Tax License for Reselling Goods

Retail businesses collect sales taxes from customers and pay them to the state government.

Retailers and other businesses that engage in the resale of goods often will have to collect and remit sales taxes to the state governments in the states where the businesses are located. In some cases, other excise taxes, such as alcohol taxes, are applied as well. Understanding tax and licensing requirements is important for every new business, as tax liabilities can become a major financial cost if not appropriately managed.

Basics of Sales Tax

Forty-five states and the District of Columbia charge sales taxes on the commercial purchases made at stores within their boundaries. The rates of these taxes vary from 2.9 percent at the lowest, in Colorado, to 8.25 percent at the highest, in California. Many cities and counties also apply a local sales tax to finance their operations. Businesses are usually required to collect and pay the sales tax. The states generally require a retail business to register with the state, and in some cases, apply for an exemption from having to pay sales tax to wholesalers.

Reseller's Permit

In several states, such as California, Texas and Washington, the tax license for reselling goods is called a seller's permit, a sales and use tax permit, and a reseller's permit, respectively. A seller's permit is issued by the state sales tax collection agency -- in California, this agency is called the Board of Equalization. Businesses engaged in retailing activities are generally required to hold a seller's permit and file sales tax returns.

Resale Certificate

A resale certificate is a tax document that allows the holder to purchase items from a wholesaler without having to pay income tax. In some states, such as Washington for example, the reseller's permit and the resale certificate are the same document -- wholesalers in Washington must keep records of their customers' reseller's permits to maintain an exemption from state sales tax. In other states like California, a resale certificate is a separate document, though the purchaser must provide the wholesaler with its legally registered seller's permit number.

Other Tax Licenses for Resellers

Most states levy a special excise tax on the sales of certain regulated goods including alcohol, tobacco and some hazardous materials. In most cases, these excise taxes are administered by a different authority -- such as an alcohol beverage commission or a liquor control board -- from the state sales tax agency. State alcohol beverage authorities require their own licenses, permits and tax returns. The federal government also applies excise taxes to the sales of alcohol and tobacco, though only "businesses wishing to operate above the retail level must file an application with [the federal Alcohol and Tobacco Tax and Trade Bureau] and receive approval before engaging in business," according to the TTB.

References

• California Board of Equalization; Using a Resale Certificate; 2009
• California Board of Equalization; Do You Need a California Seller’s Permit?; 2010
• California Board of Equalization; Your California Seller's Permit; 2010
• Washington Department of Revenue; Use Reseller Permits to Purchase Items for Resale
• Texas Comptroller of Public Accounts; Sales Tax and Your New Business; 2010
• Federation of Tax Administrators; State Sales Tax Rates and Food and Drug Exemptions; 2011

Resources

• Washington Department of Revenue; Wholesalers Need a Copy of Customer's Reseller Permit; 2010
• California Board of Equalization; Alcoholic Beverage Tax; 2010
• Texas Comptroller of Public Accounts; Cigar and Tobacco Products Tax; 2009
• Tax Foundation; Updated State and Local Option Sales Tax; 2009
• Alcohol Tax and Trade Bureau: Informational & Application Packets