Sales for Resale (Publication 103)
Documenting and Reporting Sales

Repeat customers and customers who use purchase orders

Repeat customers do not have to issue a seller an individual resale certificate for each of their purchases. They can, instead, provide one blanket resale certificate with a general description of the products they will buy. If they make a purchase that is not for resale, they must let the seller know so that the seller can properly apply tax.

A customer who wishes to use purchase orders to designate which purchases are for resale should issue a "qualified" resale certificate which states "see purchase order" in the property description section of the resale certificate. Each purchase order must then specifically state whether or not the property covered by the purchase order is purchased for resale. The use of the phrases "for resale," "resale = yes," "nontaxable," "taxable = no," or similar terminology on a purchase order, indicating that tax or tax reimbursement should not be added to the sales invoice will be regarded as designating that the property described is purchased for resale, provided the combination of the purchase order and the qualified resale certificate contains all the essential elements of a resale certificate (as provided in Content of a Resale Certificate).

However, a purchase order that only shows the tax amount as $0 or is left blank, will not be accepted as designating that the property is purchased for resale. The purchase order must also include the phrase "for resale" or other terminology described above to specify that the property is purchased for resale. If each purchase order is not specific, or is not issued timely, as explained below, it will be presumed that the property covered by that purchase order is subject to tax. If the purchase order includes both items to be resold and items not for resale, the purchase order must specify which items are purchased for resale and which items are purchased for use. For example, a purchase order issued for raw materials for resale and also for tooling used to process the raw materials, should specify that the raw materials are purchased for resale and that the sale of the tooling is subject to tax.

Documenting sales for resale

A seller should retain copies of all resale certificates and any purchase orders issued with the qualified resale certificates in order to support its sales for resale.

Timely acceptance of resale certificate

When a seller makes a sale for resale, the seller must obtain a resale certificate from its customer in a timely manner. Timely is considered to be any of the following:

• Before the seller bills the purchaser for the sale;
• At any time within the seller's normal billing and payment cycle; or
• At any time prior to, or upon, delivery of the item sold.

Accepting a resale certificate late does not relieve the seller from liability for the tax. If we question a transaction and the seller accepted a certificate late, the seller will be required to present other satisfactory evidence to verify that the sale was a nontaxable sale for resale (see Regulation 1668, Sales for Resale).

Properly completing the sales and use tax return

Sellers must report their total gross sales for the reporting period on their sales and use tax return. If the seller's total sales include amounts they received from sales for resale, the seller should take a deduction for those amounts on the line set aside for sales to other retailers for purposes of resale. If the seller doesn't take the deduction, they will pay more tax than they owe.