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I'd like to purchase items for resale in my store, but vendor will not accept resale certificate. Is that legal? If I am charged sales tax on resale items, can I deduct from taxes?

Full Question: We recently have found an online vendor which sells used/refurbished computers. Their prices are extremely competitive and therefore we would like to purchase their items and resell in our store after an appropriate markup. However, when I contacted the vendor about providing them with my resale certificate, their stated they don't accept any States resale certificates. My first question: Are they legally allowed to do this? My second question: If I make a purchase intended for resale and the seller collects sales tax, can I keep track of the sales tax amounts and make a deduction when I pay my taxes to the State of TN?

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Answer:

Diane Yetter photoYour question raises an unusual question. I am not aware of any state that statutorily prohibits a vendor from accepting a resale certificate. However, I am also not aware that sellers are required to enter into business relationship with anyone they don't want. It could be that since you in essence compete with this seller, they may not want to do business with you and this is their way to do that. You might want to discuss with them why they won't accept a resale certificate. In the alternative, if you decide to do business with them, most states do allow a deduction on the sales tax return for tax paid merchandise resold. You should still collect sales tax on the full selling price but then take a deduction on your return for the tax amount paid on the purchase price. If there is not a specific line for this on your Tennessee return, you could take a deduction for the purchase price as a miscellaneous deduction. Just be sure to keep copies of your purchase invoices and proof that what you purchased you did resell and you did charge sales tax on the sale.

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