Resale Certificate for Music Stores: Buy Instruments, Gear, and Accessories Tax-Free
Musical instrument retailers carry some of the widest price ranges in retail. A pack of guitar picks costs $3 wholesale. A professional grand piano costs $30,000+. A mid-size music store stocking guitars, keyboards, drums, pro audio, and accessories typically purchases $20,000 to $80,000 in wholesale inventory per month. At 7% tax, that is $16,800 to $67,200 per year in savings with a resale certificate.
The music retail industry has consolidated significantly, with Guitar Center and Sam Ash dominating the big-box segment. Independent music stores survive on expertise, service, local relationships, and lessons revenue. The resale certificate applies to every instrument and accessory you buy from manufacturers and distributors for retail sale.
How Music Stores Buy Wholesale
Direct from manufacturers. Major instrument brands (Fender, Gibson, Yamaha, Roland, Taylor, Martin) sell through authorized dealer programs. Becoming an authorized dealer requires a retail location, financial qualification, and your resale certificate. Each brand sets minimum order quantities, MAP (minimum advertised price) policies, and territory guidelines.
National distributors. These companies carry hundreds of brands and serve as one-stop sources:
- B&H Photo (pro audio, lighting, video, DJ equipment)
- Full Compass Systems (pro audio, lighting, musical instruments)
- Sweetwater (primarily retail, but also distributes some brands)
- JAM Industries / Erikson Music (Canadian parent, distributes many brands in North America)
- Korg USA (distributes Korg, Vox, Blackstar, and other brands)
- Yamaha Corporation of America (direct distribution for Yamaha, Line 6, Ampeg)
Buying groups. Independent music retailers often belong to buying groups for better pricing:
- NAMM member benefits (National Association of Music Merchants provides buying programs)
- Alliance of Independent Music Merchants (AIMM)
- Independent Music Store Owners (iMSO)
Your resale certificate is required by every distributor and manufacturer. The NAMM Show (January in Anaheim) is the industry's largest trade event, where dealers place orders and discover new products.
What You Can Buy Tax-Free
- Guitars (electric, acoustic, bass, classical, ukuleles)
- Keyboards and pianos (digital pianos, synthesizers, MIDI controllers, acoustic pianos)
- Drums and percussion (drum kits, cymbals, congas, cajons, hand percussion)
- Band and orchestral instruments (trumpets, saxophones, clarinets, flutes, violins)
- Pro audio equipment (mixers, microphones, monitors, interfaces, headphones)
- DJ equipment (turntables, controllers, CDJs, PA speakers)
- Guitar amplifiers and bass amplifiers
- Effects pedals and processors
- Strings (guitar, bass, violin, banjo, ukulele)
- Accessories (picks, capos, tuners, straps, cases, gig bags, stands, cables)
- Sheet music and instruction books
- Recording equipment (microphones, preamps, monitors sold at retail)
- Lighting equipment (stage lighting, DJ lighting sold at retail)
- Instrument care products (polish, cleaners, humidifiers, fretboard oil)
- Replacement parts sold at retail (tuning machines, pickups, bridges, drumheads)
What You CANNOT Buy Tax-Free
| Item | Why It Is Taxable |
|---|---|
| Lesson room instruments (not for sale) | Business equipment |
| Store PA system | Business equipment |
| Display racks and guitar hooks | Store fixtures |
| Repair tools and workbench | Business equipment |
| Repair supplies consumed in service (solder, fret wire scraps) | Business supply |
| Store demo amplifiers (not for sale) | Business equipment |
| Studio recording equipment (for your own studio) | Business asset |
Lesson and demo instruments. If you keep a drum kit in your lesson room that is never offered for sale, it is business equipment. If every instrument in your store (including the ones students play during lessons) is available for purchase, they remain inventory. Most music stores handle this by keeping lesson room instruments in their inventory system and marking them as sold when eventually purchased or writing them off.
Repair and Setup Services
Most music stores offer instrument repair, setup, and modification:
Parts installed and sold to the customer. New pickups installed in a guitar, a replacement bridge on a violin, new tuning machines, replacement drumheads. These parts are sold to the customer (even though you install them). Your resale certificate covers the wholesale purchase. You charge the customer for the part plus labor.
Supplies consumed during repair. Solder used during electronics work, fret wire scrap, sandpaper, lubricants, and cleaning supplies used during setups. These are consumed in providing the service and not sold to the customer. Business supplies, not resale.
The setup and restring distinction. When you restring a guitar, the new strings are sold to the customer. The old strings are discarded. Your certificate covers the wholesale string purchase. The setup labor may or may not be taxable depending on your state.
Rental and Rent-to-Own Programs
School band instrument rentals are a significant revenue stream for music stores:
Rental income. Monthly rental charges on band instruments (clarinets, trumpets, flutes, saxophones) are taxable in most states. States that tax equipment rentals treat band instrument rentals as taxable transactions.
Rent-to-own (RTO). Rental payments that build toward purchase. Tax treatment varies by state. Some states tax each rental payment. Others defer tax until the final purchase. Some tax the full retail value upfront and treat payments as installments.
Purchasing rental inventory. Instruments you buy to place in your rental fleet are purchased for resale (or for rental, which is similarly exempt from tax at purchase in many states). Your resale certificate typically covers these purchases because the instruments will generate taxable rental income or will ultimately be sold.
Maintenance and repair of rental instruments. Pads, corks, springs, and other parts used to maintain rental instruments are consumed in your business operations. The servicing keeps the rental fleet functional but is not a sale to the renter.
Dollar Savings
| Store Type | Monthly Wholesale Purchases | Annual Tax Savings (7%) |
|---|---|---|
| Small lesson-focused shop | $8,000 | $6,720 |
| Standard music store | $30,000 | $25,200 |
| Full-line music store with pro audio | $60,000 | $50,400 |
| Multi-location or high-volume | $120,000+ | $100,800+ |
Common Mistakes
Not separating rental fleet purchases from resale in your records. While both may be exempt from tax at purchase, the ongoing tax treatment differs. Rentals generate taxable income monthly. Resale generates a one-time taxable transaction at the point of sale. Clean records prevent audit confusion.
Forgetting to charge tax on lessons-related product sales. When a student buys a book, strings, or a metronome during their lesson appointment, that is a taxable retail sale. Some stores treat lesson transactions casually and miss collecting tax.
Using the certificate for store demo gear. A Marshall half-stack that sits in your amp room for customers to try but is clearly labeled "NOT FOR SALE" is store equipment. Pay tax on it.
Not understanding MAP pricing. MAP (minimum advertised price) policies are set by manufacturers. Violating MAP can cost you your dealer authorization. While not a tax issue, losing your authorized dealer status means losing access to wholesale pricing altogether.
How to Get Started
- Apply for your resale certificate through your state or our service.
- Apply for authorized dealer status with the brands you want to carry. Fender, Gibson, Yamaha, and others have dealer application processes that require the certificate.
- Set up distributor accounts. Full Compass, B&H, and brand-direct programs all need the certificate on file.
- Configure your POS for multiple revenue streams. Retail sales, repair labor, lesson fees, and rental income may all have different tax treatments.