In the process of buying products for resale, one of the most common mistakes is that most of the businesses unknowingly accept a copy of the seller’s permit instead of the resale certificate. Sometimes, the owners cannot distinguish these two documents. It’s a pretty common mistake. If you are dealing with commerce and you are a manufacturer or wholesaler, understanding the difference between these two documents is crucial for your business. Let’s dig into this topic in order to deeply understand the purposes that both of these documents serve.
For the sake of simplicity, we’ll pick the state of California as our test subject:
California Seller’s Permit
If you decide to start your commerce or e-commerce business in California, you should obtain a seller’s permit. A seller’s permit contains the permit number, the name, and address of the business, which is registered in your state.
California Code of Regulation has strict requirements for receiving a resale certificate when a sale is intended for resale. The certificate should be provided by the purchaser to the seller in a timely manner and must include the following information:
- The signature of the buyer or authorized representative.
- Both the name and the address of the buyer.
- The purchaser’s seller’s permit number.
- Approval that the good is purchased for further resale.
- The expiration date of the document.
California Resale Certificate
As we have mentioned before, a seller’s permit provides a seller with an opportunity of selling in California. A resale certificate, on the other hand, is provided from a buyer to the seller in order to assist the exempt nature of a sale for reselling. If you are a business owner, it is vital for you to keep resale certificates received from customers since it will help you avoid further issues within your business. Keep in mind that a California resale certificate is considered to be valid until the buyer cancels it. However, there are several states which do not require updating your reseal certificate.
In most cases, sellers unknowingly accept the seller’s permit instead of the resale certificate, and sometimes this cause inconvenience and problems. If your resale certificate is accepted without any problems, you can easily avoid tax obligation even if the purchased items are not going to be resold.
One of the most important parts for the business owner is understanding the difference between a seller’s permit and a resale certificate since it will help you reduce potential risks during the audits. By launching your business, the importance of being aware about these documents is tripled. Do not put them on the back burner; let Prestige Auditors guide you in the process of obtaining all the necessary documentation in the process of creating a skyrocketing business!