When do Texas sellers need resale certificates

Congratulations! You’ve decided to sell your products or services in Texas -- a business-friendly state with 27.7 million potential customers.

In order to stay in compliance with the state’s tax laws, you need to file certain paperwork for your business. Unlike some states, Texas does not issue special reseller licenses or permits. However, businesses are required to issue resale certificates.

Confused about when and how to use resale certificates or how to get them? Read on to learn the basics of Texas resale certificates.

What's a resale certificate?

In Texas, the sale of a taxable item that is intended for resale is exempt from sales tax. For example, if you operate a gift shop, you can purchase inventory for the shop tax-free from a wholesaler because you intend to sell the goods to customers and collect the tax on the sales.

In order to purchase resale goods tax-free, you need to provide the seller with a resale certificate. If you do not provide a certificate, the seller is required to charge you sales tax on the goods.

Basically, the resale certificate is a guarantee to the seller that you intend on reselling the items and that the sales tax doesn’t need to be collected at the time of purchase.

How do you get a resale certificate?

The resale certificate form is available from the Texas Comptroller’s website as a fillable PDF, along with a variety of other useful tax forms.

A resale certificate needs to include basic information, such as the names and addresses of the buyer and seller, the buyer’s Texas sales tax permit number, and a general description of the items sold.

What are your tax compliance responsibilities?

Only use a resale certificate if you are truly purchasing the goods for resale. If you are unsure of whether or not you plan to resell an item, you should not use the resale certificate to purchase it tax-free.

If you do purchase an item tax-free with a resale certificate, but then decide to not resell it, you are responsible for the taxes owed.

Improper use of a resale certificate to evade taxes is illegal, and can result in criminal charges ranging from misdemeanor to felony, based on the amount of taxes evaded.

When and how do you submit resale certificates?

You need to submit a resale certificate each time you make a purchase of goods for resale. A seller cannot legally sell you goods tax free without a properly completed, original resale certificate.

The original, filled-out certificate should be furnished to the seller at the time of the purchase; you do not have to send a copy of the form to the Comptroller’s office.

However, if all of your purchases are for resale, your vendors are allowed to accept a blanket resale certificate, which states that all items purchased going forward are intended for resale.

Learn how Avalara can help streamline exemption certificate management.

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