What Is a Resale Certificate?
Resale certificates in South Carolina work more or less the same way as in most other states across the U.S.:
- A resale certificate is filled out by the buyer in a wholesale transaction
- The buyer gives the completed certificate to the seller (wholesaler)
- The seller examines the certificate to ensure everything seems accurate
- The seller keeps the certificate on file
The purpose of this is to enable retailers to purchase wholesale goods without being required to pay sales tax on the transaction. The only condition is that these goods must be resold as part of the normal operations of the buyer’s business.
For instance, if a retail business sells shoes, it can purchase new footwear for its inventory tax-free by giving the seller a resale certificate. When the retail business later sells the footwear to the public, the normal sales tax is collected at that time.
A business cannot legally use a resale certificate to purchase items for internal use. It cannot, for example, buy new laptops for the office tax-free with a resale certificate. Purchased items must be intended for resale.
If for any reason a business ends up consuming products purchased with a resale certificate, the normal sales tax must be paid by the buyer. That’s because the resale certificate essentially shifts the burden of collecting sales tax from the seller to the buyer. Once the certificate has been delivered, the wholesaler is relieved of the responsibility to collect the sales tax. However, the seller can be penalized under South Carolina law if it fails to act in good faith—for instance, by knowingly participating in a fraudulent transaction, or by accepting an obviously falsified resale certificate.
