subject: Are You Maximizing Tax Benefits By Using A Resale Certificate? [print this page] When purchasing with the intention of reselling, leasing or renting to some other person or persons, the purchaser is under obligation to provide the seller with a resale certificate. This resale certificate is meant to be used only for items being consumed mainly in the US and is valid only in the United States.
The purpose of this resale certificate is to enable the purchaser to make tax free purchases. For purchasers who obtain benefits from more than one authority, multi-state exemption certificates must be issued. In case the purchaser uses the resale certificate to purchase a taxable item and then uses it for personal use, a divergent use takes place which makes the purchaser liable to pay taxes based on the taxable value of the item.
Selling any taxable service will be thought of as a sale with the intention of reselling the purchased service only if it is an essential, indivisible part of the service that is being resold to the last customer. If such service has been included in the final service that is for sale then it is not allowed for it to be included into any other service which is apart from the original service that had been purchased. Such a resale certificate is applicable only to resale of services.
When a wholesaler sells his products to some other business instead of end users, in such cases his customers may make exempt resale purchases for which he may apply a blanket resale certificate for purchases from such suppliers. This allows the customers to make multiple purchases on the strength of such blanket resale certificates. This is another type of resale certificate known as a blanket resale certificate.
Typically, a supplier will ask the customer to fill out a form before submitting a resale certificate. This form will ask for the name of the seller, name of the buyer, address of the buyer, buyer's UBI/ Revenue Registration number, nature of business that the buyer is engaged in, and the types of items being purchased for resale.
In addition, the purchaser will certify that he is only purchasing the items that he has specified in the form. The purchaser will also accept full responsibility for purchasing the specified items and in case the purchaser misuses the resale privilege claimed under the certificate he shall be liable to pay a penalty that may be as much as 50% of the tax owed as well as paying taxes, interest and other penalties as levied by the tax authorities.
In addition, the seller shall certify that he holds valid sellers permit whose number he shall provide on the form. He shall further state that, as buyer, he will purchase with the intention of reselling the item in the normal course of his business without using the items in any other way except for demonstration or display purposes. In case the purchaser violates any of the provisions of the resale certificate conditions in order to default on paying taxes to the seller then he shall be liable to pay such amount of penalties and dues as stipulated by law.
The resale certificate will be considered as a part of each order placed by the purchaser unless otherwise specified and shall remain legally binding till revoked by the purchaser in writing.
In case a purchaser wants to obtain a resale certificate and has no idea of know how to go about obtaining one, he can easily find a suitable resale certificate form from vendors selling such documents. These documents are readily available and suit almost all needs since they have been well researched and tailored to meet current business needs. They do not cost much and are a money and time saving means that will easily pay back its cost through ease of use and completeness of information.
