How to Qualify for a California Tax Exemption for Sales Tax

California retailers that buy goods for resale can get a sales tax exemption on those purchases. The California tax exemption applies only if the business has registered with the state. Those who register can then get an exemption by presenting a California resale certificate to the seller each time they purchase a wholesale item for resale purposes.

Step 1:

First, you will need to register your business. In California, you can register a corporation, limited liability company and certain partnerships with the California Secretary of State. If you intend on registering such a business, then you need to do that first before applying for a California tax exemption on your wholesale purchases.

Step 2:

Get a federal employer identification number (EIN) from the Internal Revenue Service if you need to get one. This is federal tax ID number for certain businesses (all nonprofits and generally other businesses with employees). You should get this number first so you can report it on your California seller’s registration form.

Step 3:

You will also need the following before completing the registration form:

a. Social Security Number;

b. Copy of driver’s license;

c. Bank-account information;

d. Supplier information;

e. Bookkeeper information;

f. Two personal references;

g. Estimate of your future total and taxable sales on a monthly basis; and

h. Registration information if you are registering a business that you purchased.

Step 4:

Download the “California Seller’s Permit Application” from the California Board of Equalization at boe.ca.gov/pdf/boe400spa.pdf. This is a standard California sales tax business registration form. It is the first thing you need to do to qualify for a California tax exemption for sales tax.

Step 5:

Fill out the form. This is a rather detailed form. Make sure you read the included instructions so that you provide all the necessary information that the Board of Equalization wants to register your business for sales and use tax. You will get a California sales tax ID number ( a “California seller permit”) after the BOE processes the form.

Step 6:

Send the form to a BOE district office. You can find the location, address and phone number of these offices at Boe.ca.gov/info/phone.htm.

Step 7:

Now that you are registered as a seller, you get your California tax exemption by giving your suppliers a “California Resale Certificate.” When you buy products from other sellers that you will resell, give them a fresh copy of this certificate with your business information. If you do this, the seller does not have to obtain California sales tax on your purchases. You can download this California tax exempt form at Boe.ca.gov/pdf/boe230.pdf.

Warning: You cannot get a California sales tax exemption on products you intend to personally use in the business. For example, if you are buying cleaning supplies for the office, you cannot get a California tax exemption on that purchase for sales tax because the cleaning supplies are not a resale product.

Sources:

California Seller’s Permit (First Step to Getting a California Sales Tax Exemption)

California Resale Certificate (To Give to Sellers When You Want a California Tax Exemption for Sales Tax)