California Resale Certificate

Goals

To understand the official process for obtaining resale certificates for California; and to know the legitimate platforms that provide the certificates. Also, how can these certificates be used retroactively? This information would be used in avoiding the payment of sales tax.

Early Findings

SELLER'S PERMIT

  • In order to purchase property for resale without having to pay sales tax to a supplier, a business/seller must obtain a seller’s permit. Once this seller's permit is obtained, a seller can present a resale certificate to a vendor as proof that the property being purchased would be resold.
  • A resale certificate cannot be used to buy property for personal use (even if the intention is to sell that property after it has been used).
  • Regardless of the possession of a seller's permit, records must be kept and returns must be filed. Also, sales tax due must be paid on all retail sales in California. These dues may be reimbursed through the tax paid by the seller's customers.

OBTAINING A RESALE CERTIFICATE

  • According to the California Tax Service Center, resale certificates "may be in any form". However, the center provides a "blank resale certificate" online as a template for sellers. The official resale certificate template provided by the California government may be found here.
  • A seller may choose to draft the resale certificate in any form provided it contains the following:
      • The buyer's name and address;
      • The buyer's seller’s permit number (except that purchaser is not required to have one).
      • A description of the item/property to be purchased;
      • A statement indicating that the property is being purchased solely for resale purposes;
      • The document's date;
      • The signature of the buyer/purchaser. Someone who is approved to represent the purchaser may also sign on behalf of him or her.
  • According to the California Department of Tax and Fee Administration (CDTFA), "a resale certificate which is not timely taken is not retroactive and will not relieve the seller of the liability for the tax". However, "the seller will be relieved of liability for the tax" if certain conditions are fulfilled. These conditions may be found here.
  • Details regarding how to apply for a seller's permit in California may be found here.

Proposed next steps:

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Our background search has provided the official process for obtaining a resale certificate in California, an official resale template, and the terms governing retroactive use. We would, therefore, recommend additional research to provide detailed insight into the federal and state laws/regulations governing sales and purchases in California. We would also uncover any pain points currently experienced by sellers within the state.