Private Label Selling: Tax Benefits with a Resale Certificate

Private labeling—creating your own branded products—is one of the most profitable e-commerce business models. But to maximize your margins, you need to understand how resale certificates apply to private label businesses.

This guide covers everything you need to know about tax-free purchasing for your private label products.

Private Label Products

What Is Private Label Selling?

Private label means you sell products manufactured by someone else under your own brand name.

The Private Label Model

1. Find a manufacturer (domestic or overseas)
2. Design/customize the product
3. Add your branding
4. Sell as your own brand

Common Private Label Products

• Supplements and vitamins
• Skincare and cosmetics
• Food products
• Home goods
• Pet products
• Electronics accessories
• Apparel
• Kitchen items

How Resale Certificates Work for Private Label

Your resale certificate allows tax-free purchases on anything that becomes part of your product for resale.

What You Can Buy Tax-Free

What's NOT Tax-Exempt

Domestic vs. International Manufacturing

Domestic Suppliers

If you work with US-based manufacturers:

Your certificate applies:

• Manufacturing costs (often included in per-unit price)
• Packaging materials
• Labels and inserts
• Any components you purchase separately

How to use it:

1. Provide certificate to manufacturer
2. They keep it on file
3. Tax-exempt pricing on all orders

International Suppliers

If you source from overseas (China, India, etc.):

US sales tax doesn't apply:

• No US sales tax on international purchases
• You'll deal with customs/import duties instead
• Certificate not needed for overseas suppliers

But you still need one for:

• Domestic packaging suppliers
• US-based label printers
• Any domestic components

Detailed Breakdown: Tax-Free Purchases

Product Manufacturing

Packaging Materials

Primary packaging (product container):

• Bottles and jars ✅
• Tubes ✅
• Boxes ✅
• Bags and pouches ✅
• Caps and closures ✅

Secondary packaging (shipping/display):

• Retail boxes ✅
• Shrink wrap ✅
• Display packaging ✅
• Inner shipping boxes ✅

Labeling and Branding

• Printed labels ✅
• Stickers ✅
• Hang tags ✅
• Branded packaging ✅
• Instruction inserts ✅

What's Specifically Excluded

• Label printing equipment ❌
• Design software ❌
• Photography equipment ❌
• Computer for business ❌
• Promotional items ❌

Setting Up Your Private Label Business

Step 1: Register Your Business

Choose a structure (LLC recommended) and register with your state.

Step 2: Get Your Resale Certificate

Register for a sales tax permit and obtain your certificate.

Get Your Resale Certificate →

Step 3: Provide to All US Suppliers

Step 4: Set Up Fulfillment

Options for private label fulfillment:

Many private label sellers use a 3PL like 3PLGuys because they can handle:

• Receiving inventory from manufacturers
• Kitting and assembly
• FBA prep and forwarding
• Multi-channel fulfillment

Common Private Label Tax Questions

"Can I use my certificate for product samples?"

It depends:

• Samples for product development: Usually yes
• Samples given to customers: No (promotional)
• Samples for quality testing: Usually no

"What about photography and content creation?"

Generally no:

• Photography equipment: Business use
• Props: Business use
• Stock photos: Digital purchase

"Are my Amazon FBA fees tax-free?"

No. FBA fees are a service, not inventory. They're a business expense you can deduct on taxes, but not tax-exempt at purchase.

"What if my manufacturer includes packaging?"

If packaging is included in the per-unit cost and billed by a US manufacturer, the whole amount should be tax-exempt with your certificate.

"Can I buy marketing materials tax-free?"

No. Marketing materials (brochures, promotional items, etc.) are not for resale—they're given away. Not tax-exempt.

Managing Multiple Suppliers

Tracking Certificates

Keep records of:

• Which suppliers have your certificate
• When you provided it
• Expiration dates (if applicable)
• Contact info for updates

Organizing Purchases

Use accounting software to track:

• Tax-exempt purchases by supplier
• Tax-paid purchases (business expenses)
• Separate categories for clarity

Tools for Private Label Sellers

Manage your multi-supplier, multi-channel business with tools like Raidframe:

• Track inventory from multiple suppliers
• Monitor stock levels across channels
• Calculate true product costs
• Manage supplier relationships

Maximizing Your Tax Savings

Bundle Your Orders

Instead of many small orders, consolidate to:

• Reduce shipping costs
• Simplify certificate management
• Negotiate better pricing

Choose Domestic Suppliers for Some Components

While international manufacturing may have lower base costs, consider:

• Faster turnaround on domestic orders
• Tax-free purchasing with certificate
• Easier quality control
• Simpler communication

Keep Detailed Records

For each product, track:

• All component costs (tax-exempt)
• Manufacturing costs (tax-exempt if domestic)
• Business expenses (deductible)
• True landed cost

Audit Protection for Private Label

Documentation Needed

Keep these records:

1. Copy of certificate given to each supplier
2. Invoices showing tax-exempt purchases
3. Bill of materials for each product
4. Sales records showing products sold

Red Flags to Avoid

• Purchases that don't match what you sell
• Very high exempt purchases, low sales
• Personal-use items from business suppliers
• Incomplete records

Getting Started Checklist

1. ☐ Register business (LLC recommended)
2. ☐ Get EIN from IRS
3. ☐ Apply for sales tax permit
4. ☐ Obtain resale certificate
5. ☐ Select manufacturers/suppliers
6. ☐ Provide certificate to all US suppliers
7. ☐ Set up accounting system
8. ☐ Choose fulfillment method
9. ☐ Configure sales tax collection

Start Your Private Label Business

Your resale certificate is essential for maximizing private label profits. Get yours and start buying materials tax-free.

Apply for Your Resale Certificate →

Questions about private label tax requirements? Contact us for guidance.