California has a population of nearly 40 million, which makes it an excellent location for just about any business. If you have considered selling goods or services within this state, you have an above-average chance of thriving. One of the basic things you should do before your venture begins is to ensure you comply with the set tax laws.
In California, businesses may purchase items tax-free to resell. Sales tax will then be collected when the items are sold at retail.
In a Hurry? Here is the Resale Certificate Form from the California Department of Tax and Fee Administration for every industry to get your California Resale Certificate.
Read on to learn more details, including how to get a resale certificate in California.
How Do I Obtain a California Resale Certificate?
Obtaining a resale certificate in California is not as challenging as many may assume. You merely need to fill out the Resale Certificate). You can get this form in PDF on the CA.gov Department of tax website. This is the same site you should visit to get other necessary business tax forms.
Filling out the forms is easy-peasy. The process merely requires providing basic information such as your California sales tax permit number, a general description of your type of merchandise, your name, and your address. If you apply for a blanket resale certificate, it will remain a valid seller’s permit for as long as the authorities don’t revoke it in writing.
Guide for Filling out Resale
One certificate is enough to show that all purchases are intended to be resold and, therefore, exempt from taxation. This makes the process of filling out the form relatively easy because you can always apply for a blanket certificate. For you to avoid getting into trouble with the taxman and for a seller to accept your certificate, it is crucial to have filled out the California resale form correctly.
- Here is a good video that helps explain the California Resale Certificate:
Here is a step-by-step guide on how to fill out this important form.
- Step 1
Download California Sales and Use Tax Resale Certificate
- Step 2
Provide basic information about your name, phone number, and address
- Step 3
Key in the California Sales and Use Tax Permit Number
- Step 4
Provide the name and address of a seller
- Step 5
Describe the items to be acquired in a brief
- Step 6
Describe your business and what you sell in brief
- Step 7
Indicate that the property you want to buy is for resale. Include the date on the certificate and sign.
How and When To Use A California Resale Certificate
Once you have obtained your resale certificate, you must submit it to a seller anytime you want to acquire resale goods. It is illegal for a seller to allow you to purchase goods tax-free if you fail to produce your original resale certification.
As the holder of a resale certificate in the state, your responsibilities include:
- Don’t use the resale certificate when purchasing goods not intended for resale.
- If you opt not to resell an item you purchased tax-free using the certificate, make sure you take care of the taxes you are owned.
- Don’t use the certificate as a means to evade taxes. This is illegal and can be charged as a felony or misdemeanor, depending on the accumulated taxes that are evaded. Evaded taxes amounting to more than $750 but less than $20,000 can attract third-degree felony charges. On the other hand, evaded taxes amounting to $20,000 or more attract second-degree felony charges.
Sellers also have responsibilities that cannot be escaped when accepting resale certificates. They include:
- You have to confirm the proper completion and validity of the resale certificate.
- Don’t accept certificates if you suspect the goods being bought are not for resale purposes.
- You must keep each retail certificate for about four years in your records. This allows you to validate claims that goods bought were for resale and hence exempted from tax.
What Should You Do If Someone Presents To You a California Resale Certificate?
Whether you are a wholesaler or retailer, someone may present a resale certificate when making a purchase. Here are the steps to take:
- Step 1- Do a Brief Verification Process
It is crucial to confirm that the California resale certificate presented is filled out with all the essential information. This may include the buyer’s name and the items they sell, a general description of the goods bought for resale purposes, and the name of your store. Additionally, ensure you get the address and signature of the buyer.
The need to verify that a certificate contains all the vital information must not be underestimated. If any of the details are missing and you still proceed to offer a tax-free purchase, you may end up in trouble in case of an audit.
- Step 2- Verify the Authenticity of the Certificate
If a Texas resale certificate has all the needed information, this is a good sign. However, it would be best to protect yourself further by checking the validity of the document with the state. This can easily be done online through a California Tax Permit Search.
- Step 3- Keep Your Records
Having the certificate on file is essential, just in case the auditors knock on your door because of sales taxes that were dodged. Usually, a buyer can use the same certificate as long as their information does not change, and they continue trading in the same selection of products.
What is the history of resale certificates?
Resale certificates have been around for well over a decade. In fact, the concept of resale certificates is as old as auctioning itself and came about because consumers demanded it. Consumer surveys conducted in the late 1980s showed that consumers wanted to be able to buy goods at lower prices than those at retail stores. These surveys were pivotal in providing the impetus for a federal law to require large ticket sellers (over $500) to provide buyers with information about the original seller and also allow them to cancel their purchase within three business days. This legislation was enacted in 1993 and became known as the “The Cooling-Off Rule”, codified at 15 U.S.C., Section 2302. This law has also been implemented in most states, and is known as the “Satisfaction Guaranteed Law”.
How do I fill out a resale certificate in California?
Simply visit the California Department of Tax and Fee Administration and complete the resale certificate form
Why is the California resale certificate required for resellers?
A California seller’s permit is required to show that no tax is due on any sale that is made for the intention of resale.
Is a resale certificate the same as a seller’s permit?
Most of the time these are the same thing as the California resale certificate is often referred to as a “California Sales Tax Exemption” certificate or sales tax license. Some cities throughout California have unique sales tax registration requirements so be sure to check with your applicable county.
Does a California reseller’s permit expire?
A resellers’ permit does not expire and there is no need to update it. The intention behind them is to make it easier for businesses that are in the reselling business to provide an official document so they don’t have to pay taxes if they intend to sell the goods which gives them a better chance to be profitable.
How much does a resale license cost in California?
A resale license is free to download is intended to help resellers do business in the state.
How long does it take to get a resale license in California?
It depends on the workload that the California Department of Tax is under to figure out how long it takes to get your license processed.
Who must obtain a California seller’s permit?
If you plan on selling property that would ordinarily be charged sales tax you are required to have a seller’s permit
There you have it, detailed information about how to get a valid resale certificate in California, how to use it, and even the responsibilities you have as a certificate holder. We hope this post answers all the questions you may have, especially if you want to start a venture within the state.
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