1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Which do I need to buy from most wholesalers?

Discussion in 'Dropshipping & Wholesale Hookups' started by Platinum350, Apr 18, 2011.

  1. Platinum350

    Platinum350 Junior Member

    Joined:
    Jan 19, 2011
    Messages:
    104
    Likes Received:
    6
    Location:
    Philly
    Hey guys,

    I've been wanting to take my "casual" reselling up a notch so am now looking into getting a tax ID. However, after researchin this I am getting confused and am not sure which ID/license/permit I need.

    I know most legit wholesalers require a tax ID...but would a Sales Tax Resale Certificate Number work as well?

    I am in PA and am not ready to get an LLC or Inc, is this a must to get a Fed Tax ID?

    Do I need a business license?

    Anyone that is familiar with this please share what exactly I need to apply for. Also, I don't really want to use my SSN as my ID.

    Lastly, I am trying to operate a small home based reselling business...mainly selling online and want to get legit wholesalers to deal with me.

    Thanks!
     
  2. Bigfriend

    Bigfriend Newbie

    Joined:
    May 9, 2010
    Messages:
    38
    Likes Received:
    4
    Location:
    Windy City - USA
    Business Licenses and Taxes for The eBay & Amazon Seller
    By Skip McGrath

    Before we get into taxes and business licenses, lets take a look at the various type of business you can set up.

    Business Types
    The most common way to start a business is called "Sole Proprietorship." When you start a business, unless you incorporate or form a partnership, then you are automatically a sole Proprietorship. This is the basic business type.

