You Legally Need This To Sell!?!

[PTP]

After a few months of importing from China and not having any issues, I decided to try and source some products from the US.

Everything was going smoothly until it came time to pay. The manufacture asked to see copies of my business licence as well as my re sellers permit. Uhhh what? I didn't know what a re sellers permit was, and definitely didn't know that I needed one!

After some research I found out that a re-sellers permit helps to allow businesses to buy from manufactures without the need to pay sales tax. While good for large orders, I was only going to order about 25 pieces.

So this does not seem like a 100% necessity for right now. Right? I can tell the manufacture that I don't have one/in the process of getting one. I pay sales tax, no big deal.

It will make me less professional, oh well. Am I right to assume that I don't need one?

The real conundrum: The Business Licence. (Dun Dun Dun...)

I was under the impression that you are not considered a business until you have reached $20,000 in sales. At this point you change from a "hobby" to a "business".

(***For those who may not be aware, you get a 1099 from your friendly neighborhood IRS agent once you cross 20k in sales for a given year***)

While I am very close, I am not there yet. However, scowering the internet has only left me more confused. Numerous sites have said that you need a license others say no.

For those of you who run online businesses, did you need need a license to buy from the US? (Im from TX btw).

Would I be able to tell my manufacture that I am a new business and in the process of getting these documents but dont have them at the moment?

Why do I not need licenses to buy from China but I do from the US?

Any guidance would be greatly appreciated!

TLDR:
Do you need a business licence and re-sellers permit to buy from manufactures in the USA (TX)?

 

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[Jon L]

After a few months of importing from China and not having any issues, I decided to try and source some products from the US.

Everything was going smoothly until it came time to pay. The manufacture asked to see copies of my business licence as well as my re sellers permit. Uhhh what? I didn't know what a re sellers permit was, and definitely didn't know that I needed one!

After some research I found out that a re-sellers permit helps to allow businesses to buy from manufactures without the need to pay sales tax. While good for large orders, I was only going to order about 25 pieces.

So this does not seem like a 100% necessity for right now. Right? I can tell the manufacture that I don't have one/in the process of getting one. I pay sales tax, no big deal.

It will make me less professional, oh well. Am I right to assume that I don't need one?

The real conundrum: The Business Licence. (Dun Dun Dun...)

I was under the impression that you are not considered a business until you have reached $20,000 in sales. At this point you change from a "hobby" to a "business".

(***For those who may not be aware, you get a 1099 from your friendly neighborhood IRS agent once you cross 20k in sales for a given year***)

While I am very close, I am not there yet. However, scowering the internet has only left me more confused. Numerous sites have said that you need a license others say no.

For those of you who run online businesses, did you need need a license to buy from the US? (Im from TX btw).

Would I be able to tell my manufacture that I am a new business and in the process of getting these documents but dont have them at the moment?

Why do I not need licenses to buy from China but I do from the US?

Any guidance would be greatly appreciated!

TLDR:
Do you need a business licence and re-sellers permit to buy from manufactures in the USA (TX)?

A few things:

• You can consider yourself a business, and file with the IRS as one, even if you make $1 a year. The IRS will start caring that you DON'T consider yourself a business when you start making a part-time wage equivalent.
• Business licenses aren't necessarily needed - it depends on the city/county you live in.
• A reseller's permit is definitely needed - your state will have a website where you can apply for one. They're really easy to get.
• A lot of businesses will require a copy of the reseller's permit because they need it in case they're audited - if they don't have one for you, they would owe sales tax for your order, plus a fine if it were caught in an audit. They also ask for one because it weeds out end-users, and a lot of companies don't want to deal with the problems that come along with selling to end-users.
• If you don't need a business license in your jurisdiction, you can use the paperwork you got when you filed for a fictitious business name with your county. (you need one of these to open a business bank account, which you should also have.)

 

[Jon L]

also...when you're reselling, you need to be charging sales tax, and sending that into your state govt.

