Why Do You Need A Resale License

Resale license allows one to sell their products as well as collect sales taxes. It is a must especially when you are doing business with some other businesses. For example, you want to retail fashion and jewelry items, chances are high that the manufacturer or the wholesalers would like to ask for your resale license to be sure that you are not buying them for your own consumption. This license is known by different names, such as resale permit, certificate of authority, and sales tax authorization etc depending on the state or country where your business is located.

Why do you need them?

As already mentioned, such license ensures the wholesaler that you will actually resell their products. In addition, with a resale permit the government of your state or country authorizes your business to collect the sales taxes. It also ensures that the business owners submit the collected taxes to the appropriate government agencies. Such permits are issued along with your business license. In case  these two licenses are handled by two different jurisdictions, you will have to submit an additional application for obtaining the resale permit.

What are the benefits of a resale license?

There are a large number of advantages of such permits. First and foremost, you can make tax free purchases. In other word, there is no need to pay sales tax for goods which are purchased for reselling purposes. This will surely increase your profit margin. And with multi-state exemption certificates you can obtain benefits from numerous authorities. They are ideal for those retailers who buy and sell in more than one state. But as a business owner you must make sure that this permit is used only for business purposes. You cannot use this certificate for purchasing taxable items for your personal use. Those who are reselling taxable services can also take advantage of this license.

Before submitting such a resale license to the wholesaler or the supplier you will need to fill out a form. You will have to give information like the name of the buyer and the seller, the buyer's address, the nature of your business, your (i.e. buyer's) UBI/ Revenue Registration number, as well as the types of goods that you are purchasing for reselling purposes.

As a buyer you must certify that you are purchasing only those items which you have specified in that form. Moreover, you will have to take the total responsibility of purchasing those items. And if you misuse this resale privilege, mentioned in the certificate, you will have to pay a penalty of up to 50% of the tax owed. In addition, you will have to pay the other interests, taxes and penalties levied by the concerned tax authorities.