How to Accept a Resale Certificate from a Customer: A Vendor's Guide

Most guides about resale certificates focus on the buyer: how to get one, how to use it, how to save money. This one is for the other side of the transaction. You are the vendor. A customer walks in or places an order and says, "I have a resale certificate. Do not charge me sales tax."

What do you do?

Accepting a resale certificate is not complicated, but it is also not risk-free. If the certificate is fraudulent, incomplete, or improperly applied, you could be on the hook for the uncollected sales tax. Every dollar of tax you did not collect becomes your liability.

This guide covers everything a vendor needs to know: what to check, what to keep on file, when to refuse, and how to protect your business.

Why This Matters to You as a Vendor

Here is the legal reality. When a buyer gives you a valid resale certificate, you are relieved of the obligation to collect sales tax on that transaction. The buyer takes on the tax responsibility; they will collect sales tax from the end consumer when they resell the goods.

But "valid" is the key word. If the certificate turns out to be fraudulent, expired, or improperly completed, most states will hold you responsible for the uncollected tax. You made the tax-free sale. You should have verified the certificate. You owe the tax.

In an audit, the state examiner will pull your resale certificate files and check each one against the state's registration database. Certificates that do not match, are incomplete, or belong to cancelled registrations result in assessed tax against your business, plus penalties and interest.

The good news: if you accept a certificate in good faith and it contains all the required information, most states protect you from liability even if the buyer later misuses the goods. "Good faith" means you did your due diligence and the certificate was not obviously fraudulent.

What Information Must Be on the Certificate

Requirements vary slightly by state, but every valid resale certificate should include these elements:

Required Fields

State-Specific Requirements

Some states have additional requirements:

• California: The buyer must provide their California seller's permit number. Out-of-state resale certificates are generally not accepted for purchases made in California.
• New York (Form ST-120): Requires the buyer to indicate the type of business and provide their Certificate of Authority number.
• Texas (Form 01-339): Requires the buyer to describe how the item will be used or resold.
• Florida: The buyer must provide their Florida Annual Resale Certificate number, which can be verified through the Florida Department of Revenue's online tool.
• Illinois (Form CRT-61): Requires the buyer's Illinois registration number. Illinois does not accept out-of-state certificates for purchases made in Illinois.

How to Verify a Resale Certificate

Accepting a certificate at face value is not enough. Here is a practical verification process.

Step 1: Check Completeness

Read every field. Is the form fully completed? Are there blanks where there should be information? An incomplete certificate is not a valid certificate. Do not accept it until every required field is filled in.

Common problems:

• Missing permit number (the buyer "forgot" or "will send it later")
• No signature
• No date
• Generic or vague descriptions of goods
• Using a form from the wrong state

Step 2: Verify the Permit Number

Most states offer free online lookup tools where you can verify a sales tax permit number. Here are some of the major ones:

If the state does not offer an online lookup, you can call the state's Department of Revenue and verify the number over the phone.

Step 3: Match the Information

The business name and address on the certificate should match what comes up in the state's database. Minor variations are normal (e.g., "LLC" vs "L.L.C."). Major discrepancies are a red flag.

Step 4: Check the Expiration

Most resale certificates do not expire. But some do:

• Florida's Annual Resale Certificate expires December 31 each year. The buyer should have a current-year certificate.
• New Mexico certificates can have limited validity periods.
• Hawaii certificates may have expiration dates.

If the certificate has an expiration date and it has passed, do not accept it.

Step 5: Evaluate the Transaction

Does the purchase make sense for the buyer's stated business? A company called "Smith's Pet Supply" buying 500 dog collars for resale makes sense. The same company buying 200 laptop computers? That warrants a question or two.

You are not required to be a detective. But if something is obviously wrong, accepting the certificate despite clear warning signs may not qualify as "good faith."

Red Flags to Watch For

Years of audit experience have revealed patterns in fraudulent or misused resale certificates. Watch for these:

The Individual Buyer

A person (not a business) wants to use a resale certificate. They have no business name, no business card, no website, and no reasonable explanation for why they need to buy tax-free. Some individuals obtain resale certificates specifically to avoid sales tax on personal purchases. This is tax fraud on their part, but if you accept it knowing the purchase is personal, you share the risk.

The Out-of-State Certificate in a Restricted State

California, Florida, Illinois, Hawaii, Maryland, Massachusetts, Washington, and Washington D.C. generally do not accept out-of-state resale certificates. If a customer hands you a Texas resale certificate for a purchase at your California store, you should not accept it. They need a California seller's permit.

The Blanket Certificate for Unrelated Goods

A customer gave you a blanket resale certificate when they opened their account. They run a restaurant supply company. Now they are ordering 50 desktop computers. Restaurant supply companies do not resell computers. The blanket certificate does not apply to goods outside their stated line of business.

The "I'll Send It Later" Buyer

The customer wants tax-free pricing now and promises to send the certificate later. This is risky. Some states allow a grace period (California gives 90 days, for example). Others do not. If the certificate never arrives, you owe the tax.

Best practice: collect the certificate before or at the time of the tax-free sale. If you must extend a grace period, document it and follow up aggressively.

The Cancelled Permit

You verify the permit number and the state's database shows the registration is cancelled, inactive, or suspended. Do not accept the certificate. The buyer's authority to make tax-free purchases ended when their permit was cancelled.

