How to Use and Accept Resale Certificates in South 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 South Carolina?

To qualify for a resale certificate, a business must:

• Be registered with the South 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 South Carolina

Businesses must follow these steps to obtain a resale certificate:

1. Register for a Sales Tax License

Businesses must first register for a Sales Tax License with the South Carolina Department of Revenue (SCDOR) through their online portal.

Once approved, the business will receive a Sales Tax License Number.

2. Understand the South Carolina Resale Certificate Process

South Carolina issues a standard resale certificate form, which businesses must complete to claim tax-exempt purchases.

This form serves as a resale certificate, which businesses provide to suppliers.

3. Provide Your Resale Certificate to Suppliers

When purchasing tax-exempt inventory for resale, businesses must provide a copy of their South Carolina Resale Certificate to suppliers.

Some suppliers may require additional verification or documentation.

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 SCDOR database.

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?

• Unlike some states that allow for the use of multistate resale certificates, South Carolina requires the use of its state-specific form for purchases.
• Businesses must ensure they are complying specifically with South Carolina’s resale laws.

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

South 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 South Carolina

Misusing a resale certificate in South 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 South Carolina

Do resale certificates expire? 

In South Carolina, resale certificates typically do not have an expiration date, but it is advisable to confirm any specific requirements or updates with the SCDOR.

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

While South Carolina generally requires the use of its specific resale certificate, verification with the SCDOR can confirm any reciprocity or special conditions that may apply.

Can a resale certificate be used for multiple states?

Resale certificates are typically state-specific, so using them across different states requires verification of interstate agreements or additional state filings.

How long is a resale certificate valid? 

Resale certificates in South Carolina generally remain valid until the business is no longer operational or changes its operational status unless otherwise updated by the SCDOR.

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 South 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 South Carolina. By leveraging our team’s professional assistance, businesses can focus on what they do best while staying compliant with state regulations.