Resellers need new permit by Jan. 1 to avoid sales tax

The Bellingham Business Journal

Time is running out for businesses to obtain a new permit they need to avoid paying sales taxes on wholesale purchases in accordance with a new state law.

The 2009 Legislature replaced self-issued resale certificates with Department of Revenue-issued reseller permits to reduce misuse of the resale system. The department estimates that state and local governments lose $100 million annually when businesses buy products for their own use rather than for resale, but claim the exemption.

While the Department of Revenue has mailed nearly 180,000 permits to businesses since September, it estimates that as many as 20,000 additional businesses, mostly contractors, have not yet applied for a permit.

Beginning Jan. 1, 2010, taxpayers who do not provide a copy of a reseller permit or other acceptable exemption certificate to wholesalers must pay retail sales tax when buying goods and services for resale. Normally, resellers don’t pay the sales tax because they charge it when the product is sold to customers.

Businesses that must pay sales tax because they don’t yet have a permit can deduct it on their tax returns after the sale, but some wholesalers may not sell items at wholesale prices to retailers without the required permits.

“We’re concerned that come Jan. 1, some businesses will be in for a big surprise the next time they try to purchase products or materials at wholesale and find out that they have to pay sales tax,” said Cindi Holmstrom, director of the Department of Revenue. “That’s not the way we want them to start the new year.”

Holmstrom urged any business that now uses resale certificates, and believes it qualifies for a reseller permit under the new rules, to apply for one immediately at or by calling 1-800-647-7706.

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