Suspiciously High-Volume Personal Items

A "business" buying 10 high-end televisions, 20 gaming consoles, or large quantities of consumer electronics at your store. These could be legitimate resale purchases for an electronics retailer. They could also be personal purchases disguised with a certificate. Ask what type of business the buyer operates.

How Long to Keep Certificates on File

States require you to retain resale certificates for a minimum period. If an auditor asks for a certificate and you cannot produce it, you owe the tax on that transaction.

Best practice: Keep certificates for at least 5 years regardless of your state's minimum. Audits can go back further than the standard period in cases of suspected fraud.

Storage Tips

• Digital copies are acceptable in most states. Scan or photograph certificates and store them in a structured filing system.
• Organize by customer name or tax ID number. You need to match a certificate to a specific customer's transactions quickly.
• Cross-reference with your sales records. Your system should flag which customers have certificates on file and which transactions were tax-exempt.
• Set renewal reminders for states that require annual certificates (Florida).

What Happens If You Accept a Bad Certificate

If the Buyer Commits Fraud

The buyer presented a certificate that looked legitimate but they used the goods personally instead of reselling them. In most states, if you accepted the certificate in good faith and it contained all required information, the buyer is liable for the tax, not you. Your good-faith acceptance protects you.

"Good faith" means:

• The certificate was complete
• The information appeared accurate
• You had no reason to suspect fraud
• The purchase was consistent with the buyer's stated business

If the Certificate Was Incomplete or Invalid

If the certificate was missing required fields, used the wrong state's form, had an expired permit number, or was otherwise deficient, good-faith protection may not apply. The state can assess the uncollected tax against you.

If You Did Not Collect a Certificate at All

Some sellers offer tax-free pricing to "good customers" without collecting any certificate. This is the worst-case scenario. Without documentation, you have zero protection in an audit. Every tax-free sale without a certificate on file becomes your tax liability.

The Math

Consider the exposure. Your business does $500,000 per year in tax-exempt sales. The average sales tax rate is 7%. If an auditor finds that 20% of your certificates are invalid or missing, your assessment is:

$500,000 x 20% = $100,000 in unprotected tax-exempt sales $100,000 x 7% = $7,000 in assessed tax Plus penalties (10% to 25%): $700 to $1,750 Plus interest (calculated from the original due date)

On a larger scale or over multiple audit years, these numbers grow quickly.

When to Refuse a Certificate

You have the legal right to refuse a resale certificate and charge sales tax. Some situations where refusal is appropriate:

1. The certificate is incomplete and the buyer will not provide the missing information.
2. The permit number does not verify in the state's database.
3. The certificate is from a restricted state (e.g., an out-of-state certificate used for an in-state purchase in California or Illinois).
4. The purchase is obviously for personal use. The buyer is an individual with no apparent business, buying a single consumer item.
5. The certificate is expired (for states with expiration dates).
6. The buyer is evasive about their business or refuses to provide identification.

You do not owe the buyer a tax-free sale. Sales tax exemptions are a privilege, not a right, and they require proper documentation. If you are not comfortable with the certificate, charge the tax. The buyer can dispute it with you afterward by providing proper documentation.

Best Practices for Managing Resale Certificates

Create a Standard Process

Every employee who handles sales should know:

1. What a resale certificate looks like
2. How to check for completeness
3. Where to file the certificate
4. When to escalate to a manager

Use a Tracking System

Whether it is a spreadsheet, a filing cabinet, or integrated accounting software, you need a system that:

• Links certificates to customer accounts
• Flags customers with certificates on file
• Tracks expiration dates (for Florida and other renewal states)
• Stores digital copies of each certificate

Periodically Re-Verify

Set a schedule to re-verify permit numbers for your active tax-exempt customers. Annual re-verification catches permits that have been cancelled since the original certificate was filed.

Train Your Staff

A cashier or sales associate who has never seen a resale certificate will not know what to look for. Train your frontline staff on the basics: what the form looks like, which fields are required, and when to call a manager.

Keep a Log

Maintain a log of all resale certificates received, including:

• Date received
• Customer name and tax ID
• State of issuance
• Blanket or single purchase
• Verification status (verified/pending/rejected)

For Buyers: Getting Your Certificate Right

If you are reading this as a buyer and want to ensure your suppliers accept your certificate without hesitation, here is what to do:

1. Complete every field on the certificate. Leave nothing blank.
2. Use the correct state form. If your supplier is in California and you are making a purchase in California, use a California resale certificate with a California seller's permit number.
3. Provide your current, active permit number. If your permit has been renewed, use the updated information.
4. Sign and date the certificate.
5. Be prepared to explain your business. A brief description of what you sell and why you need the goods for resale goes a long way.

Need a resale certificate to present to your vendors? Apply for yours today.

Key Takeaways

1. As a vendor, you are liable for uncollected sales tax if you accept an invalid or fraudulent resale certificate without exercising good faith.
2. Good faith means verifying completeness, checking the permit number against state databases, and ensuring the purchase makes sense for the buyer's business.
3. Keep certificates on file for at least 5 years. Organize them so you can produce any certificate quickly during an audit.
4. States like California, Florida, and Illinois require in-state registration and do not accept out-of-state certificates.
5. You have the right to refuse a certificate that appears invalid, incomplete, or suspicious.
6. Create a repeatable process for accepting, verifying, filing, and re-verifying certificates. Train your staff on it.

Related Articles

• What Is a Resale Certificate? The Complete Guide
• Resale Certificate Mistakes That Can Trigger an Audit
• Tax Exempt Form Guide 2026: Every Sales Tax Exemption Form You Need