It is known as a “resale number” because businesses use it to prove they are not subject to sales tax on their raw materials or goods purchased for resale.
However, businesses are subject to paying sales tax on goods or services they use & which are not part of an item that will be resold. It is important to understand the distinction in order to use a resale certificate correctly.
Usually, sales tax is collected only on finished goods or on professional or other services provided. But sales tax laws are administered on the state and local level, so they vary widely among states, cities, counties or towns.
Regulations, tax rates, services & products subject to sales tax differ from location to location. It is important to understand when & how you are required to collect sales tax, especially if you are an online retailer.
Getting appropriate tax and legal advice on this issue is very important as business owners can, in some circumstances, be held personally liable for unpaid sales taxes.