    Another approach is to actually incorporate which can be done very inexpensively in most states. Once incorporated, you can register an unlimited number of DBA's (Doing Business As), which are company names controlled by the master corporation. Once your income goes over $30,000 per year net, you may wish to incorporate for tax reasons. Also, small corporations are audited far less frequently than sole proprietors are. I use My Corporation at Mycorporation.com. They will incorporate your business for as little as $99 + state filing fees.
    There are two types of corporations: Corporation and Limited Liability Corporation. Both of these work fine for a small business. If you are going to raise money from investors, or give or sell stock to friends or family members, they a basic corporation is best. If it is just you or you and your spouse, then an LLC gives you all the benefits of a corporation and is a lot less paperwork and hassle.
    The third type of business ownership is a Partnership. I personally would avoid this as it leads to more lawsuits than any other type of business. If you wish to become partners with someone, you should incorporate and decide who gets the controlling (51%) share of stock. Equal partnerships are usually a disaster waiting to happen when it comes to small business. There is, however, a type of partnership called a limited liability partnership. This has interesting tax advantages and if you will have partners or co-investors, ask you CPA about this option.
    Business Licenses
    There are two types of business licenses and people are often confused about the difference:
    Local Business license
    State Sales Tax or Resale Number
    Let's look at each one.
    Local Business License
    A local business license is issued by the city or town you live in. These are usually only required if you have a retail location or if you have a business where customers are coming and going. I have heard of a few cities or towns that require a local business license for home-based businesses, but these are rare.
    In general you will not need a local business license if you are operating out of your home, or if you rent office space where you are just working on the computer, storing merchandise -and you have no employees.
    State Sales Tax Number
    If you are serious about buying goods from true wholesale companies, you will need a sales tax number for your state (or a State Business License number if your state does not have sales tax). Almost every state has a website that gives information about how to obtain a sales tax number. The state's websites are usually http://www.WA.gov. (This example is for Washington. Put the two-letter abbreviation of your state in the URL to access). There are some exceptions (such as http://www.myflorida.com for Florida). If you want to link directly to your state website, or learn more about state sales tax, read my free article How and Why to Get a State Sales Tax Number.
    Many states will let you apply over the web or download the forms to apply. All states charge a fee (usually less than $50). Some states require a deposit based on your annual estimated sales. The minimum deposit is usually $200-400. A few states do not charge sales tax. These states will still give you a business license number that will serve the same purpose.
    If you live in a state that charges sales tax, you must charge (or pay) sales tax on all transactions shipped to buyers in your state. Not doing so can result in fines and eventually loss of your sales tax license. When you ship to a buyer in another state, generally you do not have to collect or pay sales tax.
    When you get a sales tax number, ask your state authority for a pamphlet or instructions that specify exactly what products and services are taxable. In many states, food, vitamins, periodicals, books, etc. are exempt from sales tax. If you are selling one of these items, you need to know if they are taxable or not.
    You will need to create a Resale Certificate to purchase from most wholesale distributors. Most states have a certificate you can simply download and print out. If not, you can create one on your computer.
    Simply draft a document with the words: "Resale Certificate" at the top. Now put the following information on the page:
    The Business name and address
    Sales Tax ID number
    A description of the type of goods you normally purchase (i.e. gifts, clothing, jewelry, electronics, etc.)
    A statement that says: "This property is being purchased for resale."
    A line for your signature and the date.
    Many companies will just ask for your resale number before selling to you tax-free. Others will ask you to mail or fax a copy of the Resale Certificate for their files. If you ever sell to anyone else free of sales tax, then you should ask them for their resale certificate so you can keep it on file.
    Taxpayer Identification Number (TIN)
    This is not a license, but some people confuse it with one. A Taxpayer Identification Number is nothing more than a number the IRS uses to identify your business. Most people just use their social security number. As a business owner (even if you just started yesterday) you can also get an Taxpayer Identification Number (TIN) to use in place of your social security number. If you are a sole proprietor, this is not mandatory and you can just use your SS number. However, I strongly recommend getting a TIN. This way you are not sharing your social security number with strangers.
    If you are incorporated, or you have any employees, you are required to get a TIN number. TINs are provided by the IRS. Go to the IRS website (http://www.irs.gov) and you can download the form and mail it in (IRS Form: W-9). A better way is to call the IRS at 800-829-4933. This is the fastest way to get a number because they give it to you immediately while you are on the phone.
    Even if you don't need a TIN number it is a good idea to get one. Besides keeping you from having to share you social security number with strangers, a lot of wholesale companies will take you more seriously if you have one. But remember, you will still need a sales tax or resale number to do business.
    Once you have a business license (sales tax number) in your own name you can register a DBA (doing business as) business name. You can use almost any name that isn't already taken in your state. Once you have a DBA registered, take this to a bank and open a business checking account.
    When you select your checks, pick one of the large business-type checkbooks with room for more information than just the name and amount of the check. You can also get checks printed to use with Quicken or Quick Books if you use those programs.
    Don't forget to use your resale number to avoid paying tax when purchasing shipping supplies. Most eBay sellers add a shipping and handling surcharge to the amount they charge for shipping. Since shipping is technically part of your product cost you do not have to pay sales tax on shipping supplies.
    Lastly, once your business starts to make money, you will need to keep good business records for the purpose of paying taxes. Yes if you make money (more than $600 year profit) then you must claim the income and pay taxes to the IRS.
    Record Keeping
    You will want to keep a record of your sales and income and your product costs, shipping supplies & expenses, office supplies, hosting fees, charges for DSL, telephone and so on. All of these expenses can be deducted from your profit and you only pay tax on the remainder. I really advise using a CPA or a professional tax preparer such as H&R Block. If you use H&R, each office usually has one small business specialist. Be sure and ask for that person when you walk in.
    If you own more than one business or if you own income-producing real estate, it would be better to spend a little more money and have a CPA help you incorporate as there are several ways to incorporate and each has different tax advantages.

