What is a resale certificate and how to submit it?

What is a resale certificate?

A resale certificate is a document that allows retailers to purchase products without paying sales tax if they plan to resell them.

Retailers with a valid sales tax permit can apply for a resale certificate, and they are responsible for collecting sales tax from their customers when selling the items in the nexus states.

Valid resale certificates allow you to qualify for a sales tax exemption on orders placed through Tapstitch.

For a smoother experience, we strongly recommend submitting tax exemption documents for all states where you anticipate placing orders.

To become tax-exempt on orders in eligible states, complete the resale certificate form by following the steps below.

When is a resale certificate required?

A resale certificate is typically required when a business purchases goods for resale.

It allows the buyer to avoid paying sales tax on products that will be resold to customers.

Who can apply for resale certificate?

Retailers, wholesalers, and distributors who buy products to resell to consumers or other businesses are eligible to apply for a resale certificate.

Businesses that purchase goods to be incorporated into the products they sell (e.g., manufacturers or assemblers) may also qualify.

Why should I have a resale certificate?

• Tax savings
  Reduced sales tax on resale purchases allows you to minimize operational costs.
• Streamlined operationsResale certificates simplify the purchasing process for businesses, eliminating the need to pay sales tax and seek refunds for inventory-related purchases.
• Regulatory complianceA resale certificate helps you to comply with state tax laws and regulations, avoiding penalties and legal issue

How do you complete and submit your resale certificate?

1. Navigate to the Taxes Section

   • Log in to your Tapstitch account.
   • Go to Wallet → Taxes → USA tab.

2. Access the Submission Service

   • Click Submit Now to access the Exemption Certificate Submission Service.

3. Follow the Instructions

   • If you already have a valid resale certificate, follow these steps:

     • Select the Upload Pre-Completed Certificates to attach your resale certificate.

     • Attach a scanned copy or PDF of your resale certificate.

1. • If you don’t have a resale certificate yet, you can create and submit one:

     • Click Submit Certificates and complete each step.

     • Complete each step of the process, providing the required information. Exemptax will guide you to generate a resale certificate tailored to the specific state(s) you’re applying for.

2. Submit for Review

   • Once completed, your resale certificate will be submitted for approval.
   • Review typically takes up to 3 business days. If rejected, you’ll receive an email detailing the issue so you can resubmit.

    

Resale Certificate Guidelines

To ensure your resale certificate will be approved on time, follow these guidelines:

• Ensure your resale certificate is signed and dated if the form requires it.
• Additional documents may be required for regulation purpose, such as:
  • Your state sales tax license for each state you are applying for.
  • Your business registration license if using a DBA (Doing Business As) name.

Related FAQ

Which Types of Orders Are Tax-Exempt?

Certain Tapstitch orders are not subject to sales tax. Here are the situations where this may apply:

1. Shipping Address Is in a State Where Tapstitch Has No Economic Nexus: If your order is being shipped to a state where Tapstitch does not have economic nexus, we will not collect taxes for that order.
2. Valid Resale Certificates Provided: If you have a valid resale certificate for the state where the order is being shipped and it has been approved by Tapstitch, your order will be tax-exempt.
3. Orders Placed Through Etsy or Amazon: For orders placed via Etsy or Amazon, tax collection is managed by these platforms in accordance with applicable laws. Tapstitch does not collect additional taxes for these transactions.

When is a Resale Certificate Required?

A resale certificate is typically required when a business purchases goods intended for resale without paying sales tax. It allows the buyer to bypass sales tax on items that will be resold to customers.

Who Can Apply for a Resale Certificate?

Retailers, wholesalers, and distributors who buy products for resale to consumers or other businesses are eligible to apply for a resale certificate. Additionally, businesses that purchase goods to incorporate into products they sell—such as manufacturers or assemblers—may also qualify.

For international sellers, even if your business is not physically located in the U.S. or has never registered there, you may still need to register for a seller’s permit and obtain a resale certificate. This could occur if your business establishes economic nexus, inventory nexus, or another form of nexus in a U.S. state. For more details, check out the TaxJar blog post.

Why Should I Have a Resale Certificate?

A resale certificate provides several key benefits for businesses:

• Tax Savings: Avoid paying sales tax on purchases intended for resale, reducing operating costs and improving profit margins.
• Streamlined Operations: Simplifies the purchasing process by eliminating the need to pay sales tax upfront and seek refunds for inventory-related expenses.
• Regulatory Compliance: Helps businesses comply with state tax laws, minimizing the risk of penalties and legal complications.

What Happens if I Don’t Have a Resale Certificate?

Without a resale certificate, TapStitch is required to charge sales tax on your purchases. This is because, without proper documentation, you cannot legally claim a tax exemption for resale purposes.

What is sales tax?

Sales tax is a form of consumption tax that is levied on the majority of goods and services sold to the final consumer.

This tax is not uniform across all US states and is collected at both the state and local levels. The amount of sales tax charged is usually a percentage of the total purchase price and is included in the final cost of the item.

Retailers are responsible for collecting the taxes from customers and remitting them to the appropriate state authorities. It is important to note that regulations regarding sales tax can differ from state to state.

Sales Tax= Taxable Amount × Sales Tax Rate

Certain organizations may be exempt from paying sales tax on our products, such as items bought for resale (provided the business upload a valid resale certificate).

Click here to see who is eligible for sales tax exemptions: https://www.taxjar.com/sales-tax/sales-tax-exemptions

Which product categories on TapStitch are subject to sales tax?

Depending on the US state, all of our product categories could be subject to sales tax. Many states also require sales tax on shipping costs. You can find more details here. (Cloth, Shipping)

How do I collect sales tax?

Once you’ve determined that your business has nexus in a given state, you should register for a sales tax permit, as this is required to legally collect sales tax in states you have nexus.

To register, you could follow the steps outlined here.

We also recommend obtaining a resale certificate from your state’s tax authority. This certificate differs from a sales tax permit and allows you to purchase products without paying sales tax on transactions made with Tapstitch, provided the products are intended for resale and you collect sales tax through your own business. Sales tax is required to be collected only once on the same goods.

After submitting a valid resale certificate to us, your Tapstitch orders shipped to the applicable state will be exempt from sales tax.

Does your business have nexus to a state?

Determining whether your business has nexus in a state—meaning a sufficient connection to require you to collect and remit sales tax—depends on several factors. Nexus can arise through physical or economic presence, and the specifics vary by state.

Reference: 
1. How do I know where I have nexus?
2. Economic nexus

What is a business license?

A business license is a permit issued by a government agency that authorizes an individual or entity to conduct business operations within the jurisdiction. In the United States, each state issues its own business license, granting businesses the legal authority to operate within that state's jurisdiction.

Can I recover sales tax charged by Tapstitch?

For compliance purposes, we collect sales tax on orders shipped to states where we have established nexus, provided the customer has not submitted a valid tax exemption certificate at the time of purchase. We encourage customers to upload their tax exemption certificates and place orders after the certificates have been reviewed and validated.

If sales tax were charged because the order was placed before the certificate review was completed, following are some options to recover the tax:
1. File refund claim with the “ship to state”:
2. Claim a tax credit on the sales tax return filed: 
3. Include a line on the customer’s invoice for the tax paid to the vendor:

Click here for more details.

This information is not intended as professional tax advice. We strongly recommend consulting a qualified tax specialist to determine your specific tax obligations and ensure compliance with applicable laws.