Why Your Business Needs a California Resale Certificate
- Any business that sells goods or any product online and ships to a customer in California is legally required to collect sales tax from the buyer. The sales tax you collect is then required to be paid to the state of California. Sales tax is not required to be collected if your annual gross sales total less than $4 million.
- California Sales Tax Resale Certificate Example: If you live in California and sell or ship something to someone else in California, then you must collect and pay sales tax to the State of California. But, if you sell the same item to someone outside the State of California, you do not need to charge sales tax, but you must report the exempt tax sale to the State of California.
- You are able to purchase items without paying California sales tax. When you buy an item that you plan to resell, you can purchase it without paying California sales tax. Items must be for resale or qualified business use.
- California Sales Tax Resale Certificate Example: If you go to a wholesaler and buy a computer you plan to sell, you may purchase the item without paying state sales tax.
- Wholesale companies in California require a sales tax resale certificate. Virtually all legitimate wholesale companies will ask for a copy of your resale certificate before they will sell to you at wholesale prices. Also, wholesale companies require a California state sales tax certificate number to open a commercial account.
- California Sales Tax Resale Certificate Example: Wholesale trade shows and merchandise marts require a copy of your certificate before allowing you to participate.
California Resale Certificate
Businesses that register for a resale certificate are issued an Annual Resale Certificate. The certificate allows business owners or their representatives to purchase wholesale items, buy/rent property, and/or services completely tax free! Below are a few examples of purchases or rentals that you can make with a resale certificate.
- Items that become part of a product that you sell (example: fabric, nails, wood that are incorporated into a sofa).
- Rentals that will be re-rented as real or personal property.
- Products resold as tangible personal property or services.
- Services that will be resold as part of your businesses operations.
Apply for a California Resale Certificate by clicking here
Employer Identification Number (EIN)
A number associated with your company that can be used for standard business needs. Below are a few examples.
- Applying for business licenses.
- Opening a bank account
- Filing a tax return by mail.
Before registering your company for a California Resale Certificate, you are required to have an Employer Identification Number (EIN) for your business.