    How and Why To Get A State Sales Tax Number
    by: Skip McGrath
    Most states charge sales tax on goods sold within their state. A lot of eBay and web site sellers seem to wonder why they need a sales tax number. If you only run a few auctions for used goods you buy at garage sales, I wouldn't worry about it. But if you run several auctions a week, you probably should get one.
    There are three reasons for having a state sales tax number (also called a Resale certificate or Resale Number)
    1. It's the law. If you sell goods on eBay or the internet and ship them to someone in your same state, then you have to collect (charge the buyer) sales tax and pay that tax to your state. However, if you sell less than $4 million in annual sales (I think that covers most of us), then you do not have to collect or pay sales tax on sales where you deliver the goods to an out-of-state address. For example, if you live in Virginia and you sell something to someone else in Virginia or to someone out-of-state that asks you to ship it to someone in Virginia, then you need to collect and pay sales tax to the State of VA. But, if you sell the same item to someone in Florida, you can forget all about the tax.
    2. You can purchase items without paying sales tax on them. When you buy something that you plan to resell, you can purchase it without paying sales tax. But it must be for resale. For example you can not buy a new computer to use in your office and not legally pay sales tax. But if you go on Liquidation.com and buy a computer that you plan to sell on eBay, then you can buy it without paying sales tax.
    3. Most wholesale companies require a sales tax certificate . Almost all legitimate wholesale companies will ask for a copy of your resale certificate before they will sell to you at wholesale prices. Besides wholesale companies, in most states you need it to open a commercial checking account. Every wholesale trade show and merchandise mart I have ever been to requires a copy before letting you in.
    If your state does not charge sales tax, (Oregon and Idaho for example) then it will probably issue some type of Business License that will serve the same purpose for wholesale companies.
    Getting a sales tax number is very easy and inexpensive. You can link to any of the states below to get information on obtaining a sales ore use tax number. Some of the states allow you to apply on line and other will give you forms to download, fill out and mail in.
    For some reason links to government sites seem to change often. If one of these links doesn't work, simply type in http://www.xx.gov. Just replace the " x x" with the two letters of the state you want. For example, http://www.wa.gov will get you to the State of Washington web site.
     
    • Thanks Thanks x 1
  3. Bigfriend

    Bigfriend Newbie

    Joined:
    May 9, 2010
    Messages:
    38
    Likes Received:
    4
    Location:
    Windy City - USA
    Do You Need a Federal Tax ID Number?
    At some point your business will need one of these
    The government form you're feverishly filling out has a blank demanding your business's "Federal Tax ID Number" or "Employer Identification Number (EIN)." Unfortunately, you don't have one. What is a federal tax ID number, does your business even need one, and how do you get it?

    Q. What is a federal tax ID number?
    A. A federal tax identification number (also know as an employer identification number or EIN), is a number assigned solely to your business by the IRS. Your tax ID number is used to identify your business to several federal agencies responsible for the regulation of business.

    Q. Does my business need a federal tax ID number?
    A. Any business offering products or services that are taxed in any way must get a federal tax ID number. If your state taxes personal services, or if you are required to collect sales taxes on your sales, you need a federal tax ID number. All the government forms you will be required to file for your business will require either a Social Security number or a tax ID number.
    It's safe to say that any business that has employees and/or pays any kind of taxes will need a federal tax ID.
    Best advice is, when in doubt, get one. It's easy to do.
    See: How to get a federal tax ID number


    How to Get a Federal Tax ID Number
    To set up a federal tax ID number (also called an Employer Identification Number, or EIN), contact your nearest Local IRS Field Office, or call the IRS Business and Specialty Tax Hotline at 800-829-4933.
    You can also apply online for an EIN via the IRS web site. The online application asks the questions, you provide the answers and, just like that, you get your EIN immediately. You can then download, save, and print your EIN confirmation notice.
    If you want to apply the old-fashioned way, the form you'll need to fill out is IRS From SS-4 (.pdf).
    If your business does not have employees, the IRS recommends you label the top of the form SS-4 "For Identification Purposes Only."

    http://www.irs.gov/businesses/small/article/0,,id=98350,00.html
     
    Last edited: Apr 20, 2011
  4. Bigfriend

    Bigfriend Newbie

    Joined:
    May 9, 2010
    Messages:
    38
    Likes Received:
    4
    Location:
    Windy City - USA
    IRS to Track Online Sellers' Payment Transactions Beginning Next Year

    Internet sellers who don't report their sales will no longer be under the radar. Starting next year, any bank or other payment settlement company that processes credit cards, debit cards, and electronic payments such as PayPal will have to issue information returns telling the IRS what merchants receive. The new returns are Form 1099-K, Merchant Card and Third-Party Payments.

