If you run an Ecommerce or CPG business in California, securing a California Resale Certificate is a smart move to protect your margins and streamline operations.
This certificate allows you to purchase inventory and raw materials tax-free, helping you lower upfront costs, stay competitive in pricing, and remain compliant with California sales tax laws.
Understanding Resale Certificates in California
What is a California Resale Certificate?
In California, the California Department of Tax and Fee Administration (CDTFA) issues the California Resale Certificate that allows businesses to:
- Purchase goods without paying sales tax, provided the buyer plans to resell the goods to their customers in the normal course of their business.
- Make tax-exempt purchases of inventory and materials that will become part of the products they sell by presenting a valid resale certificate to their suppliers.
The resale certificate helps avoid double taxation, once at wholesale and again at the point of retail sale.
However, this exemption applies only to inventory purchases intended for resale. Businesses must still collect and remit sales tax on sales made to end consumers.
Why do you need a California Resale Certificate?
Obtaining a resale certificate in California offers several significant advantages for businesses that purchase goods for resale.
Here are some key benefits:
- Avoid Paying Sales Tax on Inventory: When you purchase inventory for resale, presenting a resale certificate lets you skip paying California sales tax upfront, improving your cash flow.
- Maintain Competitive Pricing: By avoiding sales tax on purchases, you reduce your costs and gain more flexibility in pricing, especially helpful in competitive or price-sensitive markets.
- Legal Compliance: Proper use of a resale certificate ensures your business remains compliant with California sales tax laws and avoids potential audits or penalties.
In California, the form used is the CDTFA-230 General Resale Certificate.
When completing the form, purchasers must include their California seller’s permit number that the CDTFA issued, which verifies they are registered to collect and report sales tax on taxable transactions.
Resale Certificate vs. Sales Tax Permit: What’s the Difference?
A California Sales Tax Permit authorizes your business to collect and remit sales tax on taxable sales to customers. A California Resale Certificate (Form CDTFA-230), on the other hand, is a document that lets your business purchase goods tax-free from suppliers, as long as those goods are intended for resale. You must hold a valid and active sales tax permit before issuing a resale certificate.
Who Can Use a Resale Certificate in California?
Businesses that purchase goods for resale can use a California Resale Certificate. To do so, the business must actively sell taxable tangible products and hold a valid California Sales Tax Permit.
How to Get a Resale Certificate in California: A Step-by-Step Guide
Getting a resale certificate in California is simple, but you’ll need to meet a few key requirements first. Here’s how to do it:
1. Make Sure You’re Eligible: Your business must sell taxable tangible goods and register with the California Department of Tax and Fee Administration (CDTFA). Only businesses with a valid California Seller’s Permit can issue or use a resale certificate.
2. Get a California Sales Tax Permit: If you don’t already have one, you can apply for a California Seller’s Permit through the CDTFA Online Services Portal. You must complete this step before you can issue resale certificates.
Need help? Read our blog: How to Get a Seller’s Permit in California
3. Gather Your Business Information: You’ll need basic business details to complete the resale certificate, including:
- Business Identification Information: Legal business name, physical address, mailing address
- Business Entity Structure (i.e., sole proprietorship, partnership, Subchapter S Corp., corporation, LLC, etc.)
- Federal Employer Identification Number (EIN or FEIN)
- Name, Address, Driver’s License, and SSN of owners, partners, or officers
- Business Activity Details: Date & State of Incorporation, start date with the state of California (nexus start date), Estimated Monthly Sales in California
- Names and locations of banks where you have an account
- Names and addresses of suppliers
- Name and address of bookkeeper or accountant
- Name and address of personal references
- If you have purchased an existing business, you must also provide the previous permit information
- NAICS Code
4. Complete CDTFA-230 General Resale Certificate: You can download the California General Resale Certificate (CDTFA-230) from the CDTFA’s website and fill it out. This is the official resale certificate form you’ll present to suppliers to make tax-exempt purchases.
5. Submission: In California, you do not submit the resale certificate to the CDTFA. Instead, give the completed certificate directly to your vendor or supplier when making a tax-exempt purchase for resale.
6. Pay Any Applicable Fees: There’s no fee to use the resale certificate (Form CDTFA-230). However, your California Seller’s Permit may have registration requirements depending on your business type. Learn more in our guide on Sales Tax Permit fees. To see if there’s a cost for the permit, check out our guide on Sales Tax Permit fees.
7. Understand Renewal Requirements: California resale certificates don’t have a formal expiration date, but they remain valid only while your Seller’s Permit is active and in good standing. Vendors may ask for updated certificates periodically, especially if they suspect any changes in your business’s registration.
How to Use a Resale Certificate in California
To properly use your resale certificate in California for tax-exempt purchases, you must present a completed California General Resale Certificate (Form CDTFA-230) to your supplier at the time of purchase. This certificate serves as your documentation that the items you’re buying are intended for resale in the regular course of business.
To be valid, your certificate must include all of the following information:
- Name and address of the purchaser
- California Seller’s Permit number (or reason why the purchaser doesn’t have one)
- Description of the property being purchased for resale
- A clear statement that the property is being purchased for resale
- Date of execution
- Signature of the purchaser or an authorized representative
California does not accept resale certificates issued by other states. If you are an out-of-state buyer wishing to make purchases for resale within California, you must register for a California Seller’s Permit and use a California resale certificate when purchasing from California vendors.
