Are you looking to get a wholesale license in the State of New York? If so, there are some things you need to know beforehand and a few things you'll be required to do as well.
The process isn't a difficult one, and the end result of not having to pay sales tax on your wholesale purchases is well worth the effort.
Combined with a Certificate of Authority, you will be well on your way to having a reputable business.
What is a Wholesale License?
A wholesale license is the same thing as a seller's permit, a sales tax permit, and a resale certificate. It is a state-issued business document that gives an individual the authority to legally purchase goods in bulk from manufacturers.
You can acquire your license on your own or seek assistance from a law firm or business that helps get them as well as a Certificate of Authority.
You will save money by doing it all yourself.
What Does a New York State Seller's Permit Allow For?
The New York resale certificate also allows for the reselling of the goods. In addition, the sales tax certificate gives the holder tax-free status.
In return for not paying sales tax on the wholesale goods, the holder is obligated to collect sales tax at the point of sale when they conduct business reselling.
About New York State Sales Tax
The State of New York is one of many states that charge a sales tax on retail goods. In fact, most states do charge tax on the sales of goods and services within their state.
With a resale certificate, you are not charged the tax when you purchase wholesale, but you must pay the tax department from the tax you charge your customers for sales tax purposes.
Everything must be done legally and responsibly.
What Is "Sales and Use Tax"?
In addition, New York state has a "Sales and Use Tax" which is an equivalent tax that is sales taxes collected for purchases outside the state.
The reason for use tax is so out-of-state retailers don't take advantage of the fact that New York has sales taxes whereas their particular state might not.
According to the tax department in New York, if you pay sales tax, you don't owe sales use tax and vice versa. You must have a Certificate of Authority.
For businesses, if you don't charge your customers, you are responsible for the tax payment.
New York State Sales Tax Details
The New York resale certificate is a Certificate of Authority that makes the business holding it exempt from taxable sales.
The sales tax rate in the state ranges from 7% to 8.875%, with the majority of the counties and cities charging 8%.
To clarify. the state charges 4%, and each county then tacks on an additional amount for taxable services and goods. That rate is between 3% and 4.5%.
But that's not all! Counties within the metropolitan commuter transportation district (MCTD) also charge a .375% tax for motor vehicles.
What are Sales Tax Purposes?
Sales tax money is used for projects the state sees fit to use it on. It is collected from individuals and businesses.
Resale certificates give buyers the authority to not pay taxes personally, but all businesses must pay them eventually after their goods are sold to a customer or if selling to other business owners.
How to Obtain a New York Wholesale License
A New York certificate of resale is a blanket certificate that allows you to buy large quantities without paying sales tax. It is reserved for businesses and corporation entities that qualify.
The first step you'll need to take is to apply with the Internal Revenue Service (IRS) for an Employer Identification Number (EIN).
Get an EIN
It is imperative that you obtain an EIN to avoid taxation because you cannot qualify for a wholesale license without an EIN. There are other licenses and permits you'll need an EIN for as well, so you'll be well on your way to doing business in New York once you complete this process for your business.
Check New York State Requirements
Any seller who wants to be legally operating in New York must obtain a wholesale license or resale certificate. To do so, you'll need to fill out and submit a resale form. You'll need your business address and other identification information on hand. And you'll need a Certificate of Authority.
Download the New York Resale Certificate Form ST-120
You must be registered as a sales tax vendor and hold a valid Certificate of Authority, and be making purchases on tangible personal property or services that will be transferred to your customers or resold to customers.
Downloading the Certificate of Authority is not difficult if you have a printer. If you are going through a law agency, they will tend to this step on your behalf.
Businesses Fill Out the Form to Register
When applying, you must provide pertinent information on the form for a resale certificate, such as your name and address and the name and address of the seller.
If you intend to continue doing business with the wholesale vendor or will have other vendors, your company can go under a blanket certificate option.
For your resale certificate application, you will need to describe the type of business shop or store you will have and the primary products you intend to sell.
Specify if you have a sole proprietorship or the only person in the business or have a business partner. Whatever your business situation is, state it clearly. You may be asked about employees.
Certificate of Authority Number
Add the Certificate of Authority Number of the vendor or vendors on the form when prompted.
Select the Purchase Type
You will then be subject to select whether the purchase is being made for a service or resale, restaurant-type food, heated food, or heated drink for resale, or if it there is tangible personal property or certain services for resale - like buying a car in an auto shop that you are going to sell for example.
You will need a Certificate of Authority in such a case when there are goods sold.
If you don't live in New York, you'll be required to enter your sales tax ID and your state of registration.
Certify and Sign to Register
Lastly, the purchaser will need to certify the property is for resale from the seller (vendor or vendors) and then sign and date to register with the department.
You may need to answer additional information on your financial situation.
Note: Many applicants opt to turn to legal services for help in getting their licenses, but as long as you follow the instructions on the website, you can fill out the form on your own.
How it Works
Unless you are operating under a tax-exempt business status, most items you buy will have a sales tax. When you buy goods, in most cases, you won't actually pay taxes on them on the date of sale, but upon resale, you'll need to charge your customer, and that resale money will be used to ultimately pay the taxation.
Keep in mind that there are some goods that are not subject to taxation. You will need to check the official New York website to find out if certain food and drug items are exempt.
You must have a Certificate of Authority in hand to use it. You cannot simply say you have one until you really do.
Failure to have a valid Certificate of Authority to take advantage of making taxable sales. Stiff penalties are charged of up to $10,000 for those who sell without having received the form.
When you are registered, you will be responsible for paying sales tax and will be obligated by law to file and pay sales taxes on the date the payment is due.
New York does have a 20-day grace period in its financial plan.
With your sales tax exemption certificate, you will also be required to collect sales tax. That means you will need to know the exact amount to charge and pay the state.
A Certificate of Authority is very valuable and should never be misused.
There are no fees for applying for a resale certificate.
The process of obtaining a Wholesale License in New York is straightforward. You should be able to breeze through it with the information above and can begin utilizing your resale certificate.
With your certificate in hand, your business is now official.