What is a “Resale Certificate” and how is it used?
If tangible personal property is being purchased by somebody who is going to resell the product at retail, or incorporate the property into a final product for sale or resale, that purchaser can provide the vendor with a “resale certificate”. The certificate is signed and dated by the purchaser, and it represents the purchaser’s assurance that the property is for eventual resale and the tax will be charged then. It is the retailer’s responsibility to use reasonable care when exempting a transaction from Sales Tax based on a resale certificate. Technically known as “good faith acceptance”, this means that it must be reasonable to assume the purchaser is in the business of selling the type of products being purchased. Resale certificates should be updated every two to three years.
A business, registered for sales and use tax can use a resale certificate only when the merchandise being purchased is to be resold by the business. It only applies to resold merchandise, not merchandise that it will use and consume in the conduct of business. Any merchandise obtained using a resale certificate is subject to the sales and use tax if it is used or consumed by the purchaser in any manner, and must be reported and the tax paid thereon direct to the city. The city does not require or issue a resale certificate, but accepts those issued by the Alabama Department of Revenue when they are applied correctly.