While California requires resale certificates to be accepted in good faith, this only applies to California-issued resale certificates. As a seller, if you’re given a resale certificate, ensure that:
- The buyer provides their valid California Seller’s Permit number
- The described goods match the buyer’s business type (e.g., a toy retailer buying electronics may raise red flags)
- You retain the certificate as proof of why sales tax was not collected
For more details, visit the California Department of Tax and Fee Administration (CDTFA) website or refer to Publication 103 – Sales for Resale.
Multi-Jurisdictional Resale Certificates
A multi-jurisdictional resale certificate is a standardized form designed to simplify tax-exempt purchases for businesses that operate and make purchases for resale across state lines.
Unlike a standard resale certificate issued by a single state, a multi-jurisdictional certificate aims to be recognized and accepted by multiple states as valid proof that the goods being purchased are intended for resale and are therefore exempt from sales tax at the time of purchase.
However, it’s crucial to understand that not all states accept these multi-state forms, and acceptance can come with specific conditions.
In California, here are the main multi-jurisdictional resale certificates and how they apply:
- Uniform Sales & Use Tax Resale Certificate – Multijurisdiction Form: This form is issued by the Multistate Tax Commission (MTC) website and is accepted by many U.S. states. For a California vendor to accept this certificate for a purchase made in California, the buyer must generally provide a valid California Seller’s Permit number. While the form has a space for an “out-of-state” registration number, simply entering an out-of-state permit number is typically not sufficient for a purchase that would otherwise be subject to California sales tax. California’s rules for resale certificates prioritize the buyer’s registration within California.
- Streamlined Sales Tax (SST) Certificate of Exemption: California is not a member of the Streamlined Sales Tax Governing Board website. Therefore, while some vendors may accept the SST certificate at their discretion, California generally requires the CDTFA-230 resale certificate or the Uniform MTC form.
Businesses need to verify whether California accepts these multi-jurisdictional certificates and if there are any specific requirements or limitations on their use within the state. This is to avoid any audit issues.
Responsibilities When Using or Accepting a California Resale Certificate
Buyer Responsibilities
If you’re using a California resale certificate (Form CDTFA-230), it’s your responsibility to ensure it’s used only for purchases of tangible goods that you intend to resell in the regular course of business. Using it for personal consumption or business operations (such as office supplies, equipment, or giveaways) is illegal and may result in significant penalties.
- California-based buyers: If you’re registered in California, you must provide your valid California Seller’s Permit number on the resale certificate. The CDTFA also requires that you clearly identify the items purchased for resale. If your business sells both taxable and exempt items, or resells and consumes items, you must ensure the correct classification on each transaction.
- Out-of-state buyers: If you’re based outside California but purchasing from California vendors, you must either:
- Hold a valid California Seller’s Permit and include it on the resale certificate, or
- Clearly state on the certificate why you’re not required to hold one.
California does not automatically accept out-of-state resale certificates. Without a California Seller’s Permit or proper justification, the vendor may be required to charge sales tax.
Seller Responsibilities
As a seller in California, accepting a resale certificate comes with the responsibility of verifying and retaining proper documentation for tax-exempt sales. You must:
- Accept the certificate in good faith
- Ensure it includes all required information: buyer’s name, address, sales tax permit number (or equivalent), reason for exemption, and signature
- Reject the certificate if the items aren’t for resale (e.g., personal or business use)
Keep records for at least 4 years: Your properly completed resale certificate proves why you didn’t collect sales tax. If you’re audited, keep all records for the audit period until it ends, even if that means storing them for more than four years.
Frequently Asked Questions About the California Resale Certificate
Are There Penalties for Misusing a California Resale Certificate?
Yes. Misusing a resale certificate, such as using it for personal items or non-resale purposes, is illegal in California. Penalties include:
- Owing the full amount of tax due, plus interest
- A 10% penalty or $500 (whichever is greater) per violation
- Potential misdemeanor charges under Revenue and Taxation Code §6094.5, punishable by a fine of $1,000 to $5,000 and/or up to one year in county jail
Does a California Resale Certificate Expire?
The California General Resale Certificate (Form CDTFA-230) does not have a set expiration date. However, it is only valid while the purchaser’s California Seller’s Permit is active and in good standing. If the permit is revoked, canceled, or inactive, the certificate becomes invalid.
How Do I Verify a Resale Certificate in California?
To confirm that a buyer’s resale certificate is valid:
- Request a completed Form CDTFA-230 (California General Resale Certificate) from the buyer.
- Look for their California Seller’s Permit number on the form.
- Use the CDTFA’s Seller’s Permit Verification Tool to confirm the permit is active.
How TaxHero Can Help
You don’t have to complicate managing sales tax compliance and resale certificates in California. TaxHero simplifies the process, from keeping your California Sales Tax Permit active to ensuring you use resale certificates correctly.
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Schedule a Demo to see how TaxHero can streamline your resale certificate in California process today!