Is a Wholesale License the Same as a Seller's Permit in California?
California doesn't require anyone to take out a wholesale license. That's just a misnamed California seller's permit. Wholesale vendors need a seller's permit if they buy and sell goods that are subject to sales tax when sold retail. Stores and other retail sellers need the same permit. You'll probably need added licensing and paperwork beyond your permit.
You have to apply for a seller's permit if you're in business in California selling or leasing tangible real property that would be subject to sales tax if you sold it retail. State law says that being engaged in business in California means:
- You have a physical place of business in California, including an office, sales room or warehouse. Temporary locations count.
- You have a sales representative or agent operating in the state.
- You receive rental payments from the lease of tangible personal property in California.
"Tangible personal property" sounds bureaucratic but it's actually literal: it means personal property you can see, weigh, measure, feel, touch or otherwise perceive with your physical senses. This includes cars, boats, books, clothes, gravel, coal, furniture and blueprints. It doesn't include buildings, real estate or intangible property such as software. State law includes a long list of special cases; organs for transplant don't count as tangible personal property, for instance.
The rules about what's subject to sales tax can get similarly complex. Books, clothes and furniture are subject to sales tax, for instance. If someone crafts a diamond ring or draws up blueprints for a customer, there's a sales tax on the labor to create the product. If you're in any doubt whether your line of goods is taxable, the state tax authorities can tell you.
A California seller's permit is not the same thing as a business license. Business licenses are local permits authorizing you to open a business in a given city or county. There are parts of the United States where you need a state business license as well, but California isn't one of them. You'll have to contact your county or city licensing department to ask if you need a business license and how to apply.
You can apply for your wholesale permit online. You may need multiple permits if you have multiple business locations, but the state will figure that out once they get your information. There's no permit fee.
If you later go out of business, take on or get rid of a partner or relocate your place of business, you have to update your information with the state.
You have to take out a California seller's permit if you deal in sales-taxable goods, but that's not the same as having to charge sales tax. When you resell your wholesale stock, you can avoid having to charge the customer sales tax if the customer has a California resale certificate including:
- The name and address of the buyer.
- The buyer's seller's permit.
- A description of the goods they bought from you.
- A statement that the buyer is purchasing the property for resale.
- The document must be dated.
- The purchaser or their representative must sign the certificate.
When you buy goods to resell to retailers, filling out a certificate for yourself spares you from paying sales tax. If you make several purchases from the same vendor, you can simply keep one permit on file to cover all the transactions.
This tax break is only for resellers. Say you buy office furniture from a manufacturer and plan to sell most of it to stores but decide to keep some to furnish your office. You have to distinguish the stuff you keep from the items you're reselling. The ones you keep are subject to sales tax.
As a permit holder, you are subject to a state audit if the state tax authorities want to confirm that you're buying and reselling the way you claim.