Why do I need a State Sales Tax License?

Have you been searching the web for wholesale merchandise? There are literally thousands of companies who either specialize in specific categories of wholesale merchandise or offer multiple lines of merchandise to meet your reselling needs. Many of the web's largest wholesale distributors have online catalogs where you can shop and compare pricing.

Have you noticed that some wholesale companies/websites require you to register as a wholesale buyer before you are able to view product pricing? Companies who ask you to register are doing so for a few reasons:

1. They want to protect wholesale pricing from competitors & end consumers
   
2. They want to make sure you are actively engaged in reselling the merchandise you want to purchase
   
3. Marketing: The contact information you provide upon registration will allow the wholesaler to email or mail catalogs, latest offerings etc

I personally like the idea of a wholesale company keeping pricing exclusive to resellers and feel more wholesalers should practice this requirement. It does take some time to fill out the registration forms, but typically once completed you will have instant access to inventory pricing.

Lets take a closer look at step 2 above as this is where some questions will arise. Many wholesale companies will ask you for a resale number or State Sales Tax ID. Providing your State Sales Tax ID will prove to the wholesale company you are actively involved in reselling merchandise (Retailing) and thereby will allow them to sell to you without charging you sales tax.

Why do I need a State Sales Tax ID?

If you live in a State that charges sales tax and you are retailing merchandise to someone that resides in your State you must collect sales tax. The sales tax you collect must be paid to your state on a quarterly or yearly basis.

If you are retailing your merchandise and shipping out of your home state you do not need to collect sales tax. For example, if your business is located in California and you sell and ship to Texas...you do not need to collect sales tax.

Applying for a State Sales Tax License is very easy and in most cases inexpensive. Most States allow you to apply online, start by visiting USA.gov which will provide you with a direct link to your States' government website. Once you click on your individual state there will be links to information relating to licensing and starting a business specific to your state of residence.

Once you have applied and been issued a Sales tax license for your business you will be given specific information about how to collect sales tax, reporting and general information relating to tax laws.

If you plan on selling merchandise in bulk (wholesaling) you will want to ask for your customer's State Sales Tax license information. You must keep an accurate record of the sales you make to resellers where you do not charge sales tax.

This requirement is why the wholesale company you are thinking of buying from is asking for your specific resale number...otherwise they will have to charge you sales tax on your wholesale purchase...


Here is an example of a California Sellers permit. Each State that collects sales tax will issue a permit to resellers once you provide specific information about your business.

This post brought to you by:

The Closeout Industry - A wealth of information centered around wholesale closeout merchandise. Author and consultant, Robert Cyr has educated thousands of entrepreneurs offering advice relating to sourcing name brand merchandise far below wholesale pricing.