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Texas has a population of approximately 29 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 Texas, one is not required to have a reseller permit or license. However, you are required by law to have a resale certificate. This will allow you to resell taxable items without having to settle sales tax.
Read on to learn more details, including how to get a resale certificate in Texas.
Resale Certificate General Description
Taxable items intended for resale are not subject to sales tax in Texas. If you are running an auto spare part shop, for instance, the inventory acquired from the wholesaler is exempt from tax. This is because you plan to sell your merchandise to your customers and amass tax from the sales.
So, what happens when you approach the wholesaler?
If you produce a resale certificate, the wholesaler will allow you to purchase the goods tax-free. In the same regard, a sales tax will be included in the goods if you fail to produce this certificate. This is irrespective of the size of the purchase you make.
Your resale certificate proves that you plan to resell the goods purchased, making it unnecessary to collect sales tax at that point.
How Do I Obtain A Resale Certificate In Texas?
Obtaining a resale certificate in Texas is not as challenging as many may assume. You merely need to fill out . You can get this form in PDF on the Texas Comptroller’s website or clicking HERE. 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 Texas sales tax permit number, a general description of your type of merchandise, your name, and address. If you apply for a blanket resale certificate, it will remain valid for as long as the authorities don’t revoke it in writing.
Guide for Filling out Form 01-339
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 Form 01-339 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 Form 01-339 correctly.
Here is a step by step guide on how to fill out this important form.
- Step 1
Download Form 01-339- Texas Sales and Use Tax Resale Certificate
- Step 2
Provide basic information about your name, phone number, and address
- Step 3
Key in the Texas 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 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 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 Texas 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 Texas 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 Comptroller’s Sales 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.
Unique History of Texas Resale Certificates
Texas resale certificates, however, differ from the federal and state versions. Resale certificates in Texas were first implemented as a legislative solution to curb tax fraud by required requiring people who buy goods for resale to out-of-state resellers to complete a certificate detailing certain information about their business and deliver it to the out-of-state seller, who is required to retain the certificate for at least 6 months.
There you have it, detailed information about how to get a resale certificate in Texas, 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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