How to Obtain a Wholesaler License
Understand the purpose of a wholesale license., Identify the state or states where you do business., Decide if you need a license for your business or product., Look for any reasons for denials., Determine the tax issues related to your business...
Step-by-Step Guide
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Step 1: Understand the purpose of a wholesale license.
Someone in the wholesale business is a kind of “middleman.” In general, your business is to buy large quantities of some product from one or more manufacturers and then resell them to retailers.
The retailers then sell the product directly to customers.
Federal, state and local governments regulate wholesalers and issue licenses for several reasons:
State and local governments have an interest in collecting sales taxes on the items you provide.
As a general policy, the same item should not be taxed multiple times on its way from manufacturer to consumer.
Therefore, a wholesale license allows you to buy from the manufacturer and sell to the retailer without paying tax.
The federal government is concerned with controlling safety and participation in a variety of particular fields.
The federal government also oversees interstate commerce, so if you are involved in distributing products across state lines, you may need a federal license. -
Step 2: Identify the state or states where you do business.
This seems obvious, but “doing business” sometimes has a legal definition that you will need to review.
There may be states where you operate only temporarily, and determining whether your operation constitutes “doing business” will be necessary before seeking a license.For example, the California Board of Equalization considers businesses to be “engaged in business” in that state, even if the principal place of business is in another state.
A company is “engaged in business” in California if it maintains a sales representative, agent, or canvasser in the state.
Receiving rental payments for property that is in California also constitutes doing business in the state.You should review the licensing laws of every state with which you have contact of any kind.
Work with a local attorney to get help with interpreting the laws. , Not every business type needs to be licensed.
You should review the official site of the U.S.
Small Business Administration (SBA) to find out if your product or service is one that is subject to licensing.For example, the federal government licenses, among other things, companies that deal with alcohol or firearms.
Every state makes its own decisions about what types of businesses require licensing.
The SBA provides an interactive website that connects you to each state, to determine their licensing requirements.
You can access this information at https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits. , Each state sets its own eligibility requirements and reasons for denying a wholesaler license.
Also, different agencies will establish their own expectations and reasons for denial.
When you review the regulations for your particular license, look for these eligibility requirements.For example, if you are in Ohio and are applying for a wholesale pharmaceutical license, you can be denied if you have been convicted of a felony, particularly related to drug use, if you are addicted to alcohol or drugs, or if you have previously been disciplined by the Ohio pharmacy board. , Although the IRS does not issue business licenses, there are important tax implications to operating a wholesale business.
You will need to register with the IRS and with the tax offices of any state where you will operate.Most businesses will need to register with the IRS to obtain a Federal Employer Identification Number (FEIN).
To apply for an FEIN, visit the official IRS website at www.irs.gov.
Under the “Tools” heading, select “Apply for an Employer ID number.” From there, follow the instructions to apply for an FEIN., Each state or federal agency that issues licenses will most likely charge an administrative licensing fee.
The fee will vary from agency to agency or from one type of business to another.
You may also be required to pay a higher fee if you have more than one business location.
Information about licensing fees will generally be found together with the application materials.For example, if you are applying for a license as an alcohol wholesale distributor in New Hampshire, you will find information about the license fees on the same page as the application information. -
Step 3: Decide if you need a license for your business or product.
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Step 4: Look for any reasons for denials.
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Step 5: Determine the tax issues related to your business.
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Step 6: Be prepared to pay a licensing fee.
Detailed Guide
Someone in the wholesale business is a kind of “middleman.” In general, your business is to buy large quantities of some product from one or more manufacturers and then resell them to retailers.
The retailers then sell the product directly to customers.
Federal, state and local governments regulate wholesalers and issue licenses for several reasons:
State and local governments have an interest in collecting sales taxes on the items you provide.
As a general policy, the same item should not be taxed multiple times on its way from manufacturer to consumer.
Therefore, a wholesale license allows you to buy from the manufacturer and sell to the retailer without paying tax.
The federal government is concerned with controlling safety and participation in a variety of particular fields.
The federal government also oversees interstate commerce, so if you are involved in distributing products across state lines, you may need a federal license.
This seems obvious, but “doing business” sometimes has a legal definition that you will need to review.
There may be states where you operate only temporarily, and determining whether your operation constitutes “doing business” will be necessary before seeking a license.For example, the California Board of Equalization considers businesses to be “engaged in business” in that state, even if the principal place of business is in another state.
A company is “engaged in business” in California if it maintains a sales representative, agent, or canvasser in the state.
Receiving rental payments for property that is in California also constitutes doing business in the state.You should review the licensing laws of every state with which you have contact of any kind.
Work with a local attorney to get help with interpreting the laws. , Not every business type needs to be licensed.
You should review the official site of the U.S.
Small Business Administration (SBA) to find out if your product or service is one that is subject to licensing.For example, the federal government licenses, among other things, companies that deal with alcohol or firearms.
Every state makes its own decisions about what types of businesses require licensing.
The SBA provides an interactive website that connects you to each state, to determine their licensing requirements.
You can access this information at https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits. , Each state sets its own eligibility requirements and reasons for denying a wholesaler license.
Also, different agencies will establish their own expectations and reasons for denial.
When you review the regulations for your particular license, look for these eligibility requirements.For example, if you are in Ohio and are applying for a wholesale pharmaceutical license, you can be denied if you have been convicted of a felony, particularly related to drug use, if you are addicted to alcohol or drugs, or if you have previously been disciplined by the Ohio pharmacy board. , Although the IRS does not issue business licenses, there are important tax implications to operating a wholesale business.
You will need to register with the IRS and with the tax offices of any state where you will operate.Most businesses will need to register with the IRS to obtain a Federal Employer Identification Number (FEIN).
To apply for an FEIN, visit the official IRS website at www.irs.gov.
Under the “Tools” heading, select “Apply for an Employer ID number.” From there, follow the instructions to apply for an FEIN., Each state or federal agency that issues licenses will most likely charge an administrative licensing fee.
The fee will vary from agency to agency or from one type of business to another.
You may also be required to pay a higher fee if you have more than one business location.
Information about licensing fees will generally be found together with the application materials.For example, if you are applying for a license as an alcohol wholesale distributor in New Hampshire, you will find information about the license fees on the same page as the application information.
About the Author
Mary Hart
Professional writer focused on creating easy-to-follow organization tutorials.
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