This article is going to break down into simple terms what exactly a reseller permit is, and whether or not you actually need one to sell online.
When running a business, either a physical or an online store, there are so many regulations to consider and legalities that must be adhered to, it can often be overwhelming.
One of those is reseller permits. But don't worry, we've done all the research so you don't have to.
We'll be talking state requirements, local laws, and the process for obtaining a reseller permit.
It's crucial that your business follows all local and state laws regarding permits as it showcases to your customers that your business is legitimate and trustworthy.
Navigating regulations can be a daunting process, that's why we're here to try to make the process as smooth as possible for you. A couple of things we'll cover:
- What is a reseller permit–and do you need one?
- Reseller permit VS seller's permit–what's the difference?
- Who needs a reseller permit?
- Steps to getting a reseller permit
- Benefits of having a reseller permit
- Things to avoid once you have your permit
What is a reseller permit–and do I need one?
If you're reading this article there's probably one question you're asking yourself - 'Do I really need a reseller permit?'
Well, in short, the answer is yes. But we are about to dive into all your unanswered questions and clear up a thing or two.
Before we begin, it's important to know the true definition of a reseller permit.
A reseller permit, in simple terms, is a document that's issued to you by a state or local tax authority and allows you to buy products for resale from wholesalers or manufacturers without having to pay sales tax. It's also sometimes referred to as a resale certificate or sales tax permit.
The permit essentially confirms that you intend to resell the products you have just bought. It's then your responsibility to collect the appropriate sales tax from your customers and remit the sales tax to the state.
When you're buying goods from a seller with the intention of reselling their products, you must present your reseller permit to the vendor so you can have a tax-free sale. The vendor will then report the sale to tax authorities.
Every state in the US will have their own requirements and processes for obtaining reseller permits. Some states may have specific forms to fill out, while others might require additional documentation. It's important to take the time to familiarise yourself with local laws and requirements.
Reseller permit or seller's permit–what's the difference?
It's easy to blur the lines when it comes to seller's permits and reseller certificates, however, the two are not quite the same.
As mentioned above, the resale certificate means you're exempt from paying sales tax on items that you have bought for your business with the intention of reselling.
Meanwhile, a seller's permit, (sometimes called a sales tax license), is necessary for any business, either online or with a physical presence, that has the intention of selling goods or services.
The seller's permit gives you permission to collect sales tax from customers on behalf of the state. It's then your duty to remit sales tax back to the government.
So whether you sell private label supplements, private label pet products, or even private label skincare, you'll need to do some research.
Again, please ensure you check with your local state regulations to see if you really need a seller's permit.
Who needs a reseller's permit?
Whether you have an online business or a physical store, if you plan to resell goods, you'll need a reseller permit. However, laws and requirements do vary across different states, so it's recommended you do your research to find out what tax laws are active in your jurisdiction.
How to get a reseller permit
So, now you know exactly what a reseller permit is, you're probably wondering how to get your hands on one.
Before obtaining a reseller permit you'll need to follow these steps.
Register your business
Firstly, you must ensure that you have your business license. Your business must be legally registered with your state's business registry. Once that's done and dusted, you can move on to the next step.
Fill out an application form
Usually, permits are obtained by visiting your local state revenue website, however, some states don't issue a separate reseller’s permit, but will instead use your sales tax identification number.
The best thing to do is check the Department of Revenue's website for application instructions. As every state has its own requirements, it's difficult to say exactly what will be expected from you.
It should be a relatively straightforward process whereby you apply for a permit or certificate directly via the website by filling out an application with details such as your business registration, business locations, and your tax identification number.
Some out-of-state vendors might accept a reseller permit from your home state. Otherwise, you may have to fill out a separate form, (boring, I know), using your tax identification number.
Several states don't accept out-of-state resale certificates, so make sure you do your research beforehand.
Receive your permit
Once your application has been approved, you'll receive your shiny reseller permit and will be able to make tax-exempt purchases, hooray!
That process wasn't so bad, was it?
Benefits of having a reseller permit
There are several benefits that come with having your reseller permit.
Increased cash flow
By not paying sales tax, not only will you be saving money when buying products from wholesalers, manufacturers, and other suppliers, but you'll also maintain a better cash flow as a result. You can then use this extra cash flow to put it into other places of your business.
Boost company status
Having your reseller permit improves your company image and shows your customers your business has integrity and reliability by following legal requirements. It also enhances your credibility with suppliers, demonstrating you are a legitimate business entity.
Avoid legal implications
Compliance with laws is always a good idea anyway, I mean, duh. But, operating with an official reseller permit and adhering to state laws means you can avoid any hefty penalties or legal fees associated with improper handling of sales tax.
Increased inventory
With reduced costs, businesses can afford to purchase more inventory, potentially offering a wider variety of products to customers and increasing the potential for higher sales.
Things to avoid
Many good things come with obtaining a reseller permit, but it's equally important not to take advantage of any of its perks and avoid some common mistakes.
Perhaps one of the biggest no-no's when it comes to using your reseller permit is to avoid using it for personal purchases - that means no, you can use it to upgrade your entire wardrobe without paying tax on the goods.
It's vital that the resale certificate is only used for business-related transactions. Mixing business with personal affairs is never going to end well, and could lead to legal complications.
Failing to keep accurate records is another common mistake business owners make. Staying on track and keeping a detailed record of all transactions where your resale permit was used will be paramount.
Not only does it allow you to keep track of day-to-day business activities, but it can be useful as evidence if facing any audits in the future.
Finally, make sure you don't let your seller's permit or reseller certificate expire. Resale certificates, like most things, usually have an expiration date. Forgetting and failing to renew it could cause some issues. Stay proactive and keep track of the expiration date so as to avoid any issues.
Conclusion
If you're a business owner who plans on dealing with wholesale traders and purchasing goods for resale, a reseller permit is essential for conducting business.
A reseller permit provides a range of financial, operational, and market expansion benefits. By understanding and leveraging these advantages, you can enhance your profitability and ensure smooth, legally compliant business.
Whether or not you need a reseller permit to sell online will depend on your business location, local state requirements, as well as the type of products you're selling.
Be sure to research the registration requirements in your area to find how you can apply for a permit. It's then your responsibility to collect the sales tax on goods bought by your customers and present this to the Department of Revenue.
You should place the physical document somewhere where it will be clearly visible to your customers and to the public. Show it off to your customers, it shows your reliability and legitimacy as a business owner.
Navigating through the tedious realm of business permits and licenses can feel overwhelming at best, but at least understanding the process of getting one is a significant stride in mastering this terrain.
Ultimately, the advantages of obtaining a reseller permit are a no-brainer. So, what are you waiting for?
FAQs
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