If you are starting a business in California and intend to wholesale goods to retailers, you'll need a wholesale license if the goods are taxable. There may be other requirements too such as a tax accountant. You'll also need to check with your city and county to see if you need a business license through them.
Starting a wholesale business can be an overwhelming process if you don't know the ropes. Even getting a California seller's license can seem complicated. A little inside information makes the procedure much smoother.
Do I Need a Wholesale License?
Before going through the process to attain a wholesale license, you'll want to make sure you need one. Do you simply want to be able to sell items within California? If so, you need a seller's permit. If you are looking to buy items from a manufacturer in bulk or from a wholesale dealer without owing taxes, a resale license is what you need.
The bottom line is that if you plan to sell taxable goods, no matter who you'll be selling to and whether your business activity includes selling retail or wholesale, you will definitely need a seller’s permit or wholesale license since they are the same thing. It also doesn’t matter whether you’re an individual, a partnership agreement, or a corporation—you must have a permit in the State of California in order to sell tangible goods.
According to the governor's office at "go biz", if you have a salesroom, office, warehouse, or any other business, even if the location is temporary, you must have a license. All business sales representatives, canvassers, agents, or any retail-level sales, are required to be licensed. That also goes for anyone receiving rent payments as a business or otherwise.
What's the Difference Between a Seller's License, Wholesale License, and Business License?
A resale license is the same thing as a wholesale license. It is required in order to buy large quantities of items. A seller’s permit allows you to sell taxable merchandise.
A business license just allows you to operate your business in California while a seller's permit allows you to sell merchandise that is taxable.
If you're going to be selling goods, you'll need to apply for both - a seller's license and a business license if you're going to conduct business and sell goods that are taxable. If any of those things apply to you, you are ordinarily subject to being licensed under the state's law.
Steps to Obtaining a Seller's Permit
A California wholesale license (also called a seller's permit) is simple to acquire but failure to obtain one is a mistake you don't want to make. Penalties run high for selling without a seller's permit and besides, who wants to start their business off on the wrong foot? If your business closes down because you weren't properly licensed, you will wish you had followed the legal procedure. Besides, you'll save money by not paying sales tax.
Here are some simple steps to help you through the California seller's permit process.
Where and How to Apply for Your Seller's Permit
You can complete the steps to conveniently obtain your seller's permit in several ways - online, in person, or by mail. It's fast and free.
The official website is California Resale Certificate. An online search will usually yield private companies that specialize in assisting in the application process. You can always do business directly with the official website, however.
The application, also known as the online form, can be printed and scanned or filled out online. You can view the information on the main menu. Some private services offer expedited delivery, but they also charge labor costs. They will walk you through the process as part of the service. You will need to give your social security number, so if you aren't comfortable doing that online, look at the other alternatives.
First, you'll need to obtain a copy of the application and fill it out. You can the application sent to you by calling 800-400-7115. Fill the online form out and mail it. There will be one location address listed online for California.
If you'd rather, you can visit a physical location at one of the Board of Equalization's field offices where generally on the same day, you can obtain business licenses. You'll find special information packets at the California Department of Equalization's office. In the packet will be a registration application.
Requirements for a Seller's Permit
The State of California requires all applicants to provide some basic information about their business if they are to acquire a seller’s permit. The state will always demand basic information, but you may also be asked additional questions as it is on a case-to-case basis.
Your social security number, bank account information, and projected monthly sales will need to be listed as well as your full name and date of birth. You may be asked about supplier information, your state ID number, corporate number, business name (if different from your full name), military ID information, federal employer identification number or employer identification number, personal references, tangible personal property, labor charges, and other business information deemed vital.
If you plan to sell tangible property, operate from more than one location, receive rental payments, sell construction equipment, or deal with alcohol or tobacco products, expect to be asked more extensive questions than businesses than are asked for general applications.
Description of Item or Items
The long and the short of it is that businesses that purchase items they plan to sell won't be subject to sales tax on that purchase when doing business in the state if they obtain a wholesale license. The California Department of Tax will need a description of the item or items you are going to sell that you wish to avoid paying sales taxes on. Be sure to include all the required information in addition to extra details as well - to be on the safe side and to avoid paying taxes on the items you'll be selling.
When applying for a California seller's permit as a sales representative, you will need to not only list the item or items for sale, but you'll also be required to describe them. It is best to include more information than is needed rather than to give too little.
If you are selling more than one product, each product will need to be described to obtain a seller's permit to obtain a resale license for each one. For example, you will need a separate permit for selling real estate or taking a security deposit for rental property than you do for getting a resale certificate to sell tobacco.
Tax and Fee Administration
When you apply to avoid paying sales tax on items you plan to resell, the request is taken seriously by the tax and fee administration. It is their job to collect tax, so it is imperative to complete your tax information form in its entirety and to do so correctly.
There is often confusion on the status of businesses such as the difference between corporations, and corporate officers, when corporate officers are excluded applies, limited liability companies, and other specifics on how one is engaged in business. You can check to see how your business is registered which will reveal what to disclose when applying to avoid paying sales tax.
When engaged in business as a seller, it is vital to charge the correct amount of sales tax from your customers. The State of California has set prices so do be sure yours is current by checking with the tax department.
Temporary Permit and Sales Tax
If you are going to operate a resell business for less than ninety days at your business address or anywhere else, you can still avoid paying sales tax on items you purchase for resale. You will need a temporary seller's permit in order to do so though. Fireworks stands, garage sales, and holiday pop-up shops are examples of businesses that would operate under a temporary status.
Wholesale Perks and Obligations
Along with the mandatory reseller's license, you'll receive your share of perks as a business with a wholesale license. If you have plans to sell within the State of California, get yours today.