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California: How to Document Exempt Sales to Merchants from Mexico

  • Dec 8, 2014 | Gail Cole

 There's a lot of coming and going.

It is not uncommon for California merchants to sell to purchasers from Mexico. While California sales tax usually is collected on all taxable sales, in certain instances, sales to Mexican buyers may be exempt as a sale for resale or a tax-exempt sale for export. The California State Board of Equalization recently updated the publication Sales to Purchasers from Mexico to ensure that retailers understand their sales tax collection responsibilities when transacting business with an individual or business from Mexico.

Sales for resale

Tax-free sales may be made to merchants from Mexico who will resell the property (either as-is or as part of another product), provided the buyer presents a valid resale certificate and any other required documentation. California sellers must maintain all necessary documentation to validate exempt sales.

Merchants from Baja California or the northern part of the State of Sonora who participate in the Mexican Merchants Program may make tax-exempt purchases for resale so long as they present both of the following:

  • A valid official identification card.
  • A Mexican Merchant resale certificate or a Border States Uniform Sales for Resale Certificate*.

Tax-free sales for resale may also be made to merchants from Mexico not participating in the Mexican Merchants Program, provided the buyer provides the following:

  • The same kind of resale certificate a California reseller would present.
  • A “signed statement, preferably on their business letterhead, stating the reason they are not required to hold a California seller’s permit.”
  • Documentation proving the purchaser is a legitimate business.

*To promote and simplify trade, the border states of Arizona, California, New Mexico and Texas and the United Mexican States have created the Border States Caucus, “in accordance with the objectives set out under NAFTA.” One outcome is the Border States Uniform Sale for Resale Certificate, which enables businesses to buy tax-free goods purchased for resale that will be transported across state and/or national borders.

Sales for export

California sales tax does not generally apply to sales when:

  • The buyer intends to ship the property to a foreign destination,
  • The property is irrevocably committed to export at the time of sale, and
  • The property is actually shipped or delivered to that foreign destination prior to its use by the customer.

However, it is not a sale for export if a merchant sells a television and delivers it to the trunk of the purchaser’s car, even if the purchaser is en route to Mexico.

See the publication for more detailed information.

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photo credit: nathangibbs via photopin cc

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.