Do You Need a Business License to Buy Wholesale?

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The best prices for merchandise are wholesale orders placed with vendors and manufacturers. While discount outlets often advertise below-wholesale pricing, the truth is most of the merchandise carried by these vendors did not sell in the stores. For real wholesale costs and discounts, a business license is necessary, and usually required when ordering from the manufacturer or supplier.

Retail Versus Wholesale

Large corporations are in the business of manufacturing and producing new and innovative products for the consumer. They count on the retailer to sell the product at a profit to fulfill the demand by the consumer. It is more cost-effective for the manufacturer to provide the product to a retail sales distributor than it would be to offer the product, one sale at a time, to the general public. Shipping and packaging materials would increase the price. For example, selling and shipping 1,000 bottles of shampoo for $1 to a retail store is less expensive than selling and shipping the same bottles to 1,000 customers. Manufacturers protect their retailers by requiring a business license to order the product.

Wholesale Versus Outlet

A true wholesale supplier requires a vendor's or resale license number from all of their clients. Outlet stores will sell the merchandise even if you are not tax-exempt and don't have a business license. Upon further examination, the products carried by many warehouse outlets are last year's models or styles, while a true wholesale supplier provides current merchandise. Most outlet stores have a policy of "all sales are final," while most wholesale vendors provide return or exchange policies for their clients.

Minimum Orders

Without a business license, wholesale suppliers either refer you to a retail store handling the desired product or charge the suggested retail price for each item ordered. The suggested retail price may be higher than if you bought it from the retailer. With a business license, you can order the merchandise at the lower price from the vendor. In many instances, the wholesale vendor has a minimum dollar amount or quantity for every order. Outlet and factory-direct stores allow you to buy a single item.

Payment Policies

Wholesale companies provide a payment policy for clients. While they may require new customers to pay when ordering or prior to shipping, most wholesalers set up payment invoices for established businesses. The client pays for the merchandise at the end of a specified period of time. If a supplier requires payment every time you place an order, they are most likely not a true wholesale company. A little research may reveal a true wholesale provider with lower prices.