Resale Certificate
Definition
A document that lets a business buy goods for resale without paying sales tax, because tax will be collected when the goods are sold to the end customer.
Want a deeper explanation?
Resale certificates matter on both sides. When you sell wholesale, collecting them protects you if a state audits. When you buy inventory, providing yours keeps sales tax out of your product cost.
Rules and forms differ by state. Watch for: wholesale sales with no certificate on file, which can leave you owing the tax yourself.
Example
A retailer gives you its resale certificate for a $20,000 wholesale order, so you do not charge sales tax. You keep the certificate on file in case of audit.