Resale Certificate for Coffee Shops: Buy Beans, Cups, and Supplies Tax-Free
A single-location coffee shop burns through $3,000 to $8,000 in supplies every month. Coffee beans, milk, syrups, cups, lids, sleeves, pastries, and food items add up fast. At a 7% tax rate, a shop spending $6,000 monthly on these supplies pays $5,040 per year in sales tax that a resale certificate would eliminate.
The key principle: ingredients and materials that become part of a product you sell to a customer are purchased for resale. The coffee bean that goes into a latte, the cup it is served in, the lid on top, and the sleeve around it are all part of the product your customer buys.
What Qualifies as a Resale Purchase
This is where coffee shops differ from many other businesses. You are not buying finished products to put on a shelf. You are buying ingredients and components that become part of what you sell. The resale exemption still applies.
The legal concept: When raw ingredients are transformed into a product for sale, those ingredients are considered purchased for resale. A bag of espresso beans is not the end product. The espresso drink is. The beans are an ingredient in a product you sell.
This is the same principle that applies to restaurants and bakeries.
What You Can Buy Tax-Free
Ingredients (become part of the product sold)
- Coffee beans (whole bean, pre-ground, all origins)
- Espresso beans
- Tea (loose leaf, bags, matcha powder)
- Milk and cream (dairy, oat, almond, soy, coconut)
- Syrups and flavorings (vanilla, caramel, hazelnut, seasonal flavors)
- Sweeteners (sugar, honey, agave, artificial sweeteners served to customers)
- Chocolate (cocoa powder, chocolate sauce, chocolate chips)
- Whipped cream and toppings
- Ice (used in iced drinks sold to customers)
- Water (filtered water used in brewing that becomes the product)
- Pastries and baked goods (purchased from a bakery supplier for resale)
- Sandwiches and food items (pre-made or ingredients for made-to-order items)
- Bottled beverages (water, juice, kombucha sold at retail)
- Retail coffee bags (whole bean bags sold to customers)
- Branded merchandise (mugs, tumblers, t-shirts sold at retail)
Packaging (goes home with the customer)
- Cups (hot cups, cold cups, all sizes)
- Lids
- Sleeves and cup jackets
- Straws
- Napkins given to customers
- To-go bags
- Pastry bags and food packaging
- Cup carriers
What You CANNOT Buy Tax-Free
| Item | Why It Is Taxable |
|---|---|
| Espresso machine | Business equipment |
| Grinders | Business equipment |
| Blenders | Business equipment |
| Refrigeration | Business equipment |
| Cleaning supplies | Business use |
| Mop, broom, sanitizer | Business use |
| Brewing equipment (pour-over stations, etc.) | Business equipment |
| Furniture (tables, chairs) | Business property |
| POS system and receipt printer | Business equipment |
| Wi-Fi router | Business equipment |
| Reusable pitchers and tampers | Business tools |
| Aprons and staff uniforms | Business use |
| Dishwashing soap | Business use |
| Air filters for HVAC | Business property |
Key distinction: A paper cup goes to the customer. A ceramic mug that stays in the shop and gets washed does not. If you use reusable mugs for dine-in, those mugs are business equipment (taxable). If you sell branded mugs to customers, those are resale (tax-free).
Prepared Food Tax: The Coffee Shop Complication
Here is where it gets complicated. Most states tax prepared food at the full sales tax rate, even if they exempt groceries. A brewed cup of coffee is prepared food. A latte is prepared food. A heated pastry is prepared food.
What this means in practice:
- You buy your beans tax-free with the resale certificate (they are ingredients for resale)
- You charge your customer sales tax on the finished drink (it is a taxable prepared food sale)
- The resale certificate saves you money on the buying side; you still collect and remit tax on the selling side
Retail packaged goods exception: If you sell sealed bags of whole bean coffee, that is usually classified as unprepared food/grocery, which may be exempt or taxed at a reduced rate depending on your state. A bag of beans a customer takes home to brew themselves is different from a brewed cup.
States with important distinctions:
- Illinois: 1% tax on qualifying food and grocery, 6.25% on prepared food
- Texas: Grocery-exempt but prepared food is taxable
- New York: Coffee sold to go is subject to tax; some nuances around food pricing thresholds
Dollar Savings
| Shop Size | Monthly Supply Purchases | Annual Tax Savings (7%) |
|---|---|---|
| Small kiosk or cart | $2,000 | $1,680 |
| Single-location cafe | $6,000 | $5,040 |
| Busy urban shop | $12,000 | $10,080 |
| Multi-location operation | $30,000+ | $25,200+ |
Wholesale Suppliers and the Certificate
Major coffee shop suppliers that will need your resale certificate on file:
- Coffee roasters (local roasters, Counter Culture, Intelligentsia, Stumptown wholesale programs)
- Dairy suppliers (local dairy, Organic Valley wholesale, oat milk brands with wholesale programs)
- Sysco/US Foods (broad-line food service distributors)
- WebstaurantStore, Amazon Business (supplies, packaging, smallwares)
- Local bakery suppliers (pastries and food items for your case)
- Torani, Monin, DaVinci (syrup companies with wholesale accounts)
Most of these suppliers require the resale certificate during account setup. Restaurant Depot and similar cash-and-carry warehouses will also accept it at checkout.
Common Mistakes
Paying retail tax at Costco or Sam's Club on shop supplies. If you buy milk, cups, or pastries from a warehouse club for your shop, present the resale certificate. Many shop owners forget and eat the tax.
Not charging tax on retail merchandise. Branded mugs, bags of beans, and gift cards have different tax treatment. Mugs and retail bags of beans are taxable sales. Gift cards are not taxed at the time of sale.
Counting cleaning supplies as resale. Dish soap, sanitizer, and cleaning rags are used in the business, not sold to customers. They are taxable purchases.
Not registering before opening. Get the resale certificate before you sign your first wholesale account. Your opening inventory order is often your single largest purchase.
How to Get Started
- Apply for your resale certificate through your state or our service.
- Set up wholesale accounts with your roaster, dairy supplier, and broad-line distributor. Provide the certificate to each.
- Configure your POS tax tables. Prepared drinks at full tax rate, retail bags of beans at grocery rate (if your state differentiates), merchandise at full rate.
- File sales tax returns on schedule. Coffee shops typically file monthly due to consistent revenue.