What is a Reseller License?
How do you get a reseller license?
What are the essential elements you should know!
In this article, we will break down the notion of a Reseller License so you know all there is to know about it!
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What Is A Reseller License
A reseller license is a type of licence issued by the state to retail businesses whether brick and mortar or online who purchase goods and products on a wholesale basis and resell them to customers.
Those in business and different states may use a different term to refer to a reseller license, such as:
- Reseller permit
- Reseller ID
- Reseller certificate
- Reseller number
- Sales tax permit
- Resale license
- Reseller business license
- Certified reseller
- Wholesale reseller license
The reason why a business may want to obtain a “reseller license” is to be qualified as a reseller so it avoids having to pay sales taxes on goods and products it purchases wholesale intended to be sold to customers.
Manufacturers may also need a license for resellers to purchase ingredients or compounds used to create new articles without having to pay sales taxes on them.
When a wholesaler sells goods and merchandise to a company for resale, the reseller will need to show that it has a resale license proving it is purchasing the goods for resale purposes.
It is also possible that the wholesaler requires the reseller to provide a tax exemption certificate to ensure that the reseller is effectively exempt from paying sales taxes on the purchase.
In Which State Will Retailers Need To Pay Sales Taxes
How do you determine if you need to collect sales taxes in a particular state thereby requiring you to get a reseller’s license?
How do you know in which state you must pay sales taxes?
Typically, a company, business, or organization will need to collect sales taxes or use taxes when it has sufficient nexus with the state in question.
“Sufficient nexus” means that the business has a sufficient physical presence in the state resulting in the business acquiring the obligation to collect sales or use taxes and remitting the same to the state authorities.
Here are some of the factors that are considered to determine if a business has sufficient nexus in a state to collect sales taxes:
- The business has an office in the state
- The company has a retail location
- The company operates a warehouse
- There are employees working out of that state
- The company has affiliates in that state
- It has a temporary physical presence to sell goods in the state
A business should verify the requirements applicable to the states they may have a nexus with to ensure they respect the particular requirements for sales taxes and reseller licenses.
For example, if you operate a business from your home, you may need to get a resale permit for your home.
However, if a company has business operations in several states like office facilities, warehouses, or storage facilities, then it may have sufficient nexus to require a license.
What Information Does A State Reseller Certificate Include
A reseller certificate, or reseller license, will include basic information about the business.
Although every state will have a slightly varying form or content in the licenses for resellers, here is the information you can expect to generally see:
- Name and address of the reseller
- Reseller’s license number
- Identification of the state issuing the permit or license
- The reseller’s business type
- Scope of what reseller may purchase with the license
How To Get A Reseller License
Although the actual procedure to apply and get a reseller’s license may be different in every state, here are some steps that you may need to complete.
The next step is to gather your business information and documentation so you can provide the answers to the application questions.
You will need to gather information such as:
- Identification documents (driver’s license, SSN, date of birth etc)
- Tax ID number
- Articles of incorporation (articles of organization, or other constituting documents)
- Bank account information
- Supplier name and address
- Estimated monthly revenue
- Business structure and its ownership (sole proprietor, corporation, partnership, LLC etc)
Once you’ve completed the application, you must submit the application to the state department along with the reseller license fees if applicable.
The last step is for you to ensure that you track your resale license renewal requirements, if any.
In some states, the reseller license will expire if you do not renew it on time, so keep an eye out for that.
In some states, a company may apply and get a sales tax identification along with a reseller certificate at the same time while in other states companies may need to file two separate applications (one for the sales tax and one for the reseller certificate).
Finally, a company must be duly authorized to do business in the state which means that foreign companies may need to file the necessary paperwork to obtain their foreign qualification or authorization to transact business in the state.
Exemption To Pay Sales Taxes
In the United States, according to every state’s tax laws, businesses are required to pay sales taxes on their purchases and collect sales taxes from their customers.
However, a company doing business with a reseller’s permit will be exempt from having to pay sales taxes on what it purchases wholesale for sale to its customers.
In this context, the reseller will purchase its goods without having to pay sales taxes on its purchase.
Rather, when the goods are sold, the reseller will collect sales taxes from its customers and then remit them to the tax authorities based on a predetermined remittance schedule.
As of July 1, 2018, there were a total of:
- 45 states in the U.S. that collect statewide sales taxes
- 38 states that collected local sales taxes
- 5 states that did not collect sales taxes (Alaska, Delaware, Montana, New Hampshire, and Oregon)
A company doing business in Alaska, Delaware, Montana, New Hampshire, or Oregon may not need a sales tax although there may be local sales taxes that will need to be collected (such as in Alaska and Oregon).
It’s important to consult with a tax accountant, tax lawyer, or specialized service company in the area of reseller licensing to ensure that you comply with the state and local requirements.
Resellers License Takeaways
So, what is a reseller certificate?
How to get a reseller certificate?
Let’s look at a summary of our findings.
Business Reseller License
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