Home Business Sales and Use Tax Special Situations Purchases for Resale Purchases for Resale Contrary to what some people believe, a sales and use tax license is not a "tax number" that exempts you from paying sales and use tax. To make tax-exempt purchases for items intended for resale or for property that will be incorporated into something you manufacture to sell, you must give the vendor a resale certificate. Do not confuse the resale certificate with the exemption certificate. Resale Certificate A resale certificate is a written statement that you provide stating that the merchandise or taxable service you buy will be resold in a taxable sale or that it will be incorporated into tangible personal property or used in a service that will be taxed when it is sold. Although there is no specific form for a resale certificate, it must include: a signed statement that the purchase is intended for resale, the purchaser's name and address, and the purchaser's Maryland sales and use tax registration number NOTE: Your sales and use tax registration number is an eight digit number that has been assigned to your business. You'll find your registration number on each sales and use tax return we send you and on your sales and use tax license. If you frequently deal with the same supplier, you may provide that supplier with a blanket resale certificate stating that all purchases are for resale. Then all you have to do is give the supplier your sales and use tax registration number. A resale certificate can be generated here. Record Keeping Vendors must clearly document the reason for all tax-exempt sales and should keep resale certificates on file as part of your business records. You must be able to match your sales records with the appropriate resale certificates for audit purposes. You can be held liable for uncollected taxes if you accept resale certificates for sales that you know or should know are not for resale. Purchases under $200 Resale certificates may not be used to make tax-free purchases for resale if the purchase is less than $200 and payment is by cash, check or credit card unless the seller delivers the goods directly to the buyer's retail place of business.However, you may present a resale certificate to make a tax-free purchase of goods for less than $200 if you are purchasing goods: (1) on credit by the seller; (2) which would be exempt even if not sold for resale; or (3) which are alcoholic beverages regulated by Article 2B of the Annotated Code of Maryland. View a Sample Resale Certificate. Purchases for Resale FAQs What is my sales and use tax registration number? Your sales and use tax registration number is an eight-digit number that has been assigned to your business. You'll find your registration number on each sales and use tax return we send you and on your sales and use tax license. How can I protect myself from unnecessary tax liabilities? You must clearly document the reason for all tax-exempt sales. Otherwise you will be held responsible for uncollected tax, plus penalty and interest. You should establish procedures to obtain valid resale certificates at the point of sale, and review your files periodically for accuracy and completeness. Make certain that you do not allow resale exclusions on cash, check or credit card sales of less than $200 when you do not deliver the goods sold directly to the buyer's retail place of business. What should I do with resale certificates my customers give me? You should keep resale certificates on file as part of your business records. You must be able to match your sales records with the appropriate resale certificates for audit purposes. May I accept resale certificates from unlicensed out-of-state customers? No. Retailers licensed and remitting taxes in other states may apply to the Maryland Comptroller's Office for a refund. However, an out-of-state vendor who has been issued a temporary permit to collect the Maryland tax may use the number on that permit to make tax-free purchases for resale at the show for which the permit was issued. Temporary permits bear six-digit numbers and are issued by the comptroller's Special Events Section. Must I fill out a new resale certificate every time I make an eligible purchase? No. If you frequently deal with the same supplier, you may provide that supplier with a blanket resale certificate stating that all purchases are for resale. Then all you have to do is give the supplier your sales and use tax registration number. Is a resale certificate the same thing as an exemption certificate? No. Exemption certificates are issued by the Comptroller of Maryland to qualifying nonprofit organizations and government agencies to make purchases for their own use. The exemption certificate is a wallet-sized card bearing the holder's eight-digit exemption number. Certificates issued to nonprofit organizations have a specific expiration date, presently September 30, 2017 for religious, educational and charitable organizations, cemeteries, credit unions, and volunteer fire companies or rescue squads and September 30, 2017 for certain veterans organizations and their auxiliaries and units. Certificates issued to government agencies have no expiration date. Organizations and government agencies presenting exemption certificates are exempt from the sales and use tax on purchases of materials and supplies to carry out their work. On the other hand, a resale certificate allows a person to make tax-free purchases for resale, not for use. What information should be included on a resale certificate? Although there is no specific form for a resale certificate, it must include a signed statement that the purchase is intended for resale, the purchaser's name and address, and the purchaser's Maryland sales and use tax registration number. What about third-party drop shipments? In a typical transaction, you would sell merchandise to a vendor who is not registered to collect Maryland sales and use tax. The unregistered vendor asks you to deliver the merchandise to a customer in Maryland. In this case, you must: Require the vendor to obtain a Maryland sales and use tax license and provide a valid resale certificate; OR Charge the vendor the tax based on the amount of the sale. You are responsible for collecting or documenting the tax on your sale to the vendor. Refunds from Purchases for Resale Buyers may claim a refund for any tax paid on purchases for resale, using line 11 of their next sales and use tax return. No documentation is required with the return. Buyers may also apply directly to the Maryland Comptroller's Office for a refund. To claim a refund for taxes you have paid: Keep invoices showing tax paid on purchases made for resale; Total the tax paid as you prepare your sales and use tax return; and Enter the amount on line 11 of the return up to the lesser of $1,000 or the amount due. For expedited refunds, licensed Maryland retailers may submit a refund claim by fax using form ST212 to be faxed to 410-333-7744. © 2023 Comptroller of Maryland. All Rights Reserved. Contact Us Your Rights as a Taxpayer Accessibility Translate Disclaimer