Are you a self-starter with strong communication skills? Do you know the ins and outs of a particular product or industry? If so, you might consider starting your own business. Wholesaling can be an excellent career option for those with a strong entrepreneurial spirit. As a wholesaler, you'll have a chance to build lasting relationships with other business owners, make tax-free purchases from hundreds of sellers and earn steady revenue. Before getting started, though, it's important that you take the steps needed to comply with the law.
What Is a Wholesale License?
A wholesale license gives you the right to purchase goods in large quantities from producers and sell them to retailers. It is also known as a seller's permit, wholesale permit or resale license.
Without this document, you will not be allowed to resell products. Furthermore, a wholesale license can help you save money since you won't need to pay sales tax out of your own pocket for the goods you're selling to other businesses.
Another advantage of obtaining this permit is that you'll be seen as trustworthy by manufacturers and customers alike. Producers who sell wholesale goods want to make sure they're dealing with a business that will promote and distribute their merchandise. Retailers, on the other hand, may want to see your license to ensure that you're compliant with the law.
Seller's Permit vs. Business License
Beware that a seller's permit is not the same as a business license. The first one gives you permission to resell goods that you've purchased from manufacturers or other wholesalers. A general business license, on the other hand, grants you the right to run a business in your city or state.
A single jurisdiction often requires more than one business license depending on your location and type of activity. Before you start a company, contact your local City Hall or access SBA.gov to find out what permits are needed. Failure to comply may lead to hefty penalties and even force you to close your business.
Even if you have a business license, you still need to apply for a wholesale retail permit. The requirements for obtaining one vary among states.
Apply for a Wholesale License
In order to apply for a wholesale retail license, you first need to register your business name and choose a legal structure. Unless you’re going to store the goods at home, you may need a warehouse or another facility.
Depending on what you're going to sell, you may require additional permits. For example, if you plan to purchase frozen desserts in bulk and then resell them in New York City, you must obtain a permit from the Department of Health and Mental Hygiene.
Another requirement is to get a tax ID number, which can be obtained from the IRS. You can submit your application online or in person. Next, open a business bank account using this number. Once these steps are completed, you can apply for a resale license at your state’s Department of Revenue.
California-based businesses, for instance, can request this permit online. You must provide a valid ID card or driver's license, your Social Security number and tax ID number, your contact information and the name, address and phone number of the person who maintains your books and records. Although you won’t be charged any fees, you may need to make a security deposit.
If you plan to run your business in Florida, you can apply for a resale license online. The certificate is valid only for one year and can be renewed afterward. Since these rules vary from one state to another, research your options beforehand.
Beware that manufacturers who live in certain states, such as California, Maryland and Illinois, cannot accept out-of-state resale certificates. Therefore, you will need to apply for a wholesale permit in each of these states in order to be able to conduct transactions.
- City of New York: Wholesale Business Registration
- City of New York: Manufacturing of Frozen Desserts – Retail
- California Department of Tax and Fee Administration: Information Needed to Apply for Permit, License, or Account
- California Department of Tax and Fee Administration: Publication 107, Do You Need a California Seller's Permit?
- Florida Department of Revenue: Florida Business Tax Application (DR-1)
- TaxJar: 9 States That Won’t Accept Your Out-of-State Resale Certificate