Sales tax compliance can be a complicated task for businesses. One area that consistently raises questions is the use of resale certificates. While many states recognize some form of resale certificate, not all accept those issued by other states. This patchwork of regulations creates potential liabilities for interstate businesses and transactions.
Knowing which states refuse to accept out-of-state resale certificates will help your business avoid costly compliance missteps. Whether you’re a new entrepreneur or a multi-national company, expert sales tax help is available. Our skilled sales tax experts are here to assist with inquiries into resale certificate compliance, audits, and everything sales tax-related.
What is a Resale Certificate?
Resale certificates allow businesses to purchase goods intended for resale without incurring tax at the point of purchase. Retailers typically issue these documents to wholesale dealers. Occasionally, manufacturers use them to secure materials that will be incorporated into products for sale or distribution.
In many jurisdictions, a resale certificate can even be used to purchase taxable services that become part of the property for resale. While most states issue their certificates, others may accept a multistate form, such as the Multistate Tax Commission’s Uniform Sales & Use Tax Certificate—Multijurisdiction Form or the Streamlined Sales Tax Exemption Certificate.
Registration for sales and use tax is a prerequisite for issuing a valid resale certificate. That is because a resale certificate requires the purchaser to insert the purchaser’s state issued sales tax or vendor license number. States further require specific information such as the purchaser’s and seller’s names and addresses, the purchaser’s registration number, a description of the items bought for resale, the reason for exemption, and a pledge that any taxable use will be reported for consumer use tax. Because some states set expiration dates for certificates, regular updates are advisable. Retaining older certificates until audit periods close can help protect you in case of compliance questions.
Difference between a Resale Certificate and Sales Tax License
Note the difference between a resale certificate and a sales tax license. A state issues a sales tax license to businesses or individuals selling taxable goods or services, whereas the resale certificate is the form you present to your suppliers to purchase items tax-free for resale. In addition to the certificate’s reference to the license number, its primary function is to verify the intention to resell and ensure that sales tax is collected only at the final point of sale.
What Does It Mean for a Resale Certificate to Be “Out-of-State?”
An out-of-state resale certificate is issued by a state other than the one where the transaction occurs. When a business obtains a resale certificate in its home state, it typically uses that document to buy goods tax-free and resell them. However, if the company operates or sources products in another state, that home-state certificate may not automatically grant tax-exempt status in a different jurisdiction.
While some states allow multistate forms, others require a specific in-state certificate to recognize the transaction as exempt. This variation in acceptance can lead to compliance challenges, particularly for businesses that frequently purchase goods in multiple states.
Which States Do Not Accept Out-of-State Resale Certificates?
While some states freely accept certificates issued elsewhere, others impose specific registration requirements or decline to honor any certificate not issued within their jurisdiction.
Alabama
Alabama generally rejects out-of-state resale certificates because the state does not issue sales tax licenses to businesses lacking a physical presence within its borders. Under Rule 810-6-1-.144.03, any buyer of goods for resale must hold the legally required sales tax license in the state in which they operate. Because out-of-state sellers cannot obtain a sales tax license in Alabama, an out-of-state retailer cannot simply acquire an Alabama-specific certificate.
Despite this, drop-shipping is quite nuanced. Alabama treats the sale between a remote reseller and the drop-shipper as distinct from the ultimate sale to an Alabama customer. While the home-state resale certificate may be accepted for the initial purchase, the remote seller bears responsibility for collecting and remitting applicable taxes on the final in-state transaction.
California
California generally does not accept an out-of-state resale certificate on its own. Instead, to purchase goods tax-free for resale, businesses must register for a California seller’s permit. According to the California Tax Service Center, once registered, you must provide (or accept, if you are the vendor) a resale certificate containing specific details, such as the purchaser’s name and address, the seller’s permit number (or a statement explaining why it is not required), and a clear declaration that the items are being purchased for resale.
If you’re an out-of-state buyer who does not need a California permit, you must still note that on the certificate—including why you are exempt from holding one. This documentation must be maintained in good faith to relieve you of the obligation to collect and report California sales tax, with the understanding that tax will ultimately be due on the final sale to the end consumer. For more information, refer to the California Tax Service Center’s guidance, including Sales for Resale (Publication 103).
