The primary purpose of a California wholesale license is to allow you to buy goods from a manufacturer without paying tax. A manufacturer who’s selling wholesale wants to avoid customers buying for personal consumption. They’re looking to deal with businesses that are planning to resell their products in a retail store, which is why they’ll often ask for a resale or wholesale license.
Do I Need a Wholesale License?
If you’re engaged in business in the state of California and intend to lease or sell tangible property that’s subject to sales tax when sold at retail, you need a seller’s permit. However, this isn’t the same as a wholesale license. Every state has different requirements, but in California, you need a wholesale license, which is also known as a resale license, if you make three or more sales of wholesale items over a 12-month period.
There are a few things you’ll likely need before applying for your wholesale license, including:
- An Employer Identification Number (EIN), which you can get by filing with the IRS. The process usually takes no more than two weeks.
- A sales tax license and state tax ID number, which let you charge taxes to retail customers, pay employees and pay state taxes.
You’ll also need to register with the California Board of Equalization to receive a seller’s permit. There’s no set cost for this, but you may have to put down a security deposit to cover fees in the case that your company closes.
The process can be complicated, especially if it’s your first time. To save time and avoid unexpected hassles, you can utilize an expedited ordering process for your California wholesale license instead of going through the California Board of Equalization.
Benefits of a California Wholesale License
The major benefit of having a wholesale license is that you don’t have to pay sales tax on wholesale purchases, assuming that you’re going to resell all the items to personal customers who you’ll charge sales tax as it’s the final sale. If you don’t have a license, you’ll have to pay tax on the initial purchase and on the final retail sale. Failure to do this may result in fees and other penalties.
In addition, your business’ sales are likely to go up, as you now have the ability to shop with an increased number of manufacturers. As mentioned earlier, a lot of companies won’t do business with you if you don’t have the appropriate documents, such as your wholesale license.