Forum Moderators: buckworks
Their wholesale set-up form requires a "Tax License\Reseller ID".
I live in California. Is the "Tax License\Reseller ID" what I would be issued after completing a "California Sellers Permit Application" found here ( [boe.ca.gov...] )?
The form you linked is an application from your business to the California Board of Equalization, which handles sales and use tax in California.
After filling it out (I recommend submitting it in person at your local branch office, if convenient to you, for speed - a list of the branch offices is here: [boe.ca.gov...]
If you did everything properly (there is a toll-free line to call to ask for help, if your questions aren't covered in the FAQ or in the PDF publication which is fairly comprehensive, available here at [boe.ca.gov...] you should receive your Seller's Permit in the mail in about one week, and it will have the number to enter in the dropshippers' forms.
Note that if you weren't dealing with a dropshipper, whose forms I suspect have all the relevant language "baked in", and were making a wholesale purchase for resale from a California wholesaler (N.B. different tax laws may apply for wholesalers located in other states), you would need to prepare, execute and deliver to the wholesaler a California Resale Certificte (blank form here: [boe.ca.gov...]
Pay attention to Paragraph 4, which reads: "I will resell the item(s) listed in paragraph 5, which I am purchasing under this resale certificate in the form of
tangible personal property in the regular course of my business operations, and I will do so prior to making any
use of the item(s) other than demonstration and display while holding the item(s) for sale in the regular course of
my business. I understand that if I use the item(s) purchased under this certificate in any manner other than as
just described, I will owe use tax based on each item’s purchase price or as otherwise provided by law."
If any of that is not true, and the Board of Equalization finds out, you may be liable both for back sales taxes as well as penalty and interest.
I hope this is helpful, although as I mentioned someone who has specific experience with dropshippers should chime in to confirm/point out anything I have missed or just got wrong.
The dropshipper isn't in California, so I don't know if they need a cert. I think maybe they do in case I resell to customers in the state that the dropshipper is in.
I'll be visiting my local boe office tomorrow to hopefully get this stuff handled.
The dropshipper also requested a business name and credit card. I haven't officially filed to create any business entities. I wonder if I should do that. Heck, I don't even own a credit card, just a debit card.
The wholesaler will require written proof (your business license issued by your state dept of revenue) that you are a "reseller" to close the loop for their own sales tax liability as well as qualify you for wholesale pricing. The credit/debit card is required because they will charge you prior to dropshipping an order. If you get this venture going they may eventually offer you net 30 terms.
It appears the California Sellers Permit is what you will need to satisfy the wholesalers requirement. The office issuing the permit can provide info about filing sales tax returns as well as answer other tax related issues. Once you get started with this "business" you will also have income tax liability courtesy of the IRS. Your post suggests you need to educate yourself on business and tax matters. You can find additional help in this area from an SBA office in your locale.
IME, companies that ask for a sales tax number are often not selling wholesale. They are selling at a discount and are requesting the sales tax number as a way of screening out members of the general public because they don't want people knowing how little their items actually cost. I have never been asked for a sales tax number by a manufacturer or a distributor, only by some discounters. IME, the request for a sales tax number is a good indication that the company is overcharging for their products.
I cannot see how a company that is located in another state has any right to request a sales tax number,
Any right?
A company has the right to ask for anything they want in order to establish a business relationship.
A bonafide business license is proof of a registered business.
Distributors, wholesalers and manufacturers have to account for sales and be able to prove a sale was made to a company intending to resell the product. If not, they become liable for the sales tax.
Apparently you have never experienced a state sales tax audit or actually viewed a resale certificate.
Sales that are made online to people in other states do not require the collection of sales tax, whether they are a business or an individual. Thus, the request of a sales tax number when a business is located in another state is not justified.
I just went and read the sales tax publication for my state. It says that if you are just going to resell the thing and you are buying it within the state, you have to pay tax on it unless you have a sales tax exemption. But if you are going to use it to make something that you will sell, you don't have to pay the sales tax. I think this might be where the discrepancy lies. I know some folks are in business reselling widgets. I buy widgets to turn into other widgets. Still, if you buy the widget in another state over the Internet, you aren't required to pay that state's sales tax and so you don't need a number. Otherwise, we would all be paying sales tax regardles of where we live every time we bought something online.
[edited by: HRoth at 1:06 pm (utc) on Sep. 28, 2007]
Being registered as a business is not the same thing as getting a sales tax number in the state of NY. They are separate.
Business License = registration with your state dept of revenue to conduct the sales of goods and services and collect sales and use tax.
Agreed - sales in interstate commerce are (currently & typically) exempt from sales tax. Sales to manufacturers that provide a manufacturers certificate are also exempt.
(Disregarding any tax issues) Without a business license anyone can claim they are a business, order your minimum and then never order again. In other words, they put one over on you and reduced your profit on the sale. If this is the way you want to do business then by all means do not ask for a business license.
Note - more and more major online vendors are now charging sales tax on purchases. IMO it's only a matter of time before states remove the interstate commerce tax exemption.
Where I'm at, a business license can cover all kinds of things, like a license to sell alcohol or to sell food, but I have always considered that it referred to registering as a dba with the County Clerk, which then allows you to go and get a checking account in your business name and to refer to yourself by your business name legally, like in ads. You are then licensed to do business in your locale. There are a ton of business licenses on the state level here, from a license to be a pharmacy, to do telemarketing, sell tobacco, and so on.
The dropshipper also requests a business name and credit card. I really just want to get started selling. Later, if this is successful, I may go and create a sole proprietorship. But do you think I can just list my name as the business name, and use a personal credit card for now? Or could I even just use my debit card so I don't have to get a credit card?
Wholesalers and distributors will normally require orders to be prepaid (at least initially) so using your debit card should be fine. Just make sure you have sufficient balance to cover your total purchase.
The dropshipper earlier mentioned there is a fee of $3/shipment or $5/shipment for large orders. I've emailed them today to clarify if this is in addition to the shipping cost... probably is, but hoping it's not.
Does anyone have some tips of things I should consider as I proceed? Is there such a thing as typical dropshipping terms/policies that I should expect?