    Purpose of Reporting
    The IRS believes that many online sellers fail to report their transactions. Some don't report because they mistakenly believe that Internet sales are invisible. Others do so because they are trying to evade taxes.
    The IRS has found that using information returns, such as W-2 forms for employees, Form 1099-MISC for independent contractors, and Form 1099-INT for bank interest, goes a long way toward improving the reporting of income. IRS computers can match income reported on these information returns with the income reported on tax returns.
    Who's Subject to Reporting
    All merchants who accept payments through credit cards, debit cards, gift cards and PayPal will receive information returns telling them - and the IRS - the gross amount of the merchant card transactions. This will be broken down month by month. While the form uses the word "card," the IRS has made it clear that this is interpreted broadly to include third-party network transactions (i.e., PayPal).
    Exception: Very small merchants won't be issued information returns. "Small" for this purpose means annual gross sales on merchant cards of no more than $20,000 or 200 or fewer transactions. In other words, reporting is required only if gross amounts for the year exceed $20,000 and there are more than 200 transactions.
    Mechanics
    As it now stands (proposed regulations have not yet been finalized), gross amounts reported for merchant transactions do not take into account any adjustments for credits, cash equivalents, discount amounts, fees, chargebacks, refunded amounts, or any other amounts. It will be up to sellers to report on their returns the full amounts reported to them and then make adjustments or explanations to account for differences in what is ultimately taxable to them.
    For example, a seller who is paid $1,000 by credit card for a particular transaction does not necessarily have $1,000 profit even though $1,000 will be included on Form 1099-K. The $1,000 must be reported so the return will match what's in the IRS computers, but this amount will then be reduced on the merchant's return by the cost of goods sold (what it costs for the inventory sold), merchant account fees, and other costs.
    Providing Your Tax ID Number to Processors
    Merchants will have to provide their federal tax identification numbers to the companies processing their transactions. If they fail to do so, they may become subject to "backup withholding," which means these companies will have to deduct and withhold income tax from reportable payments. Backup withholding won't go into effect until 2012.
    Sellers who don't wish to provide their social security number to payment processors can obtain an EIN (Employer ID Number). Note that you can obtain an EIN even if you are a sole proprietorship. See the IRS website formore information.
    More information on Form 1099-K
    You can find more information about Form 1099-K, the new information return that payment settlement entities will use to report the gross amount of merchant card or third-party payments, on this IRS web page (PDF format).
     
  5. Bigfriend

    Bigfriend Newbie

    Joined:
    May 9, 2010
    Messages:
    38
    Likes Received:
    4
    Location:
    Windy City - USA
    it can also be called a Sales Tax Number of Sales Tax ID and it's usually available from your state's tax commission. Keep in mind there's also a Federal Tax ID number, also called an EIN. You can get that from the IRS for free. Some suppliers want both numbers, some just want one but I'd say the majority want your Sales Tax Number from your State. Get both numbers just to save time down the road.
     
  6. Bigfriend

    Bigfriend Newbie

    Joined:
    May 9, 2010
    Messages:
    38
    Likes Received:
    4
    Location:
    Windy City - USA
    License Requirements for an eBay Business

    If you're opening an actual eBay business rather than just selling your old stuff, you'll likely need to acquire a business license or two. You'll probably need a doing business as (DBA) license, and depending on what your business supplies, may need some others. This guide will take you through some of the potential business license requirements you may need in order to legally open your eBay business.

    Doing Business As (DBA) License
    A doing business as license is necessary for any business which is operating under a name different from the name of the proprietor. For example, a Mrs. Jones could open a business called "Mrs. Jones' Cookies" without a doing business as license, assuming that she was in fact selling cookies. However, if she wanted to name her business "Scrumptious Snacks," she would need a doing business as license. This license allows bank accounts to be made and checks to be written and cashed in the business' name.

    Auction License
    If you are selling goods regularly and for profit through eBay, chances are that your state will require you to have an auction license. Although not every state or zone requires an auction license to open a business on eBay, many do for 2 reasons. The first reason is for consumer safety, as it gives consumers a course of action if they feel they have been taken advantage of. The second reason is for income tax purposes. Even if your area does not require you to have an auction license, it wouldn't hurt you to have one just in case. It might even bring you more business if people feel safer doing business with a licensed seller.

