New York resale certificates: When do resellers need one?

According to New York tax laws, any time you want to start selling anything as a business, you must get a reseller certificate -- known as a Certificate of Authority. A Certificate of Authority gives you the right to collect sales tax. With it, you can also accept and issue tax exemption certificates (if you are a manufacturer selling to a reseller, for example).

Applying for this certificate is fairly straightforward. You have to do it at least 20 days before starting your business, and you can register online. You can learn more at the New York License Center.

Note that this certificate applies only to selling things "as a business." You can make the occasional personal sale of a phone or laptop on eBay without having this certificate or collecting sales tax. The law states that you must collect sales tax only if you are considered to be a "vendor."

If you are a vendor, it doesn't matter if you are doing business year-round or just setting up for a few weeks every year, like a flea market stall or a Halloween store. In both cases, you will need a Certificate of Authority. To cater to both temporary and permanent businesses, New York State issues two types of certificates: permanent and temporary.

You qualify for a temporary certificate if you make sales for no more than two consecutive sales tax quarters in a 12-month period. The New York State Tax Department website lists the sales tax quarters as March 1 through May 31, June 1 through August 31, September 1 through November 30, and December 1 through February 28 (February 29 in a leap year).

In some cases, though, it is better to just get a permanent certificate, since you can only apply for a temporary certificate once every 12 months. Having a permanent certificate will leave the door open for extending your business to year-round operation.

You must not be in business if you don't have a tax certificate. If you are caught, the fines can be up to $10,000.

The New York State tax guidelines have listed taxable and tax-exempt goods/services, but in a nutshell, follow these guidelines.

• Get the certificate if you are a business based in New York State -- whether you're based in an office, warehouse, home, or anywhere, really.
• If you have multiple business locations, you need a separate certificate for each location (you can register one business with multiple locations to get many copies of the certificate).
• Even if you are out of state, if you send catalogs/deliveries to people in New York State enough times per year, or make deliveries in the state with your own vehicle, you'll need a certificate.

Generally speaking, a significant physical presence/connection (even if in the form of employees or contractors) is all you require to need to have a certificate.

Online sellers must have a certificate, but the general consensus for online sales nationwide is that you only have to collect sales tax if you have sufficient nexus in the state your customer is from. Nexus is usually determined if you have a physical presence in that state. Having independent contractors present in a state may also be considered nexus in some cases.

As for displaying your certificate on an online store, it's a little tricky. The law says you must display it at your place of business, so whether you want to consider a website a "place" or not is up to you (and your lawyer!). But if you do display it as a small thumbnail in your website's footer, it certainly can't hurt.