If you own a retail store, you might have thought about buying products from a wholesaler to help save on costs for your business and increase your profits. Because when you purchase products from manufactures in bulk, you don’t pay sales tax for the goods you sell to clients. However, when you are not supposed to pay sales tax, the International Revenue Service (IRS) requires you to do something to buy these items wholesale—the wholesale license. So, what are the requirements for a wholesale license? How one can get it?
3 Steps to Get a Wholesale License
Follow these three steps to obtain a wholesale license.
1. Register Your Business.
Whether you have a small or large store, an online company, or a home-based business, you need to legally register your business in order to get a wholesale license. To complete this step, apply for an Employer Identification Number (EIN) from the IRS. It is also called Federal Tax Identification Number that allows you to conduct your business and hire workers legally. It is mandatory to have this number even if you don’t have to employ others.
It can take up to 2-3 weeks for your application to process and get the Employer Identification Number (EIN). You can’t do business legally until you have this number.
2. Obtain a Sales Tax License.
When you’ve fully registered your business, next, you need to obtain a sales tax license. This license allows you to charge sales tax on the products you sell or the services you provide. You can contact your nearby (state) tax office to get a sales tax permit. You’ve to complete some additional requirements depending on in which state you live. If you’re not able to determine what license you need to obtain in your location, consider consulting with the Small Business Administration.
3. Apply for a Wholesale License.
After obtaining a sales tax permit, contact your state’s revenue office in order to get a wholesale license. It’s the license that exempts you from paying sales tax on the goods you buy. It means that with a wholesale permit, you don’t need to pay taxes on the products you buy in bulk and then resell them through your business. You’ll have to pay some amount of fee that varies depending on where you live—consult the tax office for further additional information.
The Bottom Line
All the requirements for a wholesale license, I’ve given above. Complete them and have your wholesale license now.
Reselling wholesale products through your business is a great way to raise your company profits. However, you need to have some necessary licenses to remain in compliance with Internal Revenue Service (IRS) or local laws. What are you waiting for then? Start building the dream of your business now.
Common FAQs related to a Wholesale License
What is a Wholesale License?
It’s a license that enables you to buy products in bulk from manufactures at a low price and then reselling them in smaller quantities by making some profits on each product.
Why do you need a Wholesale License?
With this license, you don’t need to pay sales tax on the goods you buy from manufactures. It means that with a wholesale permit, you don’t need to pay taxes on the products you buy in bulk and then resell them through your business.
What are the requirements for a Wholesale License? (in brief)
You need to register your business first. Then apply for obtaining a sales tax permit. After this, contact your state tax office—congratulation, your wholesale license is in your hands.
Do I need a Wholesale License to buy wholesales?
Yes, in order to buy products wholesale, you need it. Otherwise, you’ll have to pay sales tax on every product you purchased.