What is a reseller permit?
Reseller permits are distributed by the State and allow:
- Retailers and wholesalers to purchase items for resale without paying sales tax.
- Manufacturers to purchase ingredients or components that are used to create a new article for sale without paying sales tax.
Reseller permits are generally valid for four years. However, permits are valid for only two years if any of the following apply:
- You are a contractor
- Your business has been open for less than 12 months
- Your business has not reported gross income in the last 12 months
- Your business was on active non-reporting status at the time the application was received
- Your business has failed to file tax returns any time during the last 12 months
Expiration notice: If your business’s permit will not be automatically renewed, you will receive a notice to apply for a new reseller permit approximately 90 days before your permit expires.
Key things to know about reseller permits:
- Permit numbers: Are unique to each business. The last two digits of the permit number are the year it expires.
- Effective dates: Are listed in the upper-right corner.
- Buyers using a reseller permit: Misuse of a permit may result in penalties for the buyer and the permit may be revoked. Anyone found using a permit inappropriately will owe the tax due and a 50 percent penalty—even if there was no fraud intended.
- Sellers accepting a reseller permit: During an audit, failure to have a valid, current reseller permit or documentation on file may result in the reclassification of the sale from wholesaling to retailing B&O tax. The business will owe retail sales tax for that sale.
Buyers: Using a reseller permit
If your business has been issued a reseller permit you are responsible for ensuring that the permit is used properly. Use your reseller permit to buy only those items that you directly resell in the regular course of your business. For industry specific information on how to use reseller permits, see our Industry guides.
Reseller permits may be used to buy:
- Merchandise and inventory for resale without being used by the buyer first
- Ingredients, components, or chemicals used in processing new products for sale
- Feed, seed, seedlings, fertilizer, and spray materials if you are a farmer
- Materials and contract labor for retail/wholesale construction
Reseller permit misuse
Businesses may not use a reseller permit to buy:
- Items for personal or household use
- Items to be given away
- Items used in the business, such as supplies and equipment
- Items used by the business in performing the business activity even if billed to customers
- Tools or equipment, (unless you are in the business of directly reselling or renting out such items)
- Materials and contract labor for public road construction or U.S. government contracting
- Equipment rentals
Misuse of a permit may result in penalties for the buyer and the permit may be revoked. Anyone found using a permit inappropriately will owe the tax due and a 50 percent penalty—even if there was no fraud intended.
If you buy goods to resell but you either don’t have a reseller permit, or your permit has expired, you have the following options:
- Pay sales tax on your purchases and then take a Taxable Amount for Tax Paid at Source deduction on your tax return when you report the sale of those specific items
- Pay sales tax on your purchases and then request a refund directly from the Department
Sellers: Accepting a reseller permit
Every business that sells at wholesale must obtain a valid reseller permit or other documentation for each customer that buys without paying retail sales tax. Sellers must maintain proper documentation for all wholesale sales for 5 years after the date of sale, and have up to 120 days from the date of the sale to collect the documentation.
In the event of an audit, you will be asked to provide documentation to support your wholesale sales. Documentation options include:
- A copy of the reseller permit
- A printout of the customer's information from our Business Lookup Tool. Use this service to look up one business record at a time
- The record received through the Reseller Permit Verification Service, exported and saved. Use this free service for looking up multiple records.
Sellers may also accept other approved exemption certificates from customers. To be valid, these certificates must be properly completed and signed by the customer.
If the buyer does not have a valid reseller permit or does not provide an approved exemption certificate, you must collect and remit sales tax.
During an audit, failure to have a valid, current reseller permit or documentation on file may result in the reclassification of the sale from wholesaling to retailing B&O tax. The business will owe sales tax for that sale.
You have the right to refuse to make tax-exempt sales if you have reason to believe the customer is misusing their reseller permit, is not reselling the items purchased, or the permit is expired or otherwise not valid.
We recommend verifying your customers’ reseller permit information at least once per year.