As a retail or service supplier, you may be thinking about buying from a wholesaler to help save on costs for your business and raise your profits. Buying wholesale means you won’t have to pay sales tax for the goods you sell to clients or other businesses. However, if you aren’t paying sales tax, does the Internal Revenue Service (IRS) require you to do anything else to be able to buy items wholesale? Read on for more information on what is required for your business to purchase and resell wholesale items.
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Do I Need a License to Buy Wholesale?
Whether you have a brick and mortar store, an internet company or a home business, you’ll need a wholesale license to buy from a wholesaler. This license will give you legal permission to purchase items in bulk from producers and resell them to your customers. One of the biggest bonuses of the document is that you will not be required to pay sales tax for the goods you are selling to others.
Another benefit of getting a wholesale license is that it helps customers and suppliers see you as honest, dependable and trustworthy. It will let them know that they are dealing with a company that will do the best to advertise, market, and sell their products. They will also be ensured that you are a business that complies with local, state and national laws and follows the proper regulations to resell wholesale products.
Related: How to Buy Wholesale Products [Guide to Resale Business]
What Kind of License Do You Need to Buy Wholesale?
In order to buy items wholesale, you will need to obtain a wholesale license. Depending on the state where you business is located, it could also be called a seller's permit, a resale ID, wholesale ID, retail ID or a reseller’s license.
However, to get a wholesale license, you first need to have a few other items in place. Your business needs to be registered with the IRS and you will need to have an Employer Identification Number (EIN). You will also need a sales-tax license, a state tax ID number before you can apply for your wholesale license. More details on obtaining these items are included in the following section.
Related: How Do I Get a Tax ID Number to Buy Wholesale?
How to Get a Wholesale License
While the applications and fees for a wholesale license can vary from state to state, the basic process for obtaining a license are:
- Register your business. Contact the IRS to apply for an EIN, also called a Federal Tax Identification Number. You cannot conduct business or hire employees until you have an EIN.
- Obtain a sales-tax license. Your state’s tax office can help you with your application. Applications and fees differ depending on your state.
- Apply for a state tax ID number. This will allow you to charge taxes to your retail buyers, pay your state taxes, and pay your employees.
- Now you can get your wholesale license. To apply, contact your state’s tax or revenue office. Like the sales-tax license, how to apply and the fees for applying will vary from state to state.
Keep in mind that some states will require additional licenses and permits in order for you to buy or sell wholesale items. For example, if you want to do business in Maryland, California or Illinois, you will need to apply for a wholesale permit since these states cannot accept out-of-state resale certificates. If you are buying bulk food items and want to sell them in New York City, you will need to get a permit from their Department of Health and Mental Hygiene.
Buying items wholesale and reselling them through your business can be a great way to raise your profits. However, you’ll want to acquire the necessary licenses to remain in compliance with the IRS and any state or local laws. Obtaining a wholesale license is an IRS requirement and the most important thing you can do to help ensure your retail company does business in a responsible and legal manner.
