Whether you are thinking about launching an eCommerce site or opening up your own retail store, taking care of the legal aspects is a vital first step. When starting any type of business, you need to register your company and obtain the proper licenses and permits. Though the exact requirements vary from state to state and even city to city, every retail business owner is required to obtain a wholesale license.
Fortunately, whether you’re reselling wholesale t-shirts, sporting goods or even health and beauty products, the process of obtaining a wholesale license is straightforward. Keep reading to learn how to obtain a wholesale license so you can start reselling!
Register Your Business
Before you can obtain a wholesale license, you need to legally register your business. Generally, this means applying for an Employer Identification Number (EIN) from the IRS. Also known as a Federal Tax Identification Number, your EIN is what allows you to legally conduct business and hire employees. Applying for this number is required even if you do not plan on hiring other people.
The application process for an EIN can take up to two weeks. Until you have received the number, you cannot legally do business.
Obtain a Sales Tax License
After you’ve received your EIN, the next step is obtaining a sales tax license. This license is what allows you to charge sales tax on the products you sell. The terms of licensing and the percentage you will need to charge your customers vary from state to state. To find out more and to apply for the license, contact your state’s tax office.
There may be additional requirements, depending on where you live. If you need help determining what licenses and permits you need to obtain in your area, consider consulting with the Small Business Administration.
Apply for a Wholesale License
Once you’ve obtained your EIN and sales tax license, you are ready to apply for a wholesale license from the state in which your business is located. The fees and application process vary from state to state, so contact your revenue or tax office for additional information.
It’s important to note that wholesale licenses go by many different names. Depending on where you live, the license you need may also be called a seller’s permit, a resale permit license or a resale certificate.
Why Obtaining a Wholesale License Is Important
Obtaining a wholesale license is an important part of starting a retail business for several reasons. For starters, being licensed as a wholesaler means you will not have to pay sales tax on products you intend to resell. That means when you’re buying wholesale hoodies in bulk or buying other wholesale merchandise to resell, you don’t have to worry about paying extra for taxes. Having a wholesale license may entitle you to additional exemptions, too. In some instances, having a wholesale license can even make it profitable to sell to a competitor.
Keep in mind, too, many wholesalers require business owners to submit proof of their wholesale licenses prior to placing an order. While this isn’t required in all instances, having your wholesale license helps ensure you will be able to do business with the wholesale providers of your choosing. It also guarantees you will be able to get the best possible prices on the products you are buying to resell.
In most states, business owners are required by law to have a wholesale license to legally conduct transactions. In California, for example, any business that makes three or more sales of wholesale products over the course of a year must have a wholesale license. If you are doing business without this license, you run the risk of facing legal penalties.
The Bottom Line
Whether you’re opening up a sporting goods store, launching a new electronics shop or you’ve just learned how to monogram a shirt and want to open your own boutique, obtaining a wholesale license is a must. While the exact laws may vary depending on where your business is located, making certain you have the proper licenses ensures you are running your business legally. Doing so also enables you to work with wholesalers, avoid paying sales tax on the items you plan to resell and helps you get the best possible prices. If you haven’t already started the process, what are you waiting for? The sooner you get your wholesale license, the sooner you can start building the business of your dreams!