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What is a Texas Resale Certificate?

We all know how difficult it is to comply with Internal Revenue Service regulations, leave alone statewide chocking laws. This already complicated task may be expensive and time-consuming when you are buying inventories for resale. In Texas, you need a resale certificate to prove and explain why you should not pay tax through the supplier and instead charge it to your customers during the resale of goods. Here is an example of how the Texas resale certificate works.

How a resale certificate works

When a jewelry dealer purchases gold or diamond pieces from a credible and tax-compliant supplier, he gets them as tax-free goods if he provides the resale permit. Once the consumer of diamond pieces, be it a jewelry enthusiast or recently engaged couple, buys them, the seller will include tax charges in the final price. At the end of every month, the retailer computes and collects sales tax from completed transactions and submits the proceeds to the state.

So the purpose of a resale certificate is to prove that the seller did not pay tax to the supplier during the purchase of goods. And as explained above, the seller charges tax to a customer and sends it to the Texas Comptroller of Public Accounts. In other words, having a Texas resale certificate exempts you from paying tax when making purchases but fulfills the obligations while selling the initially tax-free commodity.

Contents of a Texas resale certificate 

The resale certificate contains;

  • The official name of the reseller or firm
  • The reseller’s contact details
  • Texas resale permit’s 11-digit number
  • Out-of-state retailer registration details

Your supplier needs a resale certificate

According to Texas law, your supplier is legally obligated to pay tax from his sales; thus, he should include a tax on his goods and submit the proceeds to the state. However, when you prove that you are buying goods for resale by showing the Texas resale certificate, your supplier will exempt tax charges from the inventories you are buying.

Tax Id and resale certificate: How do they relate

Most people tend to confuse a tax id with a resale certificate, but they are separate documents used on different occasions. Businesses with tax id are allowed to sell and collect tax from taxable inventories and submit the proceeds to the state. On the flip side, a resale certificate allows the business person to make tax-free purchases of products meant for resale.

When should you submit a resale certificate?

In case you didn’t know, suppliers will never make tax-free sales since the law legalizes such activities. Therefore to perform any tax-free transaction, a supplier will require an original and well-filed resale certificate.

How to get a resale certificate 

Getting a Texas resale certificate is a simple, straightforward process that requires you to fill in general details about your business in PDF form. In the form, provide the sales tax permit number, description of the merchandise you are selling, contact details, etc.

The best way to beat the law is by blindly obeying it. And having a Texas resale certificate is one way to do so and maintain your profit flowing. Find out more information about the resale certificate here.