Seller's Permit vs Resale Certificate for Wholesale Brands
A seller's permit is a state registration that lets a business collect sales tax. A brand selling wholesale generally needs one in each state where it must collect sales tax. The permit also lets you sell to retailers without charging tax, because you can accept their resale certificates instead. In many states, retailers need their own permit to issue one. A seller's permit number on its own is not a resale certificate.
Key takeaways
- Your seller's permit lets you collect tax. The buyer's resale certificate is what makes an order tax-free.
- Accept certificates on time and in good faith, and check that they're complete.
- Forms, deadlines and record periods differ by state.
What is a seller's permit?
A seller's permit is a state registration that authorizes a business to collect sales tax. Some states call it a sales tax permit, sales tax license or certificate of authority. For a wholesale brand, it matters on both sides of the sale. You need one to collect tax, and in many states your retail buyers need their own before they can issue resale certificates.
Do you need a seller's permit to sell wholesale?
Generally yes, in each state where you are registered, or required to register, to collect sales tax. Most states use a sales threshold to decide when an out-of-state seller must register, so check each state you ship to. If you have no duty to collect in a state, you generally don't collect tax there, and the buyer owes use tax.
A permit alone doesn't make an order tax-free. US sales tax applies to the final retail sale, but the seller has to prove that a sale was for resale. Texas presumes all receipts are taxable unless the seller accepts a properly completed resale or exemption certificate. California puts the burden of proof on the seller unless it takes a certificate on time and in good faith. New York treats sales without valid certificates as taxable, and Washington also puts the burden on the seller. For the wider setup, see how to start selling wholesale.
What is a resale certificate, and how is it different from a seller's permit?
A resale certificate is a document from the buyer stating that it is buying the goods to resell them in the regular course of business. It is one type of exemption certificate.
The Texas Comptroller says a customer's permit number, or a copy of its permit, is not a substitute for a resale certificate.
An EIN, a business license or a "wholesale license" isn't a resale certificate either, because none of them shows that the goods are for resale.
What makes a resale certificate valid?
A certificate protects you only if it is valid, timely and accepted in good faith. Check six things:
- Timing. Get it at or before the sale where you can. Deadlines range from Texas's at-or-before rule to 120 days in Washington.
- Completeness. Expect the buyer's name and address, state registration number, a description of the goods, and a signature and date where required. Texas requires an 11-digit Texas permit number, not a federal ID or Social Security number.
- A certificate, not a permit. Don't accept a bare permit number, a copy of a permit or an email saying "we're resellers."
- Reason to know. You can't accept a certificate if you know, or have reason to know, that the goods won't be resold. Texas gives the example of a landscaping service buying jewelry. California requires a specific certificate for items the buyer doesn't normally sell.
- Blanket certificates. One blanket certificate can cover repeat orders, and Texas and California treat it as valid until revoked in writing. New York requires a way to link each invoice to it. In California, a purchase order with no tax line isn't enough. It must state that the goods are for resale.
- Verification. Use state tools such as Texas's permit search, Florida's transaction authorization numbers and Washington's reseller permit verification.
How do resale certificate rules differ by state?
Each state sets its own form, deadline and record period. Five examples:
| State | Form or evidence | Deadline | Keep for | Notable |
|---|---|---|---|---|
| Texas | Form 01-339 or the MTC form | At or before the sale | 4 years | A permit number alone isn't enough |
| California | CDTFA-230 or any document meeting Regulation 1668 | Before billing, within the billing cycle or by delivery | The audit period | Valid until revoked in writing |
| New York | Form ST-120 | Within 90 days after delivery | 3 years after the return | If late, both parties carry the burden of proof |
| Florida | Annual Resale Certificate or a verification number | For every exempt sale | 3 years | Expires each calendar year-end; no signature required |
| Washington | Reseller permit instead of a certificate | Within 120 days | 5 years | Annual electronic verification can meet the seller's burden |
Multistate forms help, but only in some states. Streamlined Sales Tax member states accept the SST certificate, and states that have agreed to it accept the Multistate Tax Commission certificate. Some states set their own limits. Texas rule 3.285(h) says the Streamlined certificate may not be accepted as a resale certificate, and Colorado GIL 26-001 says unlicensed wholesalers can't use the MTC form. Check your state before relying on any form.
When should you charge sales tax on a wholesale order anyway?
In states where you collect tax, charge it when:
- there is no certificate, or it is incomplete, late or expired
- the buyer is the end user, buying for its own use
- an order mixes resale and own-use items (California requires the purchase order to say which are which)
- the goods fall outside what the buyer normally resells
- you sell direct to consumers, online or at events
If an audit finds an untaxed sale with no valid certificate, you can end up owing the tax plus penalty and interest.
How long should you keep resale certificates?
Keep each certificate for at least your state's minimum (see the table above), and longer if an audit or dispute is open. Store it where you can match it to the account and its orders, and note its expiry date. Ask for the certificate when you open the account, before the first order ships.
Put the requirement in your wholesale terms, for example: "Orders are tax-exempt only with a valid resale certificate on file."
Do wholesale marketplaces collect resale certificates for you?
Faire's help center says Faire is the marketplace facilitator in the states where it is registered. It says Faire collects resale certificates from retailers and collects and remits tax on those orders. It also says brands may still need to report those sales on their own sales and use tax returns.
Orders you take outside a marketplace, through your own order form, sales reps or emailed purchase orders, are still your responsibility.
For those orders, put the resale certificate requirement in the Terms of Sale on your Brandboom order form, and turn on Require Buyer Signature so no order can be placed until the buyer signs. Checking and storing each certificate stays with you.
Frequently asked questions
Is an EIN a resale certificate?
No. An EIN is a federal tax ID from the IRS. It identifies a business for federal taxes. It doesn't show that goods will be resold, and it doesn't register anyone to collect sales tax. Texas and Maryland don't accept federal ID numbers on a resale certificate. Ask for a completed certificate with the buyer's state registration number.
Do I need a wholesale license to sell wholesale?
Usually there is no separate "wholesale license." People who use the phrase typically mean a seller's permit, a resale certificate or a reseller permit. What you generally need is a seller's permit in each state where you have a duty to collect sales tax. Local business license rules vary, so check with your state tax agency or a CPA.
Can I charge sales tax instead of collecting resale certificates?
Generally yes, in states where you collect tax, because sellers usually aren't required to accept resale certificates. Retailers usually expect to buy tax-free, though, so be ready to take a certificate when they offer one. In states where you aren't registered and aren't required to be, you generally don't collect tax at all.
Do resale certificates expire?
It depends on the state. Texas blanket certificates and California certificates last until revoked in writing. Florida annual certificates expire at the end of each calendar year, and Louisiana certificates last one year. Washington reseller permits generally last four years. Illinois says to update certificates at least every three years. Keep an expiry or review date on file for each account.