In order to purchase inventory without paying sales and use tax, a Washington Reseller Permit is needed. Learn more about the certificate and how to get one!
When a business purchases inventory to resell, it can do so without paying sales tax. In order to do so, the retailer will need to provide a Washington Reseller Permit to their vendor.
Learn more about what a Reseller Permit is, how to get one, and more.
What is a Reseller Permit?
When retailers purchase products to resell, they often don’t pay 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 state of Washington Department of Revenue.
For example, when a pet store purchases dog toys from their supplier to sell in the store, the pet store owner won’t typically have to pay sales tax to their supplier. When a customer (or end-user) purchases the dog toy, the retailer will charge sales tax to the customer based on the full price of the toy. 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.
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.
How to Obtain a Reseller Permit in Washington
Before a business starts selling products or providing taxable services, they must first get a Washington Sales Tax Number from the Washington Department of Revenue. The Sales Tax Number 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 ID?
The Sales Tax Number and Reseller Permit are commonly thought of as the same thing but they are actually two separate documents. The Sales Tax Number allows a business to sell and collect sales tax from taxable products and services in the state, while the Reseller Permit allows the retailer to make tax-exempt purchases for products they intend to resell.
After securing a Sales Tax Number, the Reseller Permit is available by:
- Logging in to dor.wa.gov.
- On the Department of Revenue Services page, click on “Print your reseller permit”
- On the Select Customer page, select your business, then click Next
- On the Select Account page, select the excise tax account, then click Confirm
- Last, in the Active Permit table, click the Print Permit link.
A new browser will open and display the reseller permit. Use the browser menu to print or download a .PDF file of the reseller permit.
Does a Washington Reseller Permit Expire?
Washington Reseller Permits are generally good for four years.
Permits for contractors, businesses open less than 12 months, businesses with no income reported in the last 12 months, businesses with a non-reporting status within the last 12 months and businesses that have failed to file tax returns in the last 12 months are only good for two years.
Are sellers required to accept Reseller Permits?
Sellers are not required to accept Reseller Permits, 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, they will be able to get a credit for the sales taxes paid later on their sales tax filing.
What steps should a business take to accept a Reseller Permit?
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 Washington sales taxes on the seller.
Before accepting a Reseller Permit from a buyer, the following steps should be taken.
- Review the Reseller Permit to make sure it is completely filled out.
- Save a printout of the buyer’s information from the Department of Revenue’s Business Lookup Tool.
- Verify the purchaser’s Washington Reseller Permit is valid by using the Reseller Permit Verification Service. The Department of Revenue recommends verifying reseller permit information at least once per year.
- 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.
Be sure to also keep a file of your customer’s Reseller Permits.