resale certificate
Definition
A resale certificate is a document that allows your business to buy products from a supplier without paying sales tax, because you plan to resell those products to your own customers. Your customers will pay sales tax when they buy from you, so the government avoids collecting the tax twice. Each state has its own version of this document, and you typically get it from your state's department of revenue.
Example
If you own a clothing boutique and you buy 50 dresses from a wholesale supplier, you hand the supplier your resale certificate so they don't charge you sales tax on that purchase, since your retail customers will pay the tax when they buy the dresses from you.
Watch Out
Using a resale certificate to buy items you don't actually plan to resell is considered tax fraud and can result in serious penalties from your state tax authority.
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This definition is for informational purposes only and does not constitute legal advice. Please consult with a licensed attorney for legal guidance.