People interested in starting a new retail business often see articles telling them they may need a sales permit and then wonder, "What is a seller's permit?" They also often have questions like "How can I buy wholesale items?" and "Do you need a business license to buy wholesale?" While the process is complicated, it's important to get the right licenses and permits before starting your business.
TL;DR (Too Long; Didn't Read)
A seller's permit is a permit that many states require in order to sell or lease merchandise, vehicles or items.
What Is a Seller's Permit?
Some states also require seller's permits for those selling not just tangible goods but also services. The seller's permit means that you agree to pay sales tax on any taxable sales, and you will usually be issued a state tax ID number in order to do so.
Seller permits often go by other names, including resale permit, permit license, sales permit, reseller number, resale ID, state tax ID number or reseller license permit. While many people mistake a seller's permit with a resale certificate, resale certificates are actually issued by a buyer to suppliers in order to allow the buyer to buy items without paying taxes. This is why it is also often known as a wholesaler's license since it helps you get wholesale prices.
Who Needs a Seller's Permit?
If you plan to sell any tangible items or vehicles, you will almost certainly need a seller's permit. Depending on the state, you may even need a seller's permit to sell things on a temporary basis at one-time events like craft shows or online. Most people selling used items at garage sales are not required to have a seller's permit, although these rules will vary by state.
You may not be required to obtain a permit if your sales are exclusively made through interstate or foreign commerce, meaning that your buyers are not required to pay state sales tax. Also, in most states, you will not need a seller's permit if you offer services, but some states still require these businesses to obtain a permit anyway. If you offer services and items for sale or tax-exempt items and taxable items, it is important that your records accurately reflect sales of each item for tax purposes.
Failing to get a seller's permit when required to do so is a violation of the law and can open you up to fines and penalties. As a result, you should obtain your permit long before you begin selling items.
How to Get a Seller's Permit
Where to get a seller's permit will vary based on your state. Generally, you can obtain them through your state's board of equalization, franchise tax board or sales tax commission. The IRS offers a website that can help you locate the proper office in your state, or you can do a web search for your state's name followed by the words "seller's permit."
Business Licenses vs. Seller's Permits
It is important to note that a seller's permit is not a business license. Business license rules are even more diverse than those regulating the issuance of seller's permits. That's because some states require every business to have them, some states only require companies in certain industries to be licensed, some states don't require home-based businesses to get licenses while others do and some states don't require business licenses but counties or cities within the state might.
As for the question of "Do you need a business license for an online store or to buy wholesale?" the answer is: It depends. It depends on all the same factors determining if you need a business license in your area or not.
No matter what industry you are in, even if you just want to sell muffins to your local corner store, you should always research whether or not you need a business license and/or a seller's permit. Your local chamber of commerce can usually help to fill you in on what permits and licenses you might need in order to start your business.
- California Department of Tax and Fee Administration: Do you Need a California Seller's Permit?
- Fundera: The Best State-by-State Guide to Business Licenses and Permits
- FreeAdvice: What Are Seller’s Permits?
- Avalara: When Do California Sellers Need a Seller's Permit?
- Santa Clara University My Own Business Institute: Licenses and Permits