Manufacturers, wholesale distributors and retailers all benefit from having a wholesale license. With a wholesale license, they can purchase ingredients, parts or finished products without paying sales tax. Sales tax is supposed to be paid only one time. In the end, it is the retail customer that ultimately pays the sales tax to the local, county and state governments.
Another benefit of having a wholesale license is that it allows you to purchase goods directly from wholesalers and manufactures. This can result in significant cost savings because you can purchase items at a lower “wholesale price” than what is offered to retail customers. Wholesalers and manufacturers will not sell products wholesale to customers that don’t have a wholesale license. If they did, they would have to collect and pay sales tax. Wholesalers are required by law to document all wholesale sales. As a result, expect them to require verification of your company’s wholesale license before proceeding with a sale.
It is important not to misuse your wholesale license by using it to purchase products for personal or company use. A wholesale license is only supposed to be used to purchase items for resale or for leasing to retail customers. Be aware that wholesale sales are routinely audited. If an audit discovers that you used your wholesale license to purchase items for your business or for your own personal use, your license will be revoked, and you’ll be subject to taxes and severe penalties.
There can be a lot of confusion with regards to the terms that are used interchangeably with wholesale license. In some states, the terms resale license or resale certificate are used. The names differ from place to place, but the common element is that they allow you to buy goods without paying sales tax. Many people also are confused about the difference between terms that distinguish between having a license or certificate to purchase items for resale without paying sales tax and a license or permit that allows you to sell items retail. For example, in California, you need to register for a resale certificate in order to buy products wholesale and avoid paying sales tax.
A seller’s permit is required to sell items retail. In California, you are required to register for a seller’s permit whenever you sell products, motor vehicles or tangible personal property. It does not matter if you bought the items retail or wholesale. When you sell these items, you are required to collect and pay sales tax to the California Board of Equalization on any taxable sales. California even goes as far as requiring you to have a seller’s permit if you have more than two garage sales or three or more sales on internet auction sites such as eBay or Craigslist. Selling merchandise, goods or other items in California without first getting a seller’s permit violates the law and subjects you to fines and penalties.
If your business is located in some states, you don’t have to be concerned about paying sales tax. However, you will need a resale certificate in order to buy products from wholesalers and manufacturers outside the state. Alaska, Oregon and Montana don’t collect sales tax. In Alaska, however, local governments are allowed to collect sales tax which averages a little over one percent. New Hampshire is another state that doesn’t collect sales tax. It does, however, collect taxes on restaurant meals, lodgings and car rentals. In the state of Delaware, retail customers don’t pay sales tax for goods and services. However, retailers are required to pay taxes on their gross receipts.
When looking at the states with the highest sales tax, Tennessee ranks highest with a combined state and local sales tax rate of 9.44%. The one good thing that offsets Tennessee’s high sales tax is that they don’t have a state income tax. California (9.08%), Arizona (9.01%), Louisiana (8.69%), Washington (8.61%), New York (8.52%) Oklahoma (8.33%), Illinois (8.22%), Arkansas (8.10%) and Alabama (8.03%) round out the top ten states with the highest average sales tax.
In summary, having a wholesale license can generate significant cost savings because you can buy at wholesale prices, and you aren’t required to pay sales tax. One good website you can use to apply for a wholesale license or resale certificate is BusinessNameUSA.com. If you are interested in starting a business, I would recommend that you check out NewBusinessCreator.com. This web site simplifies and condenses the important things you need to know to be successful in business. It also serves as a portal to a number of affiliated listing sites that enable you to obtain the capital, human resources, materials and marketing tools that will be required to make your dreams a reality. So are you ready to make your dreams come true? Is it time to stop wishing and start planning your new future? If so, you owe it to yourself to visit NewBusinessCreator.com. You have nothing to lose. Access to the site is totally free. Remember that access to all of the listing sites for transforming your plans into reality can also be found in NewBusinessCreator.com. Written by: Mark J. Krupp, Cofounder of NewBusinessCreator.com httpv://www.youtube.com/watch?v=MiEcYIj8LE0