taxes

Texas Sales and Use Tax Frequently Asked Questions

Resale Certificates

Why are resale certificates required?

A taxable item that is purchased for resale is exempt from sales or use tax if the seller accepts a properly completed Form 01-339, Texas Sales and Use Tax Resale Certificate (PDF), instead of collecting the sales tax due. The resale certificate is the seller’s evidence as to why sales tax was not collected on that transaction and should be retained in the seller’s books and records for four years.

While resale certificates require the purchaser’s Texas taxpayer number, the customer's sales tax permit number or a copy of the customer's permit is not a substitute for a resale certificate and does not relieve a seller’s responsibility for collecting sales tax.

As a purchaser, what can I buy tax free by issuing a resale certificate under my taxpayer number?

You can use a resale certificate to purchase the following items tax free:

  • taxable items (tangible personal property and taxable services) that you intend to resell in the form or condition in which you acquired it from your vendor or that you intend to resell as an integral part of other merchandise or taxable service
  • tangible personal property that you buy to lease or rent to your customer
  • a taxable service performed on tangible personal property in your resale inventory
  • tangible personal property that you buy to use in performing a taxable service when you transfer the care, custody and control of the tangible personal property to your customer

If you use the merchandise that you purchased by issuing a resale certificate, then you owe tax on the merchandise. (For example, you purchased brooms for resale, but pulled one out of inventory and used it to sweep your store.) You must pay the sales tax either on the fair market rental value for the period of use of the merchandise or on your purchase price of the item. You can do this by including this amount in the “taxable purchases” line of your return.

What are my responsibilities as a buyer using a resale certificate?

You should not use a resale certificate if there is any question whether you will resell the property. If you are purchasing a combination of items and some are for resale while others are not for resale, you must clearly indicate to the vendor which items will be resold and on which the vendor should not collect tax.

Do I need to submit a resale certificate each time I make a purchase?

Yes, except that if a customer purchases exclusively for resale, a seller can accept a blanket resale certificate. The certificate should state that all purchases will be resold in the regular course of business.

What are my responsibilities as a seller accepting a resale certificate?

You must make sure that the resale certificate is properly completed.

As a seller, you should always note the general character of the purchaser's business. If the nature of the business is such that the property purchased would not normally be resold, you should question the use of the certificate. For example, you should not accept a resale certificate describing the business as a service station for the purchase of a sofa or other item not regularly sold by service stations.

You should not accept the certificate if you know or have reason to believe the property is being purchased for other than resale.

You must retain the resale certificates in your records (for four years) that you accept to substantiate claims that a sale was for resale and therefore exempt from tax.

Can I find out if a seller's permit number is active?

Yes. You can verify that a seller's permit is active using the Comptroller's Sales Tax Permit Search.

Can I issue a resale certificate if I buy items that will be resold in Mexico or another country?

You can issue a resale certificate if you intend to resell the taxable items in the United States or in Mexico, but not in any other countries.

Are there any penalties for the illegal use of a resale certificate?

Yes. Refer to the table below.

Penalties for Illegal Use of Resale Certificates
If the tax evaded by the invalid certificate is … The offense is …
less than $20 a Class C misdemeanor
$20 or more but less than $200 a Class B misdemeanor
$200 or more but less than $750 a Class A misdemeanor
$750 or more but less than $20,000 a felony of the third degree
$20,000 or more a felony of the second degree