Taking on dealer and resale customers: the paperwork to collect first

A dealer who buys your bumpers, brackets or kits to resell can be great business: repeat orders, bigger quantities, no retail customer service. It also changes the paperwork. Sales tax, pricing, credit and how your parts are sold all need settling before the first order ships, not after. This is the list we’d work through.

This is general information, not tax or legal advice. Sales tax rules are set by each state and change over time. Talk to your accountant or tax adviser about the states you sell into.

1. A resale (exemption) certificate

When a business buys goods to resell, the sale can often be exempt from sales tax, but you usually need the buyer’s resale or exemption certificate on file to back that up. If you can’t show one, you may end up owing the tax you didn’t collect.

What makes this tricky is that there’s no single national form. Each state sets its own rules. Two multistate forms are widely used:

The Multistate Tax Commission uniform certificate

The Multistate Tax Commission publishes a Uniform Sales & Use Tax Resale Certificate – Multijurisdiction. Its page says 36 states have indicated it can be used as a resale certificate, and that the certificate lists those states and sets out requirements and limitations on its use (MTC). The form itself says the issuing buyer and the receiving seller are both responsible for determining its proper use under each state’s laws (MTC certificate, revised October 14, 2022).

Read the state notes. They differ a lot. A couple of examples from the form:

• Michigan: blanket certificates are effective for four years unless a shorter period is agreed and stated on the certificate.
• Illinois: there’s no statutory renewal interval, but blanket certificates should be updated periodically and no less than every three years.

The MTC also says that if you’re unsure whether the certificate will be accepted in a given state, you should check with that state’s revenue department.

The Streamlined Sales Tax certificate

The Streamlined Sales Tax Certificate of Exemption (SSTGB Form F0003) is accepted by all 24 Streamlined member states, according to the Streamlined Sales Tax Governing Board (SSTGB). A few points from the board’s page and the form’s instructions (F0003, revised 12/21/2021):

• The purchaser gives the completed form to the seller and keeps a copy. It isn’t sent to the board or the states.
• Not all states allow all the exemptions listed on the form, and a state may require a state-specific ID number.
• If the single-purchase box isn’t checked, it’s a blanket certificate that stays in effect until cancelled by the purchaser, as long as purchases are no more than 12 months apart, unless a state allows a longer period.
• The instructions describe when a seller is relieved of the tax on an exempt sale, including that the fully completed certificate is provided at the time of sale or within 90 days after it.

What this means in practice

• Get the certificate before the first tax-free sale, not at the end of the quarter.
• Check it’s complete: buyer’s name and address, their ID or permit number for the state, the reason for exemption, and a signature where required.
• Keep it on file where you can find it if you’re audited, linked to the customer.
• Put a review date on it. Expiry and renewal rules vary by state and by form, so decide on a review schedule with your accountant and stick to it.
• Watch for sales that don’t fit. A resale certificate covers goods bought to resell, not tools or supplies the dealer uses themselves.

2. The dealer’s business details

Collect the basics up front, the same way for every dealer:

• Legal business name and DBA, if different.
• Business address and ship-to addresses (they’re often different).
• Seller’s permit or sales tax ID for their state (it should match the certificate).
• Main contact, plus who places orders and who handles returns.
• Accounts payable contact and email, for invoices and statements. This is the one people forget, and it’s the one that gets you paid.
• Website and storefronts where they’ll sell your products.

3. A credit application, if you offer terms

If dealers pay by card or in advance, you can skip this. If you’re going to ship now and invoice on net terms, you’re extending credit, so treat it that way:

• A credit application: business details, how long they’ve been trading, bank reference and trade references.
• The terms in writing: net days, credit limit, late fees if you charge them, and what happens to the account when it’s overdue.
• A personal guarantee, if your accountant or attorney recommends one for small accounts.
• A starting limit you’d be comfortable losing, raised as they pay on time.

Deposits are a reasonable middle ground for large or custom orders: take part up front and the balance when it ships.

4. A dealer agreement

A short written agreement saves a lot of awkward phone calls later. It doesn’t need to be long. Have an attorney look it over before you rely on it. Cover:

• Pricing tier. What discount or price list they get, and how you’ll notify them of changes.
• Minimums. Opening order, minimum order size, or annual volume to keep dealer pricing.
• Advertised pricing. If you have a minimum advertised price (MAP) policy, state it and how it’s enforced. If you don’t, decide whether you need one before you have ten dealers.
• Returns and warranty. Who handles warranty claims, restocking fees, what can’t be returned (custom or cut-to-order parts).
• Drop ship rules. If you’ll ship directly to their customers: whose name goes on the packing slip, how orders are placed, and who pays shipping.
• Use of your photos and brand. Whether they can use your product photos, descriptions, logo and build photos, and how.
• Ending the relationship. How either side ends it, and what happens to open orders.

5. Shipping and drop-ship preferences

Small details, big source of mistakes:

• Preferred carrier and service, and whether they use their own shipping account.
• Freight requirements for large items: liftgate, dock, business hours.
• Blind shipping for drop ships (no pricing, their branding or plain packaging).
• Where tracking numbers should go.

6. Setting them up in your systems

Once the paperwork is in, set the account up properly so the counter, the website and the books all treat the dealer the same way:

1. Create the customer with the business details and the AP contact.
2. Assign the dealer price tier, so pricing is applied automatically instead of by memory.
3. Mark the account tax-exempt for resale in whatever system calculates your sales tax, and only once a complete certificate is on file.
4. Store the certificate with the customer record and note its review date.
5. Set payment terms to match the agreement: card on order, deposit, or net terms with a limit.
6. Review certificates and terms on your schedule, and pause tax-free sales on any account whose certificate has lapsed.

Doing this in ShopJig

ShopJig’s website and store supports dealer pricing, so dealers see their own prices on the same catalog and stock your retail customers buy from. Deposits, invoices and pay links are handled in estimates, invoices and payments, drop ship in parts and inventory, and the day’s sales go to QuickBooks Online as summary entries. Ask your accountant how they want tax-exempt resale sales handled in your books. See how it fits an off-road shop that sells parts online.

Sources

• Multistate Tax Commission: Uniform Sales & Use Tax Resale Certificate – Multijurisdiction: https://www.mtc.gov/Resources/Uniform-Sales-Use-Tax-Exemption-Certificate
• Multistate Tax Commission: the certificate and its state notes (PDF, revised October 14, 2022): https://www.mtc.gov/wp-content/uploads/2023/01/Unif-Resale-Cert-revised-10-14-22.pdf
• Streamlined Sales Tax Governing Board: Exemptions: https://www.streamlinedsalestax.org/Shared-Pages/exemptions-
• Streamlined Sales Tax Certificate of Exemption, SSTGB Form F0003 (PDF, revised 12/21/2021): https://www.streamlinedsalestax.org/docs/default-source/forms/exemption-certificateb926a7ab4a0d43e1ad4fe8eb19e79cbb.pdf?sfvrsn=857843d_5