If you buy products at retail in order to resell them, you can often avoid paying sales tax when making the purchase.
In Alabama, this process is fairly simple. You just need to prove that you are registered to collect sales tax. And if your customer wants to buy items for resale, you just need to confirm that they are registered to collect sales tax.
If you Wish to Buy Items for Resale in Alabama
In Alabama, anybody who is registered for an Alabama sales tax permit can buy items they intend to resell, but giving a copy of your Alabama sales tax license to your vendor. Unlike many other states, you are not required to fill out a resale certificate. Instead, just a copy of your sales tax license will do the trick. Alabama even allows retailers to accept out-of-state resale certificates.
Keep in mind that you are only allowed to buy items you intend to resell without paying sales tax. For example, it’s allowable to buy inventory you plan to resale or items you intend to use to make inventory without paying sales tax.
On the other hand, you are not allowed to buy coffee, paper, office furniture, etc. without paying sales tax. While those items can be income tax deductions, they are not items you are purchasing for resale so you’d need to pay sales tax when purchasing those items.
If Your Customer Wishes to Buy Items for Resale in Alabama
If a customer says they are a reseller and wishes to buy items from you tax free, you are required to confirm that they have a valid sales tax permit. You can find out how to verify sales tax permits from every state here.
Unlike in most states, you are not required to ask for and keep on file a resale certificate. You may wish to do this anyway, for your records.
I hope this has helped you determine how to use and accept an Alabama resale certificate. Have questions or something to say? Start the conversation in the comments!