If you are looking to purchase products in bulk to physically assemble, sort or grade, or to repack and redistribute in smaller lots, then you will need a wholesaler license. The license, or resale certificate, is issued by the state in which you do business. It specifically permits you to act as an agent or broker in buying merchandise to sell to other businesses. If your business is already in operation, acquiring the license is simple. However, there are important prerequisites for your business, as needed for a wholesale license.
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Things you need
- Registered business
- Standard business license
- Employer Identification Number/Taxpayer ID
- Sales tax license
Get your Employer Identification Number (EIN), or Federal Tax ID, if you don't already have one. Realise that an EIN is required to collect sales tax in the state in which you do business and is also required to recruit employees. Apply for an EIN through the Internal Revenue Service (IRS). Submit IRS Form SS-4. No fee is required, and the EIN is provided in four to five weeks.
Procure a sales tax license. Realise that since sales tax is applied by most states to all sales of material goods to buyers--and in some states, even services--you must be licensed to collect that tax and then render it to the state afterward. Understand that once you have a wholesale license or reseller certificate, you can avoid paying sales tax on items you purchase wholesale and intend to resell. Contact your state tax department to obtain a sales tax ID number. Inquire about the sales tax rates as well.
Apply for a wholesale license with your state's department of revenue or taxation. Contact the department or review the state or department website for specific information regarding the application, process and fees. Complete and submit the necessary form and pay the applicable fees. Ensure that all the fields in the form are precisely filled in, legible and neat to avoid processing errors and/or delays. Review the form carefully before submitting.
Tips and warnings
- If your company's name is different from your own legal name (the primary name on all business entities) or you intend to have more than one, obtain a DBA (Doing Business As) document and keep it accessible. It may be necessary to provide such information when applying for or using your wholesale license.
- Consider the use of a professional agent who is familiar with wholesale/resale business if necessary. Professional consultation is not only convenient, but can streamline your application process by performing many of your tasks for you.
- Obtain and maintain a sales tax account if you do not already have one. In most cases, states require a separate account for each store you operate under the wholesale business.
- Explore whether the resale of your goods will require additional permitting beyond a wholesale license/resale permit. A good example is the sale or distribution of tobacco or alcohol, which is highly regulated in many states.
- Do not indulge in retail business of any sort. It is a violation of the wholesale license, as well as state laws governing resale business.
- States may have different titles for wholesaler privileges. Some common titles include Resale Certificate, Resale Permit or License, Seller's Permit, Use and Sales Tax License (or Permit), Sales and Use Tax, Certificate of Authority, Application to Collect (or Report) Tax and Transaction Privilege (Sales) Tax.
- Without a wholesale license or resale certificate, you will be required to pay sales tax on the goods you buy wholesale, as well as the sales tax charged in their sale.
- Do not attempt to purchase wholesale goods without your sales tax ID or wholesale license. Most wholesalers require proof of one or the other before they will agree to sell you the goods. This is because of the legal obligation they have to verify your legal ability to collect sales tax from the end user.
- Do not overlook the business laws, wholesale/resale regulations, sales tax rates and any financial reporting requirements of each and every state you do business in.
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