Florida
Businesses are required to register with the Florida Department of Revenue to obtain a Florida Annual Resale Certificate for Sales Tax. Once registered, they may purchase or rent property or services tax-free, provided they will be resold or re-rented in the normal course of business.
Pursuant to the Florida Department of Revenue, the certificate should not be used for items or services consumed by the business rather than resold. If, after initially purchasing an item tax-free for resale, it is later used for personal or business purposes, they must report and pay use tax at the same rate as sales tax.
Hawaii
Hawaii stands out from other states because it does not impose a traditional sales tax. Instead, it levies a General Excise Tax (GET) on businesses, which can be passed on to consumers if clearly disclosed at the point of sale. While many states fully waive sales tax for goods purchased for resale, Hawaii lowers the tax rate on qualifying resale transactions from four percent (or 4.5 percent in Honolulu) to 0.5 percent. To take advantage of this reduced rate, you must have a valid Hawaii resale certificate, which requires registering for a Hawaiian Tax ID number.
To use a Hawaii resale certificate, the buyer presents it to the seller at the time of purchase, ensuring that all relevant fields—such as the buyer’s and seller’s names and addresses, a description of the buyer’s business, and the buyer’s signature—are completed accurately. Once accepted, that certificate generally covers all subsequent purchases between the buyer and that vendor unless the buyer notifies the seller in writing of any changes or inapplicable transactions. On the other hand, vendors must confirm the certificate is filled out correctly and maintain a copy for their records in good faith since they bear responsibility for collecting the standard tax rate if the sale is not genuinely for resale.
Illinois
Illinois typically does not accept resale certificates issued by other states; if you want to buy goods tax-free for resale in Illinois, you must hold a valid Illinois resale number or account ID. It is also the seller’s responsibility to verify that the purchaser’s Illinois account ID or resale number is both valid and active. According to CRT-61, sellers can confirm this information by using the “Verify a Registered Business” tool on the state’s tax website (tax.illinois.gov). Failing to confirm a purchaser’s legitimacy can expose a seller to liability if the transaction is later deemed taxable.
Louisiana
Louisiana, in turn, outright refuses to recognize any out-of-state exemptions or multi-state exemption certificates. According to the Louisiana Department of Revenue, all tax-exempt transactions must be documented appropriately, and the certificate holder must be the direct purchaser for the exemption to apply.
A bill of lading, invoice, and purchase record generally suffice to establish interstate commerce for typical transactions, but drop shipments require a specialized “drop shipment letter” to substantiate that third-party interstate sale. The state treats the transaction as taxable if a business cannot provide proper Louisiana-issued documentation.
Maryland
Maryland requires businesses to register for a sales and use tax registration number before making tax-exempt purchases for resale. According to the Maryland Comptroller’s guidance, a resale certificate must clearly state that the merchandise or taxable service is intended for resale, include the purchaser’s name and address, and list the eight-digit Maryland sales and use tax registration number.
While there is no official state-issued resale certificate form, you can generate a valid certificate through the Maryland Tax Connect portal or create a custom document that meets the state’s requirements. Once you have provided this certificate to a supplier, it can serve as a “blanket” exemption for all qualifying purchases from that vendor, though both parties should keep accurate records for compliance purposes.
Massachusetts
Massachusetts mandates that a buyer hold a valid Massachusetts vendor’s registration to make tax-exempt purchases for resale. Form ST-4 explicitly states: “I hereby certify that I hold a valid Massachusetts Vendor’s Registration, issued by the Commissioner of Revenue... and that I intend to sell such property or services in the regular course of my business.”
Vermont
Vermont requires purchasers claiming a resale exemption to complete Form S-3, which demands that the purchaser supply their Vermont Sales and Use Tax number. In addition, the Vermont Department of Taxes emphasizes “good faith” acceptance of exemption certificates, meaning the seller must confirm that the transaction legitimately qualifies for exemption.
According to the Department’s guidance, the seller should be familiar with Vermont’s Sales and Use Tax laws and ensure the buyer’s certificate is valid and properly executed. If a buyer’s claim does not align with an actual exemption—such as purchasing an item that is not typically resold—then the seller should not accept the certificate. However, once a certificate is accepted in good faith, the seller is typically relieved of liability for collecting tax on that transaction.