 

[PTP]

A few things:

• You can consider yourself a business, and file with the IRS as one, even if you make $1 a year. The IRS will start caring that you DON'T consider yourself a business when you start making a part-time wage equivalent.
• Business licenses aren't necessarily needed - it depends on the city/county you live in.
• A reseller's permit is definitely needed - your state will have a website where you can apply for one. They're really easy to get.
• A lot of businesses will require a copy of the reseller's permit because they need it in case they're audited - if they don't have one for you, they would owe sales tax for your order, plus a fine if it were caught in an audit. They also ask for one because it weeds out end-users, and a lot of companies don't want to deal with the problems that come along with selling to end-users.
• If you don't need a business license in your jurisdiction, you can use the paperwork you got when you filed for a fictitious business name with your county. (you need one of these to open a business bank account, which you should also have.)

Thank you very much for taking the time to respond.

Wow... there is a lot I should be doing, but am not . I guess i'm still in the "screw the paperwork and just get started phase" and never transitioned to the "official business" stage.

Would it be possible for me to cover the cost of sales tax for them without a re sellers permit? At least for this first order and then tell them our company is currently getting one and will have one for the next order?

I want to still be able to buy from this manufacture in the future, and dont want this issue to end a potential business relationship.

Depending on whether or not I can cover the manufactures sales tax for this first order I have to courses of action.

I cover the manufactures sales tax
1) Cover their taxes, tell them I dont need a busniess license, see if I can order the product.

Not Allowed to cover sales tax
2) My plan to keep this alive is just to be honest with them and let them know that we are new and just now are getting these things. Well have them in a few weeks to get everything ordered then.

Any critiques on these courses of action?

It appears as though I can't buy in the US without these documents.

To sum it up this is what I need to do:
1)Get a re-sellers permit
2) Get a fictitious name
3)Check and see if I need a business license (get one if needed)
4)Pay taxes
5) Bask in the glory of my new self-righteously named "CEO" status

I guess this is just another reason why manufactures move to China. Its almost as though people don't want US businesses to succeed....

Im looking at this as a blessing in disguise. While annoying yes, it prevents others from easily selling.

Thanks again.

 

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[PTP]

Sent an email to the manufacture saying that we are in the process of getting the documentation and that I completely understand if he would like to wait until everything is finalized before moving forward.

Interested to see his response.

 

[PTP]

So I told the manufacture that I would be more than happy to cover the cost of sales tax in the order total (because I dont have a re-sellers permit). In addition to what I posted above.

He said that he would be happy to sell me the product without the license if I absorb the tax.

In addition, he stated that I can send any licenses or certifications I have to him for his "own records". Anyone know what this means? What other licenses are there to have?

He wants to continue on with the order which is good.However, I wonder how he will react when I tell him I dont have any licenses.

For those that find this useful Ill let you know what happens.

 

[TTG SS]

So I told the manufacture that I would be more than happy to cover the cost of sales tax in the order total (because I dont have a re-sellers permit). In addition to what I posted above.

He said that he would be happy to sell me the product without the license if I absorb the tax.

In addition, he stated that I can send any licenses or certifications I have to him for his "own records". Anyone know what this means? What other licenses are there to have?

He wants to continue on with the order which is good.However, I wonder how he will react when I tell him I dont have any licenses.

For those that find this useful Ill let you know what happens.

They're most likely looking for your business tax ID # aka TIN# aka W-9

The usual documents most manufactures look for are your Tax ID # and any tax exemption reseller forms.

They are looking for this info for auditing purposes. Some manufactures carry ISO certifications as well as other certificates that require extensive auditing and they want everything to be on the up and up.

 

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[PTP]

Yeah you're definitely going to need at minimum a Tax ID & resellers permit buying anything from a US manufacture



They're most likely looking for your business tax ID # aka TIN# aka W-9

The usual documents most manufactures look for are your Tax ID # and any tax exemption reseller forms.

They are looking for this info for auditing purposes. Some manufactures carry ISO certifications as well as other certificates that require extensive auditing and they want everything to be on the up and up.

Thanks man!

My manufacture seemed ok to continue business with me even though I dont have a re-sellers permit (im taking the hit for the sales tax). It may be because I told him im in the process of getting a license, which I have since begun.

Also, its only an order size of about $400-$500.

If I dont have a Tax ID # would a parents number work? I dont see why it wouldnt I just need to make sure they're ok we me using their number first.

