A wholesaler permit is a legal document that allows wholesalers to buy products in bulk to resell them. Wholesalers need to obtain permits to conduct their business because some manufacturers prefer to only buy products from those wholesalers who have a wholesaler permit.
A wholesaler permit indicates that the wholesaler is conducting business on legal grounds. This permit also proves that the business complies with all the state laws and follows the appropriate standards.
Types of Wholesale Permits
There are two types of wholesale permits:
- The wholesale buyer license
- The wholesale seller permit
Wholesale Buyer License
With a wholesaler buyer license, wholesalers can make mass purchases from manufacturers, suppliers, or retailers. This document allows them to make bulk purchases at discounted rates, which they can sell at higher prices to make a profit.
Wholesale Seller Permit
A wholesaler seller’s permit is a legal document that allows wholesalers to sell their products.
The Difference Between a Wholesale Permit and a Seller Permit
Often, a wholesaler permit and a seller’s permit are two sides of the same coin. There are many different names when it comes to wholesale permits. In some states, it is also known as a wholesale card, retailer card, reseller license, resale card, and vendor permit.
Despite common perception, there is no noticeable difference between these two. Depending on the state, the requirements for these two might change, but the purpose stays the same.
How to Get a Wholesaler Permit?
You can get your wholesaler permit by following a well-defined process.
Get an EIN or FTID
First things first, you have to acquire either an FTID (Federal Tax Identification Number) or an EIN (Employer Identification Number). It is important to get your hands on either of these identification numbers if you want to get a wholesaler permit.
The purpose of these identification numbers is the official registration of your business. This way, the government can track your business activities and also simplify the tax procedures of the business. It takes almost a week or fortnight to get your EIN, therefore keep this timeline in mind before applying for a wholesaler permit.
Make sure to receive this EIN because otherwise, your business can face severe trouble, legal battles, or penalties.
Acquire Your Sales Tax ID
This might sound like a lot of work, but a sales tax ID is a necessary document. It is important because it provides you insights into how much tax your business has to pay every year. Every state has different rules and regulations for this one, and it is important to acquire all the necessary information in this aspect.
Apply for the License
After the above-mentioned steps, you should contact your revenue office or state tax office. They will guide you through the process. From the relevant updates to the necessary paperwork, they will provide you with all the necessary information. Remember that this process of applying for the license might differ depending on the state regulations, your business requirements, and the standard waiting time.
Given below is the information that is required to get a wholesale license:
- Full name of the owner of the business
- Full names of all the partners involved in the business
- The full and legal name of your business
- Nature of your business, niche, industry
- E-commerce business insurance or e-commerce business license
Once you have applied along with all the necessary documents, the hard part of the process is over. All you have to do now is wait. Normally it takes 3 to 4 business days to get your wholesaler permit, but in case of any delay, you might have to wait for two weeks.
You will receive a confirmation email or a notification that your license has been approved. Make sure to get a copy of it so that you can use it for tax purposes or other references.
How Much Does a Wholesale Permit Cost?
The average cost of a wholesale permit is $6,500. In terms of range, it can lie between $3,000 to $10,000.
Two factors influence the wholesaler permit cost: the business industry and a state’s tax and revenue laws.
Business Industry
In order to conduct business in any industry, there are some rules and regulations that one must follow. Businesses that are dealing with tobacco products, medicines, drugs, or alcohol have to pay a hefty amount to obtain a wholesaler permit.
State’s Tax and Revenue Laws
Each state has a different set of rules and regulations. That is why the cost of a wholesaler permit might also differ from state to state, depending on the tax laws and regulations.
What are the Benefits of a Wholesale Permit?
Here are some of the key benefits of getting a wholesale permit:
No Sales Taxes
For every bulk purchase that a wholesaler makes, they are entitled to pay a huge amount of money as sales tax. Sometimes this sales tax adds up to the initial price of the product. This urges the wholesaler to sell the product at a higher price to ensure profit.
This is where a wholesaler permit saves the day. If you have acquired a wholesaler permit, you do not have to pay sales tax on every transaction. The wholesaler can just make a bulk purchase without having to worry about paying the sales tax on every mass purchase.
Allows the Wholesaler to Make a Bulk Purchase
Wholesalers are known for making bulk purchases at relatively cheap prices and then selling those products at a markup to make profits. However, most manufacturers and producers ask for a wholesaler permit before selling their products to the wholesalers. A wholesaler permit is legal proof of your business existence and hence assures manufacturers or producers to deal with the business.
If a wholesaler wants to make a bulk purchase, a wholesaler permit is inevitable.
Easier Access to Wholesale Prices
Not everyone can make a bulk purchase from manufacturers or wholesalers. This is something that requires a rather different pricing strategy and marketing tactics. Only those businesses that have a wholesale permit can make a mass purchase. Therefore, to gain access to wholesale prices and perks, you first need to register your business to get a wholesaler permit.
The Bottom Line
Wholesale is a profitable market. But to survive in the industry, it is necessary to acquire all the legal documents. It is needed to comply with the rules and regulations of the IRS and any other state laws. It legalizes your wholesale business and protects your wholesale business against any malpractice or fraudulent practices.
