A resale certification allows businesses to buy goods and services for resale without having to pay sales tax. To do this, the retailer must provide a California Resale Certificate.
Find out more about a Resale Certificate, obtaining one, and other details.
- California Resale Certificate form BOE-230
- California Department of Tax and Fee Administration’s verification webpage
What is a Resale Certificate, and how do you use it?
Retailers often purchase products for resale and don’t have to pay sales tax. Although sales tax is still payable, the retailer will charge sales tax to the customer on the final price of the merchandise. The retailer then sends the collected sales tax to the California Department of Tax & Fee Administration.
A pet shop might purchase dog toys from a supplier to sell in their store. The pet store owner will not normally pay the supplier sales taxes. The retailer will charge the customer sales tax based on the full cost of the dog toy when a customer (or end user) purchases it. The retailer will collect sales tax from all transactions and send it to the state periodically, usually at the end of the month.
The certificate proves that no sales tax was collected on a transaction. A resale certificate can also be called a reseller number, seller’s permit, exemption certificate or wholesale license. To allow tax-exempt purchases, the seller must prove that the buyer intends to resell the product. This can be done by providing a valid certificate.
The exemption from sales tax is for inventory that will be sold and not for tax-free purchases of normal business items such as paper, pens, etc.
A California Seller’s Permit is required before a business can sell products or provide taxable services. Sometimes, the Seller’s Permit can also be called a sales tax permit or a sales tax number.
Is a Resale certificate the same thing as a Sales Tax ID?
Although they may be mistaken for one another, the Resale Certificate and Sales Tax Permit are two distinct documents. The Resale Certificate permits the retailer to purchase tax-exempt products for resale.
Similar: How do I get a California Sellers Permit
The California Department of Tax & Fee Administration will provide a sales tax number after you have registered. This number will appear on the Resale Certificate.
How to complete the California Resale Certificate
Buyers and sellers can create a resale certification if their certificates contain the necessary information. The Department of Tax & Fee Administration offers a Resale certificate (BOE-230), which can be downloaded to help document tax-free transactions.
Although filling out the California Resale Certificate is easy, Form BOE-230 is essential for sellers.
The California Department of Tax & Fee Administration will require that the seller has a BOE-230 Resale Certificate. The seller may end up owing the buyer sales taxes, penalties, and interest if it is not correctly completed.
Fill out the BOE230 California Resale Certificate.
Step 1: Download the California Resale Certificate form BOE-230
Step 2: Enter the number of the seller’s sales permit
Step 3: Describe the seller’s business activities
Step 4: Enter your business name
Step 5: Describe the property that is being sold. Use either an itemized listing or a general description to be descriptive.
Step 6: Enter the name, signature, address, and telephone number of the purchaser
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What is the cost of a California Sales Tax Exemption Certificate?
A California Resale Certificate is free.
Is a California Resale Certificate valid for a year?
A California resale certification is valid until it’s revoked by the seller in writing unless it was issued for a specific transaction. Otherwise, the certificate is generally good for one year.
Where can I get the California sales tax exemption certificate?
The seller keeps the resale certificate on file and does not file it with the state.
Do sellers have to accept the resale certificate?
Although sellers are not required to accept certificates of resale, many do. The buyer will be responsible for any sales tax if the seller refuses to accept the certificate. You can file the California sales tax return to get credit for your sales taxes.
California is one of the few states that doesn’t recognize certificates for resale from out-of-state sellers. To purchase tax-free items from sellers in other states, the buyer must register for a sales permit in that state.
What steps should a business take to accept a certificate of resale?
A resale certificate is a document that a seller presents to a business. The seller is responsible for verifying the buyer’s details and keeping these records.
Failure to verify the information could make the seller liable for California sales tax. A seller may be charged with a misdemeanor if they issue a resale certificate to avoid paying a buyer’s sales tax. This could result in a $1,000-$5,000 fine and/or a one-year sentence.
A seller must:
- Check the resale certificates to ensure it is complete.
- Verify the purchaser’s sales permit by visiting the California Department of Tax and Fee Administration’s verification webpage or calling 888-265-5263.
- Sellers must also examine the certificate to determine if the goods are reasonably compatible with the buyer’s business line. The seller might want to look into whether the buyer is looking to buy office supplies tax-free if their business is a dealership of cars.
- Keep a list of the resale certificates.
Brian Wilson is the content manager and founder of LLC Radar.
Brian grew up in North Texas, just outside of Dallas, and has a bachelor’s degree in business journalism from Southern Methodist University. Since graduating from SMU, Brian has gained over 10 years of experience in business writing for several online publications.
Brian resides in Plano, Texas and he can be reached by email: email@example.com