 

[TTG SS]

Thanks man!

If I dont have a Tax ID # would a parents number work? I dont see why it wouldnt I just need to make sure they're ok we me using their number first.

I'm not really sure. You would need to ask them.

Just explain the situation to them, preferably over the phone if possible.

 

[PTP]

I'm not really sure. You would need to ask them.

Just explain the situation to them, preferably over the phone if possible.

I sent the manufacture an email earlier today asking what type of licenses they had in mind so we will see what they say.

If they ask for a tax ID I will call the manufacture and do what you suggested.

I appreciate the help man!

 

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[Guest34764]

This is going to be so confusing when I finally get around to making an eCommerce website.I'll go ahead and assume that the process is the same even if you're not an adult yet.Right?

 

[PTP]

This is going to be so confusing when I finally get around to making an eCommerce website.I'll go ahead and assume that the process is the same even if you're not an adult yet.Right?

I'm only coming across this issue now because i'm trying to source in the US. Orders from China or not nearly as complicated as this.

In business, no one knows/cares about whether you're an adult or not. I guarantee, however, they will assume you are an adult and treat you as such unless you give them a reason to believe otherwise.

In addition, if youre being treated like an adult, with adult problems, keep doing what youre doing cause you're doing something right!

Its a little bit harder for us to get licenses and tax IDs etc... but thats just something we have to deal with and need to get clever about. It's part of the fun

 

[Guest34764]

Ah,I must have missed the part about sourcing from the US.

Though It seem's when it's time I'll have to really get knowledgeable about business and it's laws in case something were to happen or I perhaps do something wrong.Thanks for the unintentional reminder.

 

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[PTP]

Ah,I must have missed the part about sourcing from the US.

Though It seem's when it's time I'll have to really get knowledgeable about business and it's laws in case something were to happen or I perhaps do something wrong.Thanks for the unintentional reminder.

Chinese sourcing isnt to bad, you just have to watch out for the scammers.

US sourcing has less scammers (I assume) but you have to watch out for bureaucracy.

Yeah this kind of hit me out of the blue and im kinda flying by the seat of my pants right now!

Hopefully you will be better prepared than me when your time comes.

 

[CaptainAmerica]

Get in touch with your state's Business Registry - the SBA has a full list. Just call up and start asking questions. It is literally their job to get you the correct documents. The folks in Oregon are just fantastic! Plus, there's no sales tax. Plus, I registered in Wyoming for privacy. YMMV.

 

[PTP]

Get in touch with your state's Business Registry - the SBA has a full list. Just call up and start asking questions. It is literally their job to get you the correct documents. The folks in Oregon are just fantastic! Plus, there's no sales tax. Plus, I registered in Wyoming for privacy. YMMV.

Thanks for the suggestion. I will definitely give them a call.

When you say you registered in Wyoming, did you physically go to Wyoming? Also, how does it give you more privacy?

 

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[PTP]

You don't legally need a business license or reseller permit to buy from anyone in the US. The vendor may require one or the other bar on their policies, but these have nothing to do with US law.

Also, you mentioned something about the IRS sending you a W9 when your business exceeds a certain income -- that is not true.

I guess it may just be a policy of the manufacture. However, if hes willing to work with me even though I dont have those forms, I think I may be ok. Thanks for letting me know.

In regards to the 1099. I may be mistaken, or it may be just be an eBay/Amazon thing. However, numerous sources have said that ebay/amazon report your revenue to the IRS at $20,000 and 200 transactions.

Here is one source: http://pages.half.ebay.com/help/seller/1099k.html

 

[Runum]

In Texas....You can file a DBA (Doing Business As - Assumed Name) with your local county office. It can last for 10 years. The filing is cheap. You can use it to get a business bank account. It gives you a business name but no liability separation between you and the business. However, if you have a good business name it could be copied rather easily nationally with and LLC and could cause headaches later.

Some US businesses are not set up to sell retail and it is a pain for them to change their paperwork for one retail customer. They would rather deal in large orders B2B.

The tax number .... if you are a retail customer your 9 digit SSN will usually work.

You can also use a discount legal service to file an LLC. Someone like Legal Zoom. This will lock your business name nationally and you can use it with importing and EBAY, Amazon. You can use the LLC to get a business bank account also.

