Texas is one of the best states to do business in. There are 2.8 million small businesses in Texas. If you are opening a business in the State of Texas and want to do so without paying sales tax on the goods you plan to resell, you will need a wholesale license.
A Texas wholesale license, or sales tax permit, is required anytime you are making Texas sales because you will have to pay sales taxes on the items you sell but, with a Texas wholesale license, will not have to pay when you shop for goods with wholesale prices.
There are big benefits to having a Texas sales tax permit and big penalties and punishments if you conduct such business without a reseller license. Read on to find out all you need to know about wholesale licenses within the state of Texas.
What is a Texas Wholesale License?
A Texas wholesale license is commonly known as a sales permit, resale certificate, or seller's permit. It is issued by the State of Texas and is required by all businesses when purchasing items without paying sales tax. It also qualifies a business entity to purchase products for wholesale discounts.
Do I Need a Texas Sales Tax Permit?
If you are a business that is buying or selling in Texas, you must have a Texas resale license. If you are just wanting to purchase goods from a manufacturer in bulk or from a wholesale dealer that doesn't charge sales tax, a resale license is what you'll be wanting to secure.
When you are selling taxable goods or taxable services, whether you are selling to retailers or to wholesalers, you will need a sales tax license (wholesale license) because you will not pay sales tax upon purchasing your wholesale goods but will collect sales tax from your customers when you sell your products.
Who Needs a Wholesale License?
Regardless of if you are selling wholesale to the public or selling retail goods, you need a wholesale license. Those in a Texas corporation or any corporation setting, partnership agreement, sole owner, or who are a legal business will need business licenses and a resale certificate (wholesales licenses). Those who do business in a salesroom, office, warehouse, and even online businesses need a wholesale license too.
Additional Tax Permit Information
In addition, the Texas comptroller demands that in order not to pay initial taxes on goods on taxable items, you must have a wholesale license. (sales tax permit). If you receive rent payments or are selling tangible personal property (especially if doing so with a business license or on a regular basis), you'll need a tax permit in Texas.
Business License vs. Seller's Permit
A business license will allow you to conduct business in the state, but a tax permit (seller's permit or reseller permit) is required to avoid paying taxes when you buy wholesale products and then applying a tax to customers when you sell goods.
What is a Wholesale Certificate?
A wholesale certificate is a formal document or certification that gives you the right to not only purchase in bulk for the wholesale price but to sell and add taxes onto your goods as well.
Sales and Use Tax
Sales and use tax are similar but not the same. Both require a license in Texas if they are going to be charged to a buyer from a seller. Taxes on sales is the part of Texas sales and use that describes the money that is added onto the cost of a product during a sale and is typically paid by the customer.
What is Sales and Use Tax?
Use tax is a nonrecurring tax that is added on to sales tax for the storage, use, or consumption of taxable services or to tangible personal property in Texas.
It is commonly levied on rental charges or the sales price of a property when no sales tax has been paid. In order to collect the tax, you need a use tax permit. You may also owe taxes on a security bond.
What is the Tax Rate in Texas?
According to the Texas Comptroller of Public Accounts, the current state rate is 6.25 percent but depending on where you store, use, or consume the item, up to 2 percent may be tacked on.
Is a Tax Permit and a Sales Tax Permit the Same?
A use tax permit and sales tax permit go hand-in-hand but are technically different. They typically always accompany one another and can be accessed at the comptroller's office.
Temporary Business License
If you are simply having a yard or garage sell or setting up a pop-up stand for the holidays or core business activities (permanent or not), you are probably wondering if you still need a seller's permit. Even temporary sellers operating for less than ninety days need seller's permits.
How Taxes Work in Texas
Each state operates to its own specifications where taxes, use tax permit licenses, and reseller certificate formalities are concerned. In Texas, the Texas Secretary of State at the Texas Comptroller's offices is the official who serves in collecting over 60 separate taxes, assessments, and fees - including local sales taxes and sales and use tax.
How to Obtain Seller's Permit in Texas
Applying for a reseller license in Texas is simple as long as you are prepared. Having your license in Texas is a must if you are going to buy wholesale and sell your goods.
Locate the basic information you will need for your Texas application such as your social security number, business address, bank account information, tax id, employer identification number, and contact information of personal references. Be aware that you may also be required to provide information from business records such as if you are a sole proprietor or part of a partnership.
Be prepared for additional questions if you hire employees, sell tobacco products or alcohol, are applying for a Texas resale certificate for more than one business, or have other more complicated factors.
Go onto the Texas wholesale license website (Texas Comptroller website). You can apply for your wholesale license in Texas three ways:
You can register online to get a wholesale license. Simply complete the form and click to send it in. Please note that you will need to provide personal information over the internet, so if you aren't comfortable doing so, there are two other options for applying for your wholesale license.
There are various locations you can visit to apply for your wholesale license in Texas. The information is available online. Oftentimes, you can get your resale certificate the same day.
On the site where the online application is, you will see information if you prefer to mail the form rather than acquire it online.
Why is it Required to Pay Sales Tax?
Adopted in 1961, sales tax is used for multiple things in Texas. Supporting the public education system and health care are among the top priorities.
With a wholesale certificate, you won't owe sales tax when buying but you will when selling. Typically, you'll collect that from your customers.
The Benefits of Tax Permits
While attaining your wholesale license isn't exactly a picnic, the benefits are many. You'll be able to buy wholesale goods in large quantities and won't be taxed for them. In addition, you'll miss out on the huge penalties for reselling without a permit.
Getting a wholesale license in Texas is easy if you simply follow the steps and suggestions above.