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What is a Reseller License and Why Do You Need One?

Reseller License

In this blog post, we explain the importance of a Reseller License for wholesale or a retailer selling liquidation pallets products physically or online. We cover what it is, who needs it, and the benefits it offers. Also, we discuss the consequences of not having a Reseller License and provide information on sales tax laws and variations across different states.


    What is a Reseller License?

    If you’re planning to start an online or retail business and sell products through websites like eBay and Facebook, you’ll need a Reseller License. This license allows you to avoid paying sales tax on wholesale products that you purchase for the purpose of reselling them to your customers.

    Sample of a Reseller License

    Sample of a Reseller License

    Who needs a Reseller License?

    The Reseller License, also known as a resale license, reseller permit, resale certificate, or sales tax permit, depending on the issuing state, enables a state to recognize a business as a collector of sales tax. All business types, including sole proprietors, that sell the tangible property to the public as a wholesaler or a retailer are required to have a Reseller License.

    Benefits of a Reseller License

    With a Reseller License, a business can buy wholesale products for resale without paying sales tax. Instead, the business can charge its customers the sales tax when the product is resold and remit it to the state. Filing frequency varies from state to state and can be monthly, quarterly, or annually.

    States that do not require a Reseller License

    Delaware, Montana, New Hampshire, Oregon, and Alaska are the only states that don’t charge state sales tax and thus don’t require resellers to have a Reseller License. However, local cities within these states may charge sales tax, with the exception of Delaware and Montana.

    Sales Tax Laws and Variations

    It’s important to note that sales tax laws and tax rate tables vary by state, with some states having local tax rates that must be collected for different counties, cities, or even parts of a city. As of January 2020, forty-five states and the District of Columbia collect statewide sales tax, while thirty-eight states require local sales tax to be collected.

    South Dakota v. Wayfair and Economic Nexus

    In South Dakota v. Wayfair, the Supreme Court ruled that resellers in other states may be obligated to report and pay sales tax to the state where the buyer is located. Whether a business has a physical nexus or economic nexus in a state determines if it must collect sales or use tax on the products it sells. Each state has different requirements for determining whether a business has sufficient physical or economic nexus in a state.

    Reseller License vs. Federal Employer Identification Number (EIN)

    A Reseller License is not a Federal Employer Identification Number (EIN), which is issued by the federal government and serves as a social security number for a business. The Reseller License is issued by the state government and is specifically for collecting and remitting sales tax to the local government.

    Importance of a Reseller License when purchasing wholesale products

    When setting up an account with a new wholesale company to purchase products for resale purposes, the wholesale company will require a copy of the reseller license or some other form of proof that the business has a reseller license. Without a Reseller License, a business may be required to pay sales tax, which increases the cost of goods sold. In addition, the business may be subject to penalties and interest charges for failing to collect and remit sales tax.

    Consequences of not having a Reseller License   

    The consequences of not having a reseller license can be significant. Without a reseller license, individuals or businesses may face legal consequences if they purchase goods with the intention of reselling them. The specific consequences can vary depending on the industry and location but can include fines and even criminal charges. It’s important for anyone considering reselling goods or services to understand the legal requirements and obtain the necessary licenses to avoid any potential legal issues.

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