However, it is also crucial to understand that a wholesaler is not required to accept your tax resale certificate. If the vendor doesn’t accept the certificate, the buyer will have to pay the sales tax on the merchandise being purchased. In most cases, they will be able to get credit for the sales taxes paid later on in their sales tax filing.
If the seller is out-of-state, California is one of a few states that don’t recognize out-of-state resale certificates. In order to get tax-free from vendors in other states, the customer will need to register for a nuisance tax permit within the seller’s state.
That Is Why We Are Here To Help
It is understandable that all this information can be very daunting. Not correctly understanding sales tax and the benefits of a tax resale certificate can lead to a great deal of trouble. A retailer could lose out on extremely beneficial sales tax exemptions status. A savvy business owner will understand that having a tax resale certificate will save them a good deal of money but leave the actual headache of registration to someone else.
On the other hand, misunderstanding and not paying the correct sales tax to a state government could very much hurt a business’s standing and reputation. At Tax Resale Certificate, we make the process as easy as possible. Just take advantage of our user-friendly interface to help take the headache of applying for a tax resale certificate off your plate.