Sales tax exemption for small business wholesale purchases - do we qualify?

We run a small woodworking business where we make specialty game boards that include playing cards as part of the finished product. Currently, we're buying 12-packs of cards from Amazon and including them with our game boards (we charge sales tax on the full price of our boards). I reached out to the card manufacturer directly to see if they offer bulk pricing, and they do! But now they're asking if we're purchasing as a wholesaler because that would affect whether they charge us sales tax on our order. I'm not 100% clear if we qualify as "wholesale" in this situation. We're not reselling their cards as-is - they're a component that gets bundled into our final product which we then sell (and collect sales tax on). So do we need to pay sales tax when purchasing from them directly? Or are we exempt? This might seem like a small detail, but I want to make sure we're handling everything correctly. Anyone dealt with something similar who can point me in the right direction?

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19 comments

Omar Zaki

•8M

You're dealing with what's called a "sale for resale" situation, which typically qualifies for sales tax exemption. Since those cards become a component of your finished product (the game boards), and you're charging sales tax to the end customer, you generally don't need to pay sales tax when purchasing those components. What you'll need is a resale certificate (sometimes called a reseller permit or tax exemption certificate) from your state's tax authority. This document proves to your suppliers that you're purchasing items for resale purposes. You provide this certificate to your vendors, and they keep it on file to justify not charging you sales tax. Each state has different forms and requirements, so you'll want to check with your specific state's department of revenue or taxation website.

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Omar Zaki

•8M

Yes, that's correct. If you're purchasing materials that become part of your finished product that you sell to customers, those materials typically qualify for a sales tax exemption. When you charge sales tax to your end customers, you're collecting tax on the full value of the product - including all those components. For your crafting business, you could potentially save quite a bit by getting a resale certificate and providing it to your suppliers. However, keep in mind that supplies that don't become part of your final product (like tools, equipment, office supplies) generally don't qualify for this exemption.

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Diego Flores

•8M

I went through the exact same situation with my small business last year! After spending hours trying to figure it out myself, I discovered taxr.ai (https://taxr.ai) and it simplified everything. I uploaded my business info and they immediately helped me determine I qualified for a resale exemption certificate. The best part was they showed me exactly how to apply for it in my state and even helped fill out the application forms. They explained that since the cards become part of your finished product that you're reselling, you're eligible for tax exemption on those purchases. Saved me a ton of money since I was unnecessarily paying sales tax on all my component purchases!

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Diego Flores

•8M

Yes, they handle all 50 states! I was initially using them for California which is notoriously complex, but they have specific guidance for Pennsylvania too. Their system knows the rules for each state, including the different requirements for in-state vs. online sales. Their pricing is actually really reasonable compared to what I save. I was paying hundreds in unnecessary sales tax each quarter on my component purchases. They don't charge based on your savings - it's a flat fee for the service. For a small business, it's definitely worth it just for the time saved trying to figure out the complicated tax rules.

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Anastasia Ivanova

•8M

Just wanted to update everyone - I tried taxr.ai after seeing the recommendation here and it was exactly what I needed! I was totally confused about the "sale for resale" exemptions in Pennsylvania (we have weird rules), but their system walked me through everything step by step. They helped me get my resale certificate within days and showed me how to provide it to my suppliers. I was literally paying double tax on all my component materials for years! Now I have proper documentation and my suppliers are happy to sell to me tax-free. Wish I'd found this service years ago - would have saved me thousands.

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StarStrider

•8M

If you're still struggling with sorting this out, I completely understand the frustration. I spent weeks trying to get answers from my state's tax department by phone with no success. Finally, I used Claimyr (https://claimyr.com) to get through to an actual person at the tax office who could answer my specific questions about resale certificates. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c - but basically they get you past the hold times to speak with an actual tax representative who can verify your specific situation. I was amazed when I got through in minutes instead of hours of holding. The tax rep walked me through exactly what documents I needed for my situation and confirmed I qualified for the exemption.

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StarStrider

•8M

It's actually pretty straightforward. They use a proprietary system that continuously calls the IRS or state tax departments and navigates the phone tree. When they finally get through to a human, they connect that person to your phone. So you're not technically "skipping" the line - they're just handling the hold time for you. And just to clarify, I used it for my state department of revenue, not the IRS, though they work for both. You just tell them which agency and what you need help with. The best part is it works for most government agencies, not just tax departments, which has saved me countless hours for other business paperwork too.

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Luca Marino

•8M

Ok I need to eat some crow here. After my skeptical comment, I decided to try Claimyr because I've been trying to reach our state tax department for WEEKS about my resale certificate renewal. I figured I'd either prove it was a scam or actually get help. Well, I'm shocked to report it actually worked exactly as promised. I got connected to a tax representative in under 15 minutes after spending days trying on my own. The rep answered all my questions about using my resale certificate for component parts (like OP's situation) and even helped me fix an issue with my account. Completely worth it and I'm now properly set up with a valid resale certificate.

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Nia Davis

•8M

Make sure you keep really good records of all these transactions! I got audited last year because I wasn't tracking which purchases were exempt correctly. You need to clearly document which items are going into products for resale vs. things for business use. I learned the hard way that it's not enough to just have the certificate - you need to maintain a system showing exactly which purchases were exempt and prove they were used in your final products. The auditor specifically looked at my Amazon purchases and questioned several items that weren't clearly documented.

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Nia Davis

•8M

The simplest approach is to create separate accounts in QuickBooks for "Materials for Resale" versus "Supplies/Materials (Taxable)". When you enter expenses, be diligent about which category they go into. I also recommend keeping a spreadsheet that tracks each exempt purchase, what it was used for, and which final products it went into. During my audit, this was incredibly helpful. For items like your card decks, note how many go into each game board. Take photos of your production process too - visual evidence of components going into final products saved me during my audit.

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