Reseller’s Certificate for Importation and Tax Exemption
You are on for another exciting adventure. You decided that a good tea you just recently quenched in is the best there but still off the market in your country. Now, you are convinced that it should be imported and you want to sell it. However, there are documents that need to be complied with other than importation duties, such as getting a reseller’s certificate. Let’s learn about resale certificate, what it does, why you need it, and how you obtain it, among others.
What is a reseller’s certificate?
A reseller’s certificate, sometimes called ‘resale certificates’, ‘reseller’s permits’, or sometimes just the general term ‘exemption certificates’, is an official document issued by the government that the holder is a legitimate purchaser of the imported product to be resold in the jurisdiction of the issuing government, or that such product is to be used as a material or ingredient for a product to be sold later on.
Why would you need a reseller’s certificate?
The primary purpose of obtaining a reseller’s certificate is for you, as a reseller be acknowledged as legitimate to sell the goods or products in the jurisdiction where you get the certificate. It is not just to protect you as a seller, from being protected versus illegal resellers usually online, but also you could pass on whatever sales tax that you should be, in the first place, paying, in importing the tea products. In other words, you could import tax-free whatever item you would be reselling or material you would need for your items to be sold. (Note: This depends on the country, and issuing government how it is handled) That is why this serves as an exemption for the holder that instead of paying the sales tax in the importation of the product, you could instead pass this on to the consumers once resold. In return for the exemption, the purchaser, as a reseller, is obligated to collect the supposed sales tax to the consumers and remit such to the issuing authority of the reseller’s certificate. In other words, the purchaser who has been granted a reseller’s certificate would be the collecting agent of the issuing State.
The reseller’s certificate also serves as a basis that the product is imported on a wholesale basis. Without the reseller’s certificate, aside from paying the sales tax, the said sales tax would be categorized as a retailing business and operating tax, which the reseller would be liable for such sale instead of being exempted from the importation sales tax.
This also serves as an added protection for the consumers that the products being sold have passed the requirements of the government.
On the part of the agency or government that issued the certificate, it serves as a record as to the legitimacy of the products being sold, and it could track whatever taxes or duties that need to be paid, if any, by the reseller and ultimately, by its consumers.
On the other hand, this would be among the proofs to be presented to the seller to exempt the importation from sales tax. Without any reseller’s permit, or if there is any doubt as to the validity thereof, the seller will be obligated to collect the sales tax from the importer and remit the said tax.
What are the contents of a reseller’s certificate?
A general reseller’s certificate would include the logo and name of the issuing government or State. In addition, the certificate indicates the valid certificate number issued to the holder and the basis for issuing such certificate. The certificate also shows what the product to be sold is and the items that were imported for selling or reselling, and from where.
There is also a statement that if the imported products were sold for a purpose other than what is recorded under the holder of the certificate, the holder would then be required to pay the necessary taxes and penalties for the imported product. This would also result in the revocation of the reseller’s certificate. Aside from this, if found to be fraudulent, there could be criminal charges for the misuse of the reseller’s certificate.
A space is dedicated to the description of the imported item and the usual date and place of issuance to determine its scope and validty, names, addresses, and signatures of the purchaser and issuer are also included.
What would be needed to obtain a reseller’s certificate?
There are different requirements before obtaining a reseller’s certificate, depending on the issuing State or government. Usually, what is being asked would be the necessary business licenses or permits.
Validity of a reseller’s certificate
Generally, a reseller’s certificate is valid for four (4) years, depending on the policies of the issuing State. However, some conditions shorten the validity of a reseller’s certificate, such as new reseller status, low gross income for a specific period, or other tax violations of the business, such as non-filing of tax returns.
It must be noted that a reseller’s certificate must be used for buying items or materials to be resold or to be used as a material for items to be sold in the market. In other words, the items to be bought must be in the course of trade or business for selling or resale purposes and not for personal use, or if for business purposes, must be sold or resold.
For example, in reselling tea products imported from another country, while the tea itself or the packaging for the tea would be tax-exempt, the items used for customers on-site, such as tables and chairs, credit card machines, and others, would not be covered by the sales tax exemption. Therefore, as a buyer being issued a reseller’s certificate, you have to ensure that the reseller’s certificate is validly used for the said purpose it was issued. You are responsible for the proper usage of the reseller’s certificate, or this might be revoked, and the perks included in it will be lifted by the issuing authority. Overall, it’s still a good thing to obtain a reseller certificate.
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About the author
Kei Nishida
Author, CEO Dream of Japan
Certification: PMP, BS in Computer Science
Education: Western Washington University