Purchase Order

A Purchase Order is a document used by a buyer of goods to propose a written sales contract to a vendor detailing the exact goods to be sold, the quantities, and their prices. It is an offer from the buyer to purchase the specified goods from the vendor. This offer then becomes a contract after the vendor accepts the offer by signing the document. A purchase order generally specifies payment terms, item identification, quantities, shipping address, and other such details. The Purchase Order ultimately serves as a transaction record between the buyer and the seller.

Though similar to an Invoice, the primary difference between a Purchase Order and an Invoice is that, generally speaking, a Purchase Order is issued by the buyer while an Invoice is issued by the seller. The buyer sends the Purchase Order to the seller to initiate the purchase. Once the Purchase Order has been fulfilled, the seller issues an Invoice to the buyer. Typically, the Invoice has the Purchase Order number on it to make it easier for the buyer to verify that the product being invoiced matches with the specifications and prices outlined in the original order.

A Purchase Order can help to ensure that the buyer and the seller are on the same page about the service being delivered. Purchase Orders can also help the buyer stay organized when it comes to accounting and tracking expenses.

How to use this document

Most purchases are unique but no matter what is being purchased, this Purchase Order includes the common elements and allows for customization for specific purposes. All Purchase Orders include the price of each good being purchased and the amount to be purchased. The document also includes a description of the goods purchased, applicable taxes, shipping charges, names, dates, and/or contact information involved with the transaction.

Once the Purchase Order has been prepared, it should be issued to the seller of the products being purchased. At that time, the seller will decide whether they are able to fulfill the order at the price requested. The buyer should be sure to keep a copy of the purchase order for their own records.

Applicable law

Purchase Orders in the United States are generally subject to specific state laws, which cover general contract principles like formation and mutual understanding. State laws also cover commercial transactions and business. They govern which goods and services are subject to sales tax and how much sales tax should be paid. Individual state laws should be checked for anything relating to the sale of goods or the interpretation of the purchase orders in case of a dispute.

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