If you’re starting a limited liability company (LLC) in Texas and planning to sell goods subject to sales tax, you’ll need a resale certificate, or several of them, before doing business.
This guide lays out all you need to do to get a resale certificate in Texas.
What Is a Resale Certificate?
If you expect to sell tangible goods through your LLC in Texas, a resale certificate will enable you to purchase those goods without paying sales tax. This prevents your goods from being double taxed, as you will need to charge your customer’s sales tax when they buy the goods.
If you purchase goods without paying sales tax and neglect to charge sales tax to customers who buy those goods, or if you fail to sell the goods, you and your LLC will be responsible for the sales tax and could face steep fines if you don’t pay the state.
If you purposely purchase an item not intended for resale, such as office equipment, and use your resale certificate to avoid paying sales tax, that’s tax fraud, a federal offense.
In Texas, the penalty for tax fraud is repayment of the tax owed plus accrued interest and penalties. It could even result in the revocation of your sales tax permit and being charged with a third-degree felony punishable by two to 10 years in prison.
Each resale certificate applies to only one vendor, so you’ll need one for each vendor.
Suppliers and vendors do not have to accept resale certificates. However, a vendor may refuse a resale certificate if it is invalid, which would make the vendor responsible for the sales tax.
How to Obtain a Resale Certificate in Texas
To obtain a resale certificate in Texas, visit the Comptroller’s website to download the form. Then, click on “Resale and Exemption Certificates.” A certificate is also provided in Spanish.
Obtaining the certificate is free; you can use it as soon as it’s filled out.
Once you have the certificate, present it to your vendor and keep a copy for your records.
Does a Resale Certificate Expire in Texas?
Texas resale certificates only expire if the buyer’s information has stayed the same. It’s a good idea to review them every few years to ensure the information is up to date.
In Texas, a resale certificate is relatively easy to obtain yet provides significant savings. It will also help you and your LLC avoid potentially significant penalties.
Be sure to present the correct certificate to your vendors and keep track of expiration dates so your certificates are always current. You don’t want to pay unnecessary sales tax.