    Business Specific Licenses
    Depending on the goods which your business offers, you may be required to obtain licenses. An at home bakery which sells cupcakes through eBay, for instance, would need a baking license. If your business sells consumables or cosmetics, you should be especially careful about obtaining the proper licenses and also consider some form of liability coverage in case a customer has an allergic reaction.

    State and Zone Required Licenses
    The state or zone in which you live may have more specific business licensing requirements which you need to observe. The best way to find out exactly what licenses you will need to open you business is to contact your local Small Business Administration and tell them the nature of the eBay business you wish to open. Local Small Business Administrations can help you find exactly what you need for the specific state and zone in which you reside. They make sure you don't miss anything that would hurt you later.
    The license requirements to open an eBay business, or any business, vary by state and zone. Be sure to give a call or visit to a local Small Business Administration to find out precisely what licenses you need to run legally.

    The Benefits of Having a Business License
    Even if a business license is not required to operate your business, having one may provide you with certain benefits and abilities unavailable if you just use your name for the business. Business licenses are relatively cheap and easy to file with your secretary of state. Many times, the secretary of state's office will provide you with a form to complete to obtain a business license.

    Bragging Rights
    Having a business license permits you to talk about your license. A licensed business, in whatever form you choose to incorporate the business, provides prestige and an aura of stability to your business that will be attractive to customers and investors. Approaching customers and potential investors and being able to share your licensing information shows that you are invested in and dedicated to the company's success.

    Tax Rights
    A licensed business is an entity separate from yourself; this means that the company's taxes are filed separately from your personal taxes. While this requires you to complete and file a separate tax return, it also provides you with the opportunity to deduct business expenses that you might not be able to deduct on your personal taxes. Furthermore, separating your business and personal taxes will make it easier to report income and any business losses.

    Record Keeping Guidelines
    Your secretary of state's office may provide licensed businesses with guidelines and other assistance to help small businesses flourish. This advice could even be provided free of charge if your business meets certain standards, such as the number of employees or how much income it generates in a year. Free information on how to operate properly and legally can vastly increase a business' success.

    Personal Protection
    While using your name as your business' name adds a personal element to your company, it does not protect you against liability for damages or injury caused by your company. Additionally, it puts your company's assets at risk should you be personally liable for damage or injury. Depending on how you form and license your company, a licensed business protects its owners against certain types of liability. If damage or injury were to occur as a result of the business' actions or doings, your personal finances would not be at stake in any settlement; similarly, if you are personally liable for injuring another person, the business' finances would not be accessible in a settlement for that injury. Note that the various types of licenses offer different levels of protection.

    Access to Information
    Operating as a licensed business may provide you with access to certain groups that you would be unable to join or participate in if you operate under your personal name. Companies such as the better business bureau , investment groups and other business oriented organizations may not permit you to join if your company is not licensed.

    Personal Privacy
    Not operating under your name also protects your personal information from the public. If a business is tied with your name, almost anyone can access a portion of your personal information, including your address, phone number and finances. Separating your business from yourself will maintain your privacy.







    When Do You Need a Business License?

    In many situations, whether the business is big or small, operators need to secure legal authorization in the form of a business license to carry out entrepreneurial activities in a city or state. It is important to note that regulations governing licensure will vary from state to state; in some cases it will even vary from county to county or city to city. Individuals planning to step out as entrepreneurs are left to ponder; when is a business license needed?
    The following information will help you determine when you need a license for your business.

    Types of Business License
    Although it may seem to complicate matters further, business licenses and requirements also vary according to industry; this added consideration is actually the first step for determining whether or not your business needs a license. Clearly, practicing doctors will need a state business license that is different from that of what the plumbers and salon owners. The type of city business license you get therefore depends on what industry your business falls under; sometimes this is determined by the local commerce agency or your state.
    Each license contains its own special requirements which may include fees, certifications, insurance and exams. Thus the first step is to recognize the industry of your business and contact the appropriate department in your state for information about regulations; this information is easily found on line. Be sure to check authoritative resources; do not rely on word of mouth or even the opinions of other business owners; they may be unknowingly operating illegally (especially if they have a business that may not require licensure in another state).
    It is also important to understand the scope of service that you are allowed to perform under a particular license or certification; e.g. in some states certified hypnotists can only help people lose weight and quit smoking before it is considered to be psychotherapy. Psychotherapy usually requires a Masters Degree and a therapist license (but not in all states) is required in lieu of the 30 hour hypnotist certification course. A hypnotist that acts outside the scope of service could be facing serious penalties; this could include jail time.