You can then get a federal EIN and that is the tax number that you will use for your business.

The LLC gives you some legitimacy with suppliers and a degree of separation from your personal assets. The EIN also shows the B2B and overseas suppliers that you are legit.

Good luck

*None of this is to be considered legal and accounting advice.

 

[CaptainAmerica]

Here's a fair overview of the options. I went with Wyoming because they have an extra layer of security, which I needed for one of my little niches.

 

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[PTP]

In Texas....You can file a DBA (Doing Business As - Assumed Name) with your local county office. It can last for 10 years. The filing is cheap. You can use it to get a business bank account. It gives you a business name but no liability separation between you and the business. However, if you have a good business name it could be copied rather easily nationally with and LLC and could cause headaches later.

Some US businesses are not set up to sell retail and it is a pain for them to change their paperwork for one retail customer. They would rather deal in large orders B2B.

The tax number .... if you are a retail customer your 9 digit SSN will usually work.

You can also use a discount legal service to file an LLC. Someone like Legal Zoom. This will lock your business name nationally and you can use it with importing and EBAY, Amazon. You can use the LLC to get a business bank account also.

You can then get a federal EIN and that is the tax number that you will use for your business.

The LLC gives you some legitimacy with suppliers and a degree of separation from your personal assets. The EIN also shows the B2B and overseas suppliers that you are legit.

Good luck

*None of this is to be considered legal and accounting advice.

Just for clarification, since I do not have the accompanying business documentation I would be considered a "retail" customer even if i'm wholesaling. Correct?

After talking with my dad, it looks like we're going to set up an LLC once I turn 18. Then I can get a federal EIN, business bank account, and all the other necessary things to be a business.

Until then, it looks like im allowed to buy from this manufacture without licenses. If not, I will continue to source from China until I can get an LLC set up.

Thank you everyone for your help.

 

[Jeremy Groover]

After a few months of importing from China and not having any issues, I decided to try and source some products from the US.

Everything was going smoothly until it came time to pay. The manufacture asked to see copies of my business licence as well as my re sellers permit. Uhhh what? I didn't know what a re sellers permit was, and definitely didn't know that I needed one!

After some research I found out that a re-sellers permit helps to allow businesses to buy from manufactures without the need to pay sales tax. While good for large orders, I was only going to order about 25 pieces.

So this does not seem like a 100% necessity for right now. Right? I can tell the manufacture that I don't have one/in the process of getting one. I pay sales tax, no big deal.

It will make me less professional, oh well. Am I right to assume that I don't need one?

The real conundrum: The Business Licence. (Dun Dun Dun...)

I was under the impression that you are not considered a business until you have reached $20,000 in sales. At this point you change from a "hobby" to a "business".

(***For those who may not be aware, you get a 1099 from your friendly neighborhood IRS agent once you cross 20k in sales for a given year***)

While I am very close, I am not there yet. However, scowering the internet has only left me more confused. Numerous sites have said that you need a license others say no.

For those of you who run online businesses, did you need need a license to buy from the US? (Im from TX btw).

Would I be able to tell my manufacture that I am a new business and in the process of getting these documents but dont have them at the moment?

Why do I not need licenses to buy from China but I do from the US?

Any guidance would be greatly appreciated!

TLDR:
Do you need a business licence and re-sellers permit to buy from manufactures in the USA (TX)?

-You are a business if you intentionally purchase something with the sole intention on selling it for a profit.

- In my state, I was told that you need a re-sale cert to sell something that is taxable. A service, as long as the parts are included is not a taxable item. A dishwasher is.

-You can get around not having a re-sale cert as long as you pay taxes yourself on the item, but most states will want you to have the cert because, you guessed it. More taxes are paid if the item costs more.

-Most wholesale companies require an EIN # which is what you get when you file to open a business. Not a business license but an LLC, S corp, Ect.
A business license is actually called a business tax stamp now. You need that for zoning and to operate a business in you state. In Fl. the cost of my service companies business tax receipt was $30.00 a year. My LLC was about $400.00 because I had a company help me with everything (well worth the extra $100ish)

If your going to do it, do it right. Spend the $500.00 and pay Uncle Sam his share. It will be better in the end.

