Should I Get a Wholesale License in Texas?
If you run a business that wants to sell physical items or taxable services to customers, a business license in Texas alone usually won't suffice. Instead, you'll need to obtain a Texas wholesale license, called a sales and use tax permit, either through an online application on the Texas comptroller website or a paper application. Understanding Texas's requirements for getting a wholesale license and the reasons and benefits of doing so can help you determine if your business activities warrant the permit.
Tip
You'll usually need a wholesale license in Texas to sell most things to customers and get the benefit of making tax-exempt purchases for resale.
The Texas comptroller spells out the business activities that warrant getting a sales and use tax permit in the state. Regardless of the type of business entity you've set up, you need the permit if what you're selling, renting or leasing is tangible or otherwise taxable. This permit applies to various business situations such as franchises, flea markets, independent salespeople, warehouses and places of distribution. If you have multiple locations where you do business, such as multiple offices or stores, expect to likely need a wholesale license for each place.
The state will assign you some specific responsibilities when you get the license. For example, it requires displaying the wholesale license at your location, collecting and paying all due sales taxes, maintaining business records and filing your sales and use tax returns. If you fail to meet these standards, the state can fine you or even take away your wholesale license.
Know that the Texas wholesale license gives you a benefit when it comes to making purchases from vendors. You can avoid paying double sales tax when buying things for resale. You'll be able to fill out a resale certificate so that instead of the vendor charging you sales tax, you'll just pay it when you've resold the products.
To prepare for the application process, you'll need the Social Security numbers of each company owner or officer, your business's employee identification number (if available) and your business's North American Industrial Classification System code. You can then head to the "taxes" section of the Texas comptroller website to find links to either apply online or download the application form named AP-201, Texas Application for Sales and Use Tax Permit. Regardless of whether you apply online or by mail, you can expect to provide information such as:
- Your business organization type
- Company, owner and officer contact information
- Business registration and tax ID numbers
- Banking and payment-processing details
- Descriptions of sales activities, types, volume, locations and methods
- Business industry
- Previous owner information (if applicable)
- Signatures and identification numbers for owners, partners, members, officers and similar parties
The wholesale license cost using both methods is zero, but if you plan to sell certain items like alcohol products, check if a security bond will apply to you. It usually takes a few weeks for the permit to arrive. You'll need to update the Texas comptroller if you change locations, phone numbers or ownership and if you decide to end your business activities.
After you've received your Texas wholesale license, you're ready to put it to use when buying items to sell to your customers. To take advantage of not paying sales tax when you make purchases through vendors for resale, you'll fill out and provide Form 01-339, Texas Sales and Use Tax Resale Certificate to each vendor you use. This requires giving your business's and the seller's contact information, explaining the items you're purchasing and including your wholesale permit number.
The Texas comptroller warns that you should only file this certificate if you're sure of reselling the items and to be entirely truthful with the information you provide. Otherwise, you can face either a misdemeanor or felony depending on the amount of tax evaded. You're still liable for getting the appropriate sales tax from buyers and paying and reporting that to the state regularly.