Whatever business you plan to open, your local government may require that you take out a business license before you open your doors. A reseller's permit is much more specialized, allowing you to avoid sales tax on certain business purchases. Many businesses won't need one.
Many county and city governments – not all – require businesses to take out a business license, aka a tax registration certificate. This allows you to operate your business within the government's jurisdiction, provided you meet any other licensing requirements. A bar, for example, needs a state liquor license to sell alcohol as well as a business license. The tax registration certificate doesn't affect or substitute for any other professional or legal licenses your business has to take out.
If you're working as a consultant or an electrician, you don't need a reseller's permit. The permit, also known as a tax exemption certificate, allows your business to purchase certain items, sales tax–free:
- Items you're going to sell at wholesale
- Items you're going to sell at retail
- Ingredients or components for things you're going to manufacture and sell
If you don't buy and resell anything, you have no need for the permit. Like a business license, you take out your resale permit where your resale business operates. If you incorporate in, say, Florida but have a store, online shipping location or factory in Delaware, you need a Delaware reseller's permit. If you buy and sell goods in multiple states, you need a valid permit in each.
If you sell in one state but buy goods in other states, you may only need one permit. Most states will let you use an out-of-state reseller's permit to avoid paying sales tax on resale items. Ten states as of 2016 won't honor out-of-state permits. Research state law before buying across state lines, whether in the flesh or online.
Filling Out Paperwork
To get your business license, contact city hall or the county courthouse or visit its website. Usually licensing is a simple affair: you fill out a form, send in whatever fee is required and you get a business license good for a year. Post your license at your place of business, and you're done – there's nothing else to do with it.
You apply for your resale permit with the state's department of revenue. When you purchase goods or materials for resale, you give the vendor your permit information. That proves it doesn't have to charge you sales tax.
Some business owners are tempted to operate without a local license, particularly if they're running a home business. If you're caught operating unlicensed, you'll have to pay your back license fees, possibly with a penalty.
A reseller's permit offers more opportunities to break the law. After all, who's going to know if you claim items for personal use are for business and sales-tax exempt? If you're caught, however, you may face criminal penalties.
Via - Chron