    Public Service
    When your business involves serving the public, that is, when your service or product has the potential to harm or put the people in danger, a license is definitely a must. The food business is an example of this; concerns about cleanliness and food sources among others are always present in this type of venture. Other instances where business license is definitely needed are when a service is performed on customers (e.g. plastic surgery, dental work) or when operation of your business may affect the environment. There is a need for these kinds of businesses to be monitored by the local government to ensure public safety.

    Business Financing Application
    A business tax license is a requirement of some local governments; this is also known as an operating license. Some areas only require this form of license if you have a place of operation that has coming to the business location. Other municipalities may also require home business and online businesses to pay the for the business tax license; this license is just a method for local government to collect revenues and does not reflect expertise or lack of it on behalf of the business owner.

    Opening Bank Account
    Whether it is to open a savings account or a business checking using the company's name, banks may ask you to submit a state business license as one of the identifying forms needed to verify the legitimacy of your business. The bank may just require a copy of the legal document that you used to set up your business; e.g. a sole proprietorship, a partnership, a corporation, a limited liability company and so forth. State governments will provide you with the forms to set up your business structure; to fill out the forms you will need to get an EIN (employer identification number) from the IRS; this is the business version of a social security number. The forms and the EIN are free and may easily be obtained online. Once your business has a legal structure, the state will provide you with a business identification number which you can use to set up your bank account. Note that this is not the same as getting a license from the state; however, once you have filed your business documents, the state is likely to require yearly filing fees.

    Fictitious Name
    If there is no licensing requirements or specific permit needed for your business - yet you still want it registered or legalized - you can simply file for a fictitious name. A fictitious name is also known as "doing business as" (DBA) name where your business name and personal name is made to be synonymous officially. In many states, this comes after you have filed your business structure.
    When you are wondering whether or not you need a business license, it will help to consider the professional requirements that must be met (these usually involve qualifications to do business) as well as governing body revenue requirements that are placed on businesses (these are usually fees that have no bearing on qualifications to do business).
     
    • Thanks Thanks x 2
    Last edited: Apr 20, 2011
  7. Platinum350

    Platinum350 Junior Member

    Joined:
    Jan 19, 2011
    Messages:
    104
    Likes Received:
    6
    Location:
    Philly
    You sure live up to your name Bigfriend! Thanks a ton, extremely helpful and sure other members will find this useful. I wasn't surpised to read about the IRS having online transactions reported, figured it was only a matter of time.

    Thanks again for sharing!
     
    • Thanks Thanks x 1
  8. zedscore2

    zedscore2 Newbie

    Joined:
    May 31, 2011
    Messages:
    12
    Likes Received:
    0
    I have a honed reselling business that is quick to return...on investment...if you are up to it...I can work something out with you ...
    reach me at eighthundredtwofivetwosixtyeightthirteen
     
  9. projects888

    projects888 Newbie

    Joined:
    Jul 12, 2011
    Messages:
    27
    Likes Received:
    3
    Very helpful information to learn. Thanks
     
  10. thatotherguy

    thatotherguy Power Member

    Joined:
    Mar 4, 2012
    Messages:
    555
    Likes Received:
    249
    I did LLCs to be safe. I know this is a old thread. :)
     
  11. cbs68

    cbs68 Newbie

    Joined:
    Aug 9, 2012
    Messages:
    15
    Likes Received:
    1
    Still looking for DS supplier?
    Gold - Silver - Fashion - Deco
    You can buy at wholesale price (around 50% of retail) + DS fee and have it shipped world-wide via DHL/FedEx (Tracking).
    No min. amount or quantity required!

    ASINs for easy Amazon [US/UK] setup & product feeds for several web shopping systems available.

    If you are interested, pm me!