Resale Certificate for Motorcycle Dealers: Buy Bikes, Parts, and Gear Tax-Free
Motorcycle dealerships move high-ticket inventory. A single new motorcycle wholesales at $5,000 to $25,000. A mid-volume dealer purchasing 20 to 50 units per month plus parts and accessories can have $200,000 to $800,000 in monthly wholesale volume. At 7% tax, that is $168,000 to $672,000 per year in tax savings.
Like auto dealers, motorcycle dealers operate on the "buy for resale, collect tax from the retail buyer" model. The resale certificate covers every unit and accessory you purchase from manufacturers and distributors for resale to customers.
What Motorcycle Dealers Buy Wholesale
Motorcycle dealerships have three primary revenue streams, all covered by the resale certificate:
New and used unit sales. The core business. New units come from the manufacturer or distributor (Harley-Davidson, Honda, Yamaha, Kawasaki, Indian, BMW, etc.). Used units come from trade-ins, auctions, and wholesale markets. The resale certificate covers all unit purchases intended for resale.
Parts and accessories (P&A). OEM parts, aftermarket parts, helmets, riding gear, luggage, exhaust systems, handlebars, and every other accessory sold to customers. P&A often generates higher margins than unit sales and represents significant wholesale volume.
Motorclothes and apparel. Branded riding jackets, boots, gloves, t-shirts, and lifestyle apparel. Harley-Davidson's MotorClothes line alone can represent $10,000 to $30,000 per month in inventory for a mid-size dealer.
What You Can Buy Tax-Free
- New motorcycles (street, cruiser, touring, sport, adventure, dual-sport)
- Used motorcycles (purchased for resale from auctions, trade-ins resold)
- ATVs, UTVs, and side-by-sides (if your dealer license covers powersports)
- Scooters and mopeds
- OEM replacement parts (engine parts, brake pads, filters, chains, sprockets)
- Aftermarket parts (exhaust systems, suspension, handlebars, seats, lighting)
- Helmets and riding gear (DOT helmets, jackets, pants, boots, gloves)
- Luggage and storage (saddlebags, tank bags, top cases)
- Branded apparel and merchandise (t-shirts, hats, patches, accessories)
- Tires (motorcycle-specific tires sold and installed)
- Batteries (sold to customers)
- Oils and fluids (motor oil, brake fluid, coolant sold at the parts counter)
- Cleaning and detailing products (sold at retail)
What You CANNOT Buy Tax-Free
| Item | Why It Is Taxable |
|---|---|
| Shop lifts and motorcycle jacks | Service equipment |
| Diagnostic equipment (FI tuning tools, scan tools) | Business equipment |
| Specialty tools (torque wrenches, valve spring compressors) | Business tools |
| Parts washer and cleaning chemicals (shop use) | Business supply |
| Shop consumables (rags, brake cleaner used in service) | Consumed during service |
| Showroom furniture and displays | Business property |
| Demo ride motorcycles (not for sale) | Business use asset |
| Delivery trailer | Business equipment |
Demo and loaner bikes. If you pull a motorcycle from inventory for demo rides or as a loaner, that unit is no longer held for resale. You owe use tax on it. If you later sell the demo bike, the sale is taxable at the selling price, but you should have paid use tax when you converted it from inventory to business use. Some states allow a credit for the use tax already paid.
Manufacturer and Distributor Relationships
Each manufacturer has its own dealer network and ordering system. Your resale certificate is part of your dealer agreement package:
- Harley-Davidson (direct dealer network, strict territory allocation)
- Honda, Yamaha, Kawasaki, Suzuki ("Big Four" Japanese manufacturers, regional distributor model)
- Indian Motorcycle / Polaris (includes Indian, Slingshot; Polaris also supplies ATVs and UTVs)
- BMW Motorrad (factory-direct dealer program)
- Ducati, Triumph, KTM, Royal Enfield (growing dealer networks in the US)
- Aftermarket distributors: Parts Unlimited, Tucker Powersports (formerly Tucker Rocky/Biker's Choice), Drag Specialties, Western Power Sports (WPS)
- Tire distributors: Parts Unlimited and Tucker carry tires; also Dunlop, Michelin, Pirelli wholesale programs
Parts Unlimited and Tucker Powersports are the two largest aftermarket powersports distributors in North America. Both require your resale certificate and dealer license to open an account.
Service Department Tax Considerations
Most motorcycle dealers operate a service department. The tax treatment of parts used in service repairs follows the same logic as auto repair:
Parts sold to the customer (even if installed). When a customer brings in their bike for a brake job and your invoice lists brake pads, rotors, and labor separately, the parts are a retail sale. You already bought those parts tax-free with your resale certificate. You collect sales tax from the customer on the parts (and possibly labor, depending on your state).
Shop supplies consumed during service. Brake cleaner sprayed during the job, shop rags, and similar consumables are not sold to the customer. They are business supplies. Your resale certificate does not cover them.
Warranty repairs. Parts used in manufacturer warranty claims are typically supplied by the manufacturer or reimbursed. Tax treatment depends on your manufacturer agreement and state rules. In most cases, the manufacturer covers the part cost, and no sales tax is charged to the customer for warranty work.
Dollar Savings
| Dealer Size | Monthly Wholesale Purchases | Annual Tax Savings (7%) |
|---|---|---|
| Small single-line dealer | $80,000 | $67,200 |
| Mid-size multi-line dealer | $250,000 | $210,000 |
| High-volume dealer with apparel | $500,000 | $420,000 |
| Multi-location group | $1,000,000+ | $840,000+ |
Common Mistakes
Forgetting to pay use tax on demo bikes. Every motorcycle you pull from inventory for demo rides, shows, or personal use triggers a use tax obligation. Auditors compare your inventory records to sales records and look for units that were never sold.
Not collecting tax on apparel and lifestyle merchandise. MotorClothes, branded hats, and accessories sold in the showroom are taxable retail sales. Some dealers get sloppy with tracking apparel sales separately from unit sales.
Using the resale certificate for shop equipment. A new motorcycle lift, diagnostic scanner, or tire changer is business equipment. The certificate does not cover it, even though you buy it from the same distributor as your resale parts.
Trade-in valuation and tax credits. Many states allow a sales tax credit for trade-ins (the customer only pays tax on the difference between the new bike price and the trade-in value). This is a customer-side benefit, but getting it right avoids audit issues and keeps customers happy.
How to Get Started
- Apply for your resale certificate through your state or our service. You will also need a dealer license from your state's motor vehicle division.
- Provide the certificate to manufacturers and distributors. Harley-Davidson, Honda, Parts Unlimited, Tucker Powersports, and all other suppliers.
- Set up your DMS (dealer management system) tax tables correctly. Unit sales, parts sales, apparel sales, and service labor may all have different tax treatments.
- Track demo and loaner bike conversions. Document when a unit leaves inventory for business use and pay use tax accordingly.