Virginia
Out-of-state businesses cannot rely on a home-state certificate; they must first apply for a Virginia Sales and Use Tax Certificate (obtaining a Virginia Tax Account Number) and then complete Form ST-10. Once the certificate is correctly filled out, signed, and dated, it should be presented to suppliers whenever the buyer intends to resell the purchased goods in Virginia. Suppliers should keep a copy of the resale certificate on file to demonstrate they accepted it in good faith.
Washington
The Washington State Department of Revenue, does not accept out-of-state resale certificates. Instead, it issues its own Reseller Permits to qualified businesses. To qualify, you must have the appropriate Washington business licenses, endorsements, and—if applicable—a Labor and Industries contractor’s license. Most reseller permits are valid for four years, though newer or non-reporting businesses may only receive a two-year permit.
Once you obtain a reseller permit, you may use it to purchase items exclusively for resale in the regular course of business. When you later sell those items to end consumers, you are responsible for collecting and remitting Washington’s sales tax. Misuse of a reseller permit can lead to penalties. Washington strongly recommends verifying your customers’ reseller permit information at least once per year to ensure compliance.
Washington, D.C.
Washington, D.C. (the District of Columbia) will not accept an out-of-state resale certificate in lieu of local registration. To make tax-exempt purchases in D.C., you must file DC Form FR-500, Combined Business Tax Registration Application with the Office of Tax and Revenue and obtain a District of Columbia Sales and Use Tax Account ID number. Once registered, you will use Form OTR-368 as your certificate of resale. According to the form’s instructions, the certificate is invalid unless it includes the purchaser’s D.C. Account ID number, is signed by an owner or authorized officer, and is dated.
If you buy items that do not actually qualify for resale, you must either pay the sales tax to the seller or self-report and pay use tax directly to the Office of Tax and Revenue on the appropriate return (FR-800A, FR-800M, FR-800Q, or FR-800SE). For their part, sellers are required to maintain these certificates of resale on file in case of an audit. For more information or to apply for a resale certificate in D.C., visit MyTax.DC.gov.
Don’t Leave Sales Tax Compliance Up To Chance
Are you thinking of taking a risk not knowing if your resale certificate is valid in the state you’re doing business in? You shouldn’t. While compliance can sometimes be complicated, non-compliance will likely result in hefty penalties. Luckily, help is available.
At Sales Tax Helper, our skilled sales tax professionals understand resale certificates and all things sales tax-related. Instead of hoping for the best, you can leave your sales tax trouble to the experts. Contact us today for a free consultation to discuss your business's needs and take the first step toward sales tax compliance.
1. Can I use my resale certificate in multiple states?
Answer: It depends on the state. Some states accept multi-state resale certificates, such as the Multistate Tax Commission’s Uniform Sales & Use Tax Certificate, while others require a state-specific resale certificate. Always verify with each state’s tax authority before making tax-exempt purchases.
2. Which states do not accept out-of-state resale certificates?
Answer: States that generally do not accept out-of-state resale certificates include Alabama, California, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Virginia, Washington, and Washington, D.C. These states typically require businesses to register locally and obtain an in-state resale certificate before making tax-exempt purchases.
3. What happens if I use a resale certificate incorrectly?
Answer: Misusing a resale certificate can result in tax liabilities, penalties, and potential audits. If an item purchased tax-free for resale is later used for business or personal purposes, you may be required to self-report and pay use tax.
4. How do I apply for a resale certificate in another state?
Answer: To apply for a resale certificate in another state, you typically need to register for a sales tax permit with that state's Department of Revenue. Some states allow online applications, while others may require additional documentation, such as proof of business operations and an existing sales tax license from your home state.
5. Do I need a resale certificate if I sell online or in multiple states?
Answer: If you sell online or operate in multiple states, you may need resale certificates for each state where you purchase goods for resale. Some states allow you to use a multistate form, but others require a state-issued certificate. Additionally, if you meet economic nexus thresholds, you may need to collect and remit sales tax even if you don’t have a physical presence.
6. What’s the difference between a resale certificate and a sales tax license?
Answer: A sales tax license (or permit) is issued by a state to businesses that sell taxable goods or services, allowing them to collect and remit sales tax. A resale certificate is used by businesses to purchase goods tax-free for resale—it must be presented to suppliers at the time of purchase.
7. How long is a resale certificate valid?
Answer: The validity of a resale certificate depends on the state. Some states issue permanent resale certificates, while others require renewal annually or every few years. It’s essential to keep your certificates updated and retain older ones for audit protection.