Resale Certificate
An exemption certificate claiming that goods are bought to be resold rather than consumed, so tax is deferred to the eventual retail sale rather than charged at the wholesale one.
A resale certificate is the most common exemption certificate in B2B distribution. It records the buyer's assertion that the goods will be resold in the ordinary course of business, which is why sales tax should not apply now: the tax is collected once, at the end of the chain, from the final consumer. A distributor selling to a retailer, or a manufacturer selling to a distributor, will hold a resale certificate for nearly every customer on its ledger.
The certificate carries the buyer's sales tax permit or registration number for the jurisdiction in question, a description of the property being purchased, and a signature. Its validity depends on the buyer being genuinely registered in that jurisdiction and on the goods being of a kind the buyer actually resells — a certificate covering shop supplies the buyer consumes internally does not hold up because the buyer signed it.
For a seller, the practical exposure is concentration. Resale certificates cover the highest-volume, lowest-scrutiny transactions on the account, so a lapse is expensive before anyone notices it: months of untaxed invoices to a customer whose certificate quietly expired. Because these customers order continuously, the lapse is rarely discovered by the next order — it is discovered by an audit.
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