california tax attorney

BOE Audit of Sales for Resale

A Claimed Sale for Resale is Allowed if Supported by Valid Resale Certificate

A claimed sale for resale will be allowed in a BOE audit if it is supported by a resale certificate that is proper in form and is timely taken in good faith from a person who is engaged in the business of selling tangible personal property and who holds a California seller’s permit. If the purchaser is not required to hold a permit because the purchaser sells only property of a kind the retail sale of which is not taxable, e.g., food products for human consumption, or because the purchaser makes no sales in California, an appropriate notation to that effect will be entered in lieu of a seller’s permit number on the resale certificate under Regulation 1667 governing exemption certificate requirements. A certificate will be considered timely if it is taken at any time before the seller bills the purchaser for the property, or any time within the seller’s normal billing and payment cycle, or any time at or prior to delivery of the property to the purchaser. BOE auditors can be stringent when enforcing the resale certificate requirement.

In an BOE audit Any document, such as a letter or purchase order, timely provided by the purchaser to the seller will be regarded as a resale certificate with respect to the sale of the property described in the document if it contains all of the essential elements in Regulation 1668. A signed resale certificate that has been scanned and transmitted electronically or via a facsimile machine (faxed) is acceptable provided that it contains all of the information required by Regulation 1668, is timely and accepted in good faith, and contains the date and time of transmission and telephone number of the sender either on the document itself, or on the proof of transmission such as a copy of the email, or on the standard fax cover sheet.

What Can Be Considered a Resale Certificate in a BOE Audit

The Board of Equalization provides detailed guideline for BOE audits about what can be considered as resale certificate ( BOE provides following examples:

  1. A purchase order that contains all the elements of a valid resale certificate, containing words “for resale".
  2. A valid qualified resale certificate taken timely and in good faith, combined with a purchase order that contains any of the following phrases or similar terminology to indicate that tax or tax reimbursement should not be added to the sales invoice.
  3. • “for resale”
  4. • “resale = yes”
  5. • “taxable = no”
  6. • “nontaxable”
  7. • “exempt”
  8. If the purchase order includes both items to be resold and items to be used, the purchase order must specify which items are purchased for resale and which items are purchased for use. A seller must retain copies of the purchase orders along with the qualified resale certificates in order to support sales for resale.
  9. A letter covering a specific purchase from an out-of-state retailer or from a California purchaser if all the elements of a resale certificate are shown.
  10. Contracts of sale where all the essential elements of a resale certificate are included.

Other evidence of the validity of a claimed sale for resale may be accepted by the Board of Equalization too in a BOE audit.

Read More Articles on This Topic

Download our guide "The 10 Benefits of Hiring a Tax Lawyer"

If you are struggling with tax problems, it is important to get help quickly. Click the image below to learn exactly how a tax lawyer can help with your IRS or state tax issues.


Subscribe to Email Updates

Blog Archive

Recent Posts