Do you have all the permits and certificates necessary to run your small business in California?
Most entrepreneurs start a business with the intention of doing what they love. The prospect of filling out piles of paperwork to fulfill state requirements doesn’t fill them with joy.
Yet, you can’t run a legal business without filing a permit of some sort. The good news is: Sometimes the tedious filing of paperwork can pay off in the long run.
If your business includes selling products in California, a tax break is almost guaranteed if you know the difference between a sales permit VS retail certificate. While combining the two can carry financial benefits, it’s still important to make the distinction.
In California, if you own a business, you are legally required to obtain a seller’s certificate. This document states that you can legally sell tangible items in the state of California. Even if you own a temporary business from which you sell or lease tangible products (services are typically not included in this category), you need this type of permit.
Once you have a permit on file, you should use it to report your sales to the state. This includes reporting and paying your sales tax.
A resale certificate comes into play due to sales tax. If you’re selling products that aren’t manufactured by your business, you’re a reseller. This is true even if you sell other manufacturers’ products alongside your own.
As a reseller, you have to obtain such a certificate. You then show this certificate to your suppliers as proof that you are a reseller.
Being a reseller pays off for you in the long run, though. If you purchase products for resale, you don’t have to pay sales tax on them. Your resale certificate is your ticket out of this tax. Your customers are responsible for paying sales tax on products purchased for personal use instead.
The Case For Combining Both Documents
You might not have to choose between a seller’s permit vs resale certificate. In some cases, both documents can be rolled into one. Beyond that option, however, it may pay off to file for both documents.
You have to have a seller’s permit to get a resale certificate in California, anyway. Also, having both forms of paperwork can double down on your tax cuts. Without a resale certificate, you can’t legally claim that you purchased goods specifically to resell them, even if this is the case.