How to Use and Accept Resale Certificates in North Carolina

What Is a Resale Certificate?

When a business buys products for resale, they can use a resale certificate to avoid paying sales tax on those purchases. Instead, the tax is collected when the item is sold to the final consumer.

Suppliers rely on the resale certificate to confirm that the buyer is a legitimate reseller. Misuse of the certificate, such as using it for personal purchases, can lead to penalties and tax liabilities. This helps to ensure taxes are collected only once, at the final point of sale.

Who Qualifies for a Resale Certificate in North Carolina?

To qualify for a resale certificate, a business must:

• Be registered with the North Carolina Department of Revenue for sales tax purposes
• Sell tangible goods that are subject to sales tax when sold to consumers
• Intend to resell the items rather than use them for personal or operational purposes

If your business meets these requirements, you can apply for and use a resale certificate to purchase tax-free goods.

How to Get a Resale Certificate in North Carolina

Businesses must follow these steps to obtain a resale certificate:

1. Register for a Sales Tax Account

Businesses must first register for a Sales and Use Tax Account Number with the North Carolina Department of Revenue. You can complete this process online through the state’s business registration portal.

Once approved, the business will receive a Sales and Use Tax Account ID to be used for resale purposes.

2. Understand the North Carolina Resale Certificate Rules

North Carolina issues a specific resale certificate. Businesses must fill out the Form E-595E, which is the Streamlined Sales and Use Tax Agreement Certificate, for tax-exempt purchases.

This certificate serves as proof of intent to resell, and it should be provided to suppliers.

3. Provide Your Resale Certificate to Suppliers

When purchasing tax-exempt inventory for resale, businesses must provide a completed form E-595E to suppliers.

Some suppliers may require additional documentation or verification before accepting the certificate.

4. Ensure Proper Use and Compliance

Businesses must only use the resale certificate for tax-exempt purchases of items intended for resale.

Suppliers may verify the validity of your certificate using the North Carolina Department of Revenue’s resources.

Misuse of tax-exempt status can result in penalties, back taxes, and revocation of tax privileges.

If all of this feels too overwhelming, doola’s expert bookkeeping team can guide you through the process and ease the bureaucratic burden. 

What Are Differences from Other States?

• North Carolina issues a specific resale certificate for tax-exempt purchases, unlike some states that use alternative documents such as a Sales Tax License.
• The process requires submission of a specific form (Form E-595E) to suppliers for validation.

How to Accept a Resale Certificate as a Seller in North Carolina

When purchasing goods for resale, follow these steps:

1. Provide the supplier with a completed resale certificate before making a tax-exempt purchase.
2. Ensure that the items purchased are intended for resale and not for business use.
3. Keep a record of all resale certificate transactions for tax compliance.
4. Verify that your suppliers accept North Carolina’s resale certificate.

Failing to follow these steps could result in denied exemptions, additional tax payments, or penalties.

Common Mistakes to Avoid

Using a resale certificate improperly can lead to audits, fines, and revoked tax-exempt status. Common mistakes include:

• Purchasing items for business use instead of resale
• Providing an expired or invalid certificate
• Failing to keep proper records of tax-exempt purchases

To stay compliant, businesses should periodically review their resale certificate use and maintain proper documentation.

Sales Tax Rules and Exemptions in North Carolina

North Carolina’s resale tax exemption rules specify that certain products or services may not qualify for tax exemption under a resale certificate. It is essential for businesses to stay informed about these state-specific regulations to ensure proper compliance. Refer to state regulations for comprehensive guidance on taxable versus non-taxable resale items.

Resale Certificate vs. Sales Tax Permit

While a resale certificate allows businesses to make tax-exempt purchases, a sales tax permit enables them to collect and remit sales tax to the state. These two documents are closely linked:

Resale Certificate:
Used to buy inventory tax-free from suppliers

Sales Tax Permit:
Required to charge and collect sales tax from customers

Both are necessary for tax compliance, and businesses should ensure they are properly registered.

Penalties for Misusing a Resale Certificate in North Carolina

Misusing a resale certificate in North Carolina can lead to severe consequences, including fines and tax audits. Businesses have a responsibility to maintain compliance with sales tax laws, ensuring that resale certificates are used correctly and only for legitimate purposes. Violations can result in penalties that affect both the financial standing and reputation of the business.

FAQs About Resale Certificates in North Carolina

Do resale certificates expire? 

In North Carolina, resale certificates typically do not have an expiration date but should be reviewed regularly for accuracy.

Can out-of-state resale certificates be used in North Carolina? 

Businesses must ensure that out-of-state certificates are valid under North Carolina regulations; otherwise, they may need a North Carolina-specific certificate.

Can a resale certificate be used for multiple states?

Generally, resale certificates are state-specific and may not apply to transactions in other states unless reciprocal agreements exist.

How long is a resale certificate valid? 

North Carolina’s resale certificates do not have a set expiration date; however, businesses should keep accurate and current records.

Staying Compliant With doola 

Resale certificates play a vital role in facilitating tax-free transactions for resellers, ultimately helping businesses manage their sales tax liability effectively. It is crucial for businesses in North Carolina to understand how to obtain and use these certificates correctly to avoid penalties and ensure compliance. For comprehensive financial solutions, including expert tax guidance, doola can provide guidance to ensure compliance with resale tax laws in North Carolina. By leveraging our team’s professional assistance, businesses can focus on what they do best while staying compliant with state regulations.