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What is a resale license?

Updated March 23, 2017

A resale license is an important part of setting up your business, because it allows you to sell your product and collect sales taxes. You will need it to do business with other businesses.

Types

Depending on your location, a resale license may have a different name. Some of the variations are: resale permit, sales tax certificate, sellers permit, and use and sales tax authorisation.

Significance

The government purpose behind the resale license is to authorise your business to collect sales taxes and to ensure the appropriate government agencies receive the collected taxes.

Benefits

With the resale license, you will be able to purchase goods at wholesale prices. Many distributors and manufacturers only sell to businesses for resale. The resale license is your proof that you can purchase wholesale.

Considerations

With a resale license, your business does not pay sales tax on products that are purchased for resale in the business. This will have a positive effect on the profit margin of sold goods.

Time Frame

You usually obtain a resale license at the same time you get a business license. If the business license and resale license are handled by different jurisdictions, an additional application may be necessary.

References

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About the Author

Tim Plaehn has been writing financial, investment and trading articles and blogs since 2007. His work has appeared online at Seeking Alpha, Marketwatch.com and various other websites. Plaehn has a bachelor's degree in mathematics from the U.S. Air Force Academy.