Tax Resale Certificates
A tax resale certificate allows you to not pay sales tax on items that you simply decide to resell. This will also apply to supplies that are getting to be utilized in products that you simply will resell, like wood for a cupboard.
It is critical that you simply understand that tax resale certificates also can only be used on items that will be resold. Office supplies, like new computers for your employees, wouldn’t fall into the category of retail. It can be considered fraud to not pay sales tax on these things.
If this is confusing for you, just consider tax resale certificates as state tax exemption certificates. Some states actually call them exemption certificates or reseller’s permits.
Getting Started In Maryland
Businesses in Maryland that provide any type of taxable goods and services must first apply for a Maryland Sales Tax Permit from the Maryland Comptroller’s Office. This permit is also known as a seller’s permit, sales tax number, or sales tax license.
Is The Tax Resale Certificate The Same As A Seller’s Permit?
Even though a 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.
When Do You Need A Seller’s Permit In Maryland?
A business must register for a seller’s permit in Maryland when:
- If your business has “nexus” (significant presence in the state) such as a retail store, office, or warehouse where products are produced, stored, and/or delivered
- Craft show and fair items sold in Maryland
- You have employees (including sales representatives or agents) that are working in Maryland
- You have an online business located in Maryland that is selling taxable products to Maryland residents
- You are an out-of-state business selling to Maryland residents and one of the following:
- Total sales of tangible personal property to Maryland residents is $100,000 or more; or
- Physical Products
Almost all physical products are taxable when sold at retail in Maryland.
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
- Some foods, medicine and medical equipment, security services, and sales of machinery and equipment used in producing goods are tax-exempt.
Often digital products are not taxable in this state.
In Maryland, most services are not taxable with the following exceptions:
- Short-term lodging
- Commercial janitorial and other cleaning services
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 in some states.
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 a credit for the sales taxes paid later on in their sales tax filing.
Additionally, purchases under $200 may not be tax-free unless;
- Purchasing the goods by vendor credit,
- Goods that already are exempted from sales tax
- Alcoholic beverages regulated by Article 2B of the Annotated Code of Maryland
What If A Customer Presents Me With A Tax Resale Certificate?
A customer can also present a tax resale certificate to you as a retailer and it is your discretion of whether or not you want to exempt them from the required sales tax. It is always a good idea to check on the certificate because you will be held responsible, if the certificate is expired or fraudulent, for the unpaid state sales tax. Verification is key in making sure that the correct due diligence has been completed to authenticate the tax resale certificate.
Remember To Verify Any Tax Resale Certificate Presented To You
In the first part of our series, we mentioned that a vendor can refuse a tax resale certificate. This is because the vendor will be the one liable to the state government should anything be remiss. That is why you should always take the following steps to assure that anything presented to you is valid.
- Make certain that the certificate is properly filled out and signed by the business owner
- You should be able to verify the certificate online by using the certificate
- You should also be able to verify online if the certificate has expired
- Be award of purchase that seem suspicious and do not relate to the customer’s business in a logical manner
- It is important that you keep the certificate on file for at least 5 years in case of a tax audit.
Make Sure You Understand The Specific Guidelines Of Your State
A tax resale certificate is a wonderful way a business can avoid unnecessary taxes. However, we understand that there are a lot of rules and regulations, which can be very confusing to any business owner.
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.