How to get an Alabama Resale Certificate
A resale certificate allows a business to purchase goods or services from another business for the purpose of reselling those goods or services, without paying state sales tax.
Learn more about what a Resale Certificate is, how to get one, and more.
What is a Resale Certificate?
When retailers purchase products to resell, they often don’t pay state sales tax on the purchase. Instead of the retailer paying sales tax, the retailer charges sales tax to their customer on the final value of the merchandise. The collected sales tax is then sent by the retailer to the Alabama Department of Revenue.
For example, when a pet store purchases dog toys to sell in their store, by having a resale certificate, the pet store owner won’t pay sales tax on the transaction. When a customer purchases a dog toy, the retailer will charge sales tax to the customer based on the full price of the retail sale. The retailer will collect the sales tax from all their transactions and periodically (typically at the end of the month) send the sales tax to the state.
In most states, there is a form called a resale certificate or sales tax permit that vendors will request before allowing a retailer to purchase without paying state sales tax. A resale certificate is the seller’s evidence of why sales tax was not collected on a transaction. Similar names for a sales tax license include; resale certificate, reseller number, reseller permit, seller’s permit, sales tax exemption certificate, or reseller’s license. In order to prove a buyer intends to resell the product, they must provide a valid resale certificate to the seller of the goods.
How to Get a Resale Certificate in Alabama
The state of Alabama is one of the few states that don’t have a resale certificate. When asked for one by a vendor, an Alabama business will give them a copy of their Alabama Sales Tax License.
Alabama Resale Certificate FAQs
How much does a Resale Certificate cost in Alabama?
There is no cost for a resale certificate or sales tax license in Alabama.
Are sellers required to not charge sales tax?
Sellers are not required to accept the sales tax license and sell products tax-free. If the vendor, wholesaler, or dealer doesn’t accept the certificate, the buyer will have to pay sales tax on the merchandise being purchased. In most cases, a credit for the sales taxes paid is available when filing the Alabama sales tax return.
What steps should a business take to accept a resale certificate?
When a business is presented with a request to sell items tax-free, it is the seller’s responsibility to verify the buyer’s information is correct. Failing to verify this information may put the liability of paying Alabama sales taxes on the seller.
To verify whether the sales tax license is valid:
– Request a copy of the buyer’s Alabama sales tax license.
– Log on to My Alabama Taxes and click on “Verify a Sales Account”
– Sellers are also responsible for examining the certificate and evaluating whether the goods sold are reasonably consistent with the purchaser’s line of business. For example, if the buyer’s business is a car dealership, but they want to purchase office supplies tax-free, the seller may want to investigate further.
– While it’s not required, it’s a good idea to make a copy and file the sales account verification.
Is a business license the same as an Alabama Sales Tax License?
No, a business license and a sales tax license are not the same thing. A business license is a general permit that allows a business to operate legally in a certain jurisdiction, such as a city, county, or state. A sales tax license is a specific permit that allows a business to collect and remit sales tax on taxable sales of goods or services.
A business may need both a business license and a sales tax license depending on the type, location, and activities of the business.
Alaska (no sales tax)
Delaware (no sales tax)
Montana (no sales tax)
New Hampshire (no sales tax)
Oregon (no sales tax)