If you live in California and planning to start a resale enterprise, you’ll appreciate reading this text.
We’ll tell you how to get a resale certificate in California, its cost implication, who should get such a credential, and more. Before moving to the real business of the day, let’s under what a resale certificate is.
Resale Certificate California
Do you want to start or have launched a resale business in California?
Then you’ll need a legal certificate for your venture. It’ll allow you to purchase goods and services for resale without paying sales tax.
Moreover, it indicates the items were in good faith that the purchaser would resale and report the final sale.
What’s a Resale Certificate in California all About?
A resale certificate is a legal document that permits business people to purchase goods from a wholesaler without paying California sales tax.
The credential will also inform suppliers that you can legally buy goods. Therefore, they’re not to charge you on sales tax. What’s more? It will prevent your items from being double-taxed.
However, your business may face steep fines if you buy items without paying sales tax. The same follows if you fail to charge sales tax to customers who purchase goods.
Ideally, when you use a resale certificate to purchase goods, you’re legally bound to resale them and collect sales tax. Failure to do so will also be a liability to the sales tax on such items.
In California, a resale license applies to only one vendor. So if you have many vendors, you’ll need this credential for all of them.
You can research more on this credential for a deeper understanding.
How Do I Get a Resale Certificate in California?
Getting this document in California is relatively easy compared to other business authorizations. You must visit the Department of California tax service center website and download the form.
Alternatively, you can fill out the California sales and use tax application. You can download the request form by clicking on the following link.
Before completing the form, ensure you have all the needed information. Moreover, you must fill out the form correctly. Please do so to avoid owing sales that should have been collected from the buyer.
This will translate to penalties and interest.
Completing the California Resale Certificate
You may begin completing the form after downloading the form and gathering all the necessary details. First, input your seller’s permit number, business type, and vendor’s name.
Next, you give a detailed description of items being purchased for resale. Fill in your full name, address, and contact line, then sign.
Once you complete the form, you can mail it to the state. But you can keep it to present to your vendor at the time of purchase.
Do I Need to Renew My Resale Certificate in California?
No! You can only sign up for this credential once, and no need for renewal. The document doesn’t has an expiry date in California.
However, the certificate can be revoked by the purchaser in writing.
Cost of Acquiring a Resale Certificate in California
Luckily, there’s no cost for obtaining this document in California.
However, some states charge a minimal fee for resale certificates. You must pay the price if you must do business in such areas.
You can get more details about this certificate from the state secretary’s office.
Why do You Need a Resale Certificate in California?
People venturing into the resale business often wonder why they need this document. But certainly, you’ll need this credential for several purposes.
You can use this certificate to purchase finished items for resale. Secondly, you can buy materials that will be held for resale.
Moreover, you’ll need the document when purchasing items solely for demonstration or display while holding them for sale at the regular cost of business operation.
However, you’re not to use a resale certificate when buying a product that will be used rather than selling. Before selling it, you should also not use it for personal purposes or other businesses.
Finally, your certificate should not be an investment for future value and sale appreciation.
Misusing a Resale Certificate in California
While obtaining this credential is free, it’ll cost you more money if it’s misused.
You can misuse this certificate when you knowingly issue it with purchasing items you’ll not get resale. You’ll awe the amount of tax due and the interest on the tax.
Furthermore, you’ll be penalized if you purchase for personal gain or evade tax payment with this certificate. In most cases, you’ll pay a penalty of ten percent of the taxation of $500.
For fraud or intent to evade the tax, you’ll pay a 25% penalty.
You must know that purchasers may be found guilty of a misdemeanor under the Revenue and Taxation code 7153. Each misuse of this document is punishable with a fine of not less than $1000.
Then no matter your offense level, you’ll not be fined more than $5000. If you’re to be imprisoned, it will not exceed one year.
You can research the rules and regulations of resale certificates in California to avoid breaking them consciously and unconsciously.
Do Sellers Accept Resale Certificates in California?
This is a very critical question to ask. The answer is no! Sellers are not required to accept a resale certificate in California. However, most sellers are found to receive this credential.
If a vendor doesn’t take this certificate, the buyer will be the one to pay sales tax on each item being purchased. In California, credit for the sales taxes paid is available by filling out the sales tax return.
Moreover, the state is among the few that need to recognize out-of-state resale certificates. To purchase a tax-free from vendors outside California, the buyer must sign up for a sales permit in the seller’s state.
Obtaining a resale certificate in California is necessary. Besides, the process is relatively easy and free. Once you have this document, you’ll save from potential and substantial penalties.
However, if you’re found misusing it, you’ll be penalized. So ensure you keep the rules and regulations. Additionally, be sure to present the correct certificate to your vendors.