Many retail businesses find that they must replenish their inventory of goods on a regular basis in order to avoid running out of merchandise for public sale. Often, the best solution is to purchase needed supplies from a wholesaler.
Under ordinary circumstances, business-to-business transactions are subject to state sales tax, which can cut into the retailer’s profits. Fortunately, most states allow these kinds of wholesale transactions to be carried out on a tax-free basis so long as a resale certificate is provided to the seller. South Carolina is among the states that allow resale certificates—sometimes called sales tax exemption certificates—to be used for this purpose.
The subject of resale certificates tends to cause a lot of confusion, as these documents are often mixed up with certain types of business licenses that have similar names. But if you run a retail or wholesale business in South Carolina, it is very important that you understand where to obtain a resale certificate, what it does, and how it must be filled out to be considered legally valid.
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.
Is a Resale Certificate the Same as a Seller’s Permit?
No—this is one of the most common points of confusion regarding resale certificates. A seller’s permit or sales tax permit—usually called a “retail license” in South Carolina—is used for collecting sales tax on applicable transactions. Simply having a South Carolina sales tax permit/seller’s permit/retail license is not sufficient under state law to purchase wholesale items tax-free. You need a separate resale certificate for that.
Filling Out a South Carolina Resale Certificate
There are two ways to obtain a state resale certificate template:
- The easiest way to begin is by downloading Form ST-8A (Resale Certificate) from the State of South Carolina Department of Revenue website. To find the most recent version, simply search for “ST-8A” at https://dor.sc.gov/forms/find-a-form.
- Alternatively, you can use the “Uniform Sales & Use Tax Certificate” (PDF) published by the MultiState Tax Commission. This is a multi-jurisdiction certificate recognized by many states, including South Carolina. It is considered legally equivalent to Form ST-8A.
It is not necessary to use either of the above-mentioned forms. In fact, practically any document can be considered a valid South Carolina resale certificate so long as it includes all the relevant information.
A properly filled-out resale certificate in South Carolina must include the following data:
- The name of the seller
- The address of the seller
- ZIP Code
- The name of the purchaser
- The address of the purchaser
- ZIP Code
- The South Carolina retail license number of the purchaser
- If the retail business is not located in South Carolina, then note the state and retail license number of the business
- A statement describing the nature of the purchaser’s business
- A general list or description of the types of goods involved in the transaction
- The signature of the purchaser
- May be an owner, partner, member, or officer
- The date when the certificate was filled out
Note that using a resale certificate to fraudulently obtain goods tax-free—e.g., buying items that are not eligible to be purchased in this manner—is punishable by fines.
Under South Carolina law, it is not necessary to use a separate resale certificate for each transaction involving the same seller. The seller is permitted to retain only one resale certificate per customer.
Contact FastFilings Today
Not sure how to start a business in South Carolina? FastFilings is here for you. We’re a private business-to-business (B2B) filing service that helps our clients obtain a variety of state licenses, such as seller’s permits, Certificates of Good Standing, and more. For additional information on what we offer, explore our website.