 

[Jeremy Groover]

I guess it may just be a policy of the manufacture. However, if hes willing to work with me even though I dont have those forms, I think I may be ok. Thanks for letting me know.

In regards to the 1099. I may be mistaken, or it may be just be an eBay/Amazon thing. However, numerous sources have said that ebay/amazon report your revenue to the IRS at $20,000 and 200 transactions.

Here is one source: http://pages.half.ebay.com/help/seller/1099k.html

PayPal will send you a 1099 whenever they see fit. They are required by law to report sales of over $20,000 to the IRS on your behalf. Ebay used to or still is owned by PayPal or its the other way around. This is why Ebay was similar in policies. I am unsure of Amazon. Just do it right the first time. It will be worth it in the end. It doesn't really cost you anything. Most states do not charge for a re sale certificate. Like I said, the business tax receipt is $30.00 and the LLC which is what you should do is $400-500. Meet with a CPA sooner then later to discuss accounting crap and tax. Your sales tax, at least in Fl is sent in either every 2 weeks, every 30 days or every 3 months. I would opt for the 3 month and make sure you SAVE ENOUGH TO COVER IT. Pay it on time or early and they will grant you discounts and wave fees. Stay ahead of the game.

Be a vague as possible when filling your business tax receipt. In certain places when operating out of your home, you cannot store anything that takes away from it being a home. Meaning you can store anything that you would not see at a home, ie. you cant store a ridiculous amount of a product there because its not normal. I know it sounds stupid and it is but I battled with this first hand. Service companies cannot have a truck with advertising outside of the home it must be in a garage. If you have a landscaping company, you cannot store commercial trailers and equipment at the home because that is not normal equipment that would be found at a residence, shit like that. No, no one will check but they also wont give you the tax receipt if they know that is what is happening. You may not be required to even have this with an eCommerce business but look into it. Not online but through your state. Make a call, there are people that their job is to answer questions and point you in the right direction. It can be overwhelming and scary but it really is easy and usually trouble-free. I had to make a few trips, but I didn't call before so that was my fault.

I wish you the best of luck and just don't forget to take a breather. Starting a business can be overwhelming and frustrating at times. Especially while juggling a full time job and life. If you want it bad enough, you will figure it out. We are here if you need us.

 

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[Jeremy Groover]

Just a few clarifications...



You need a re-sale certificate to BUY stuff, not sell it. Specifically, to buy stuff that you plan to resell. And specifically, to buy stuff WITHOUT PAYING TAX that you plan to resell. The government wants their sales tax, but not at each stage of item production -- only from the buyer of the final product. The re-sale certificate is your way of telling the raw material seller that you're not the final buyer, so you're not the one responsible for the sales tax when buying the raw material, as you plan to use it to build something that will be resold.



There is typically another way to avoid sales tax as well. Typically, when you the pay sales tax to the state from your customers, you can reduce that liability by the amount of sales tax you paid for your materials. So, if you paid bought something for resale, and (let's say) paid $5 in sales tax, and then resold it and collected $5 in sales tax, your state would likely give you a $5 credit on the $5 you owed, thereby reducing your liability. You still have to report them as separate transactions, but you aren't out sales tax on both purchase and sale.



You don't get an EIN when you file to open a business. You need to file with the IRS to get the EIN after you open a business with your Secretary of State. You can open a business without getting an EIN (if you want).



Typically, opening a business doesn't require any payment to the federal government (Uncle Sam). Businesses are structured at the state level, and all fees will be paid to the state(s).

When I said Uncle Sam I was refering to the government in general not just Fed. And you need an EIN in order to pay taxes so when I was talking about filing to open a business I was refering to doing it the right way, by filing for an EIN in the process. A re-sale cert is to sell stuff not to just to buy it... yes you become tax exempt when you buy stuff from certain places but you need it to sell the item and charge tax for them because you wont pay tax when you sell it... a re-sale cert is only needed when you are selling taxable goods not buying them. Legally you are required to obtain a resale cert when you are selling an item that is considered taxable. Washing a car is not taxable but selling the products to do it are. Your gonna confuse the young man...