How To Get A Texas Resale Certificate [2023 Guide]
In Texas, a Resale Certificate allows businesses to purchase items without paying sales tax. This certificate is also sometimes called a Sales Tax Exemption Certificate or a Texas Sales and Use Tax Resale Certificate. Businesses that plan to resell the items they purchase using a Resale Certificate must have a valid permit from the Texas Comptroller of Public Accounts.
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 to the supplier on the purchase. The sales tax will still be paid, but 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 Texas Comptroller of Public Accounts.
For instance, when a specialty tea shop in Texas sources exotic tea blends to sell in their store, the use of a resale certificate means the shop owner doesn’t have to pay sales tax on the procurement. The situation where sales tax comes into play is when a retail customer buys the exotic tea blend from the shop. The retailer applies sales tax to the full cost of the tea at this point.
The tea shop gathers the sales tax from all their transactions throughout a given period, usually at the end of the month. After the month ends, the store submits this collected sales tax to the state. This system effectively transfers the obligation of paying the sales tax from the retailer to the retail customer, with the retailer serving as an intermediary, collecting and transferring the tax to the state.
The purpose of the certificate is to provide evidence of why sales tax was not collected on a transaction. Similar names for a resale certificate include reseller number, seller’s permit, exemption certificate, wholesale license, or reseller’s license. In order for the supplier to allow the tax-exempt purchase, the seller needs proof the buyer intends to resell the product by providing a valid resale certificate.
The sales tax exemption is only intended to be used for inventory that will be resold and not intended for the tax-free purchase of items used in normal business operations such as paper, pens, etc.
Before a business starts selling products or providing taxable services, it must first get a Texas Sales Tax Permit from the Texas Comptroller of Public Accounts. The Sales Tax Permit is sometimes referred to as a seller’s permit, sales tax number, or sales tax license.
Is a Resale Certificate the same as a Sales Tax Permit?
The Sales Tax Permit and Resale Certificate are commonly thought of as the same thing, but they are actually two separate documents. The Sales Tax Permit allows a business to sell and collect sales tax from taxable products and services in the state, while the Resale Certificate allows the retailer to make tax-exempt purchases for products they intend to resell.
After registering, an 11-digit Texas Sales and Use Tax Permit Number will be provided by the Comptroller’s office. This number will be listed on the Sales and Use Tax Resale Certificate.
How to fill out the Texas Sales and Use Tax Resale Certificate – Form
Filling out Form 01-339 is pretty straightforward, but is critical for the seller to gather all the information.
Only one certificate is needed if tangible personal property purchases are exclusively made for resale. The blanket certificate should state that all purchases will be resold in the normal course of business.
If audited, the Texas Comptroller of Public Accounts requires the seller to have a correctly filled out Form 01-339 Sales and Use Tax Resale Certificate. Without it correctly filled out, the seller could end up owing sales taxes that should have been collected from the buyer in addition to penalties and interest.
Steps for filling out Form 01-339 Texas Sales and Use Tax Resale Certificate
Step 1 – Begin by downloading the Texas Sales and Use Tax Resale Certificate Form 01-339
Step 2 – Identify the name, address and phone number of the purchaser
Step 3 – Enter the Texas Sales and Use Tax Permit Number or if the purchaser is out-of-state, include their state’s sales tax permit number
Step 4 – Include the name and street address of the seller
Step 5 – Provide a description of the items to be purchased
Step 6 – Describe what the buyer’s business sells
Step 7 – The purchaser will certify the property being purchased is for resale and sign and date the certificate.
Fillable Form 01-339 Sales and Use Tax Resale Certificate
Texas Resale Certificate FAQs
How much does a Resale Certificate cost in Texas?
There is no cost for a resale certificate in Texas.
Does a Texas Resale Certificate Expire?
Texas Sales and Use Tax Resale Certificates don’t expire, though a vendor should periodically request a new one every few years to ensure all information is up to date.
Where do I file the Texas sales tax exemption certificate?
The resale certificate is kept on file by the seller and is not filed with the Comptroller’s office.
How often is Texas sales tax due?
Most new businesses in Texas are set up to file and pay sales and use tax monthly, but depending on the amount of tax collected, your business may have an annual filing requirement instead.
Are sellers required to accept resale certificates?
Sellers are not required to accept resale certificates for tax free purchases, however, most do. If the vendor doesn’t accept the certificate, the buyer will have to pay sales tax on the merchandise being purchased. In most cases, a credit will be provided on the Texas sales tax filing.
What steps should a business take to accept a resale certificate?
When a business is presented with a resale certificate, the burden of proof is on the seller to verify that the buyer’s information is correct and to keep these records. Failing to verify this information may put the liability of paying Texas sales taxes on the seller.
Before accepting a resale certificate, a seller should:
– Review the resale certificate to make sure it is completely filled out.
– Verify the purchaser has a valid Sales Tax Permit by visiting the Texas Comptroller of Public Accounts Taxpayer Search database.
– 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 are wanting to purchase office supplies tax-free, the seller should investigate further.
– Keep a file of resale certificates and records of tax-free transactions for four years.
Alaska (no sales tax)
Delaware (no sales tax)
Montana (no sales tax)
New Hampshire (no sales tax)
Oregon (no sales tax)