Do I need a tax permit to sell on eBay? Let me make it clear that eBay itself does not require you to have a sales tax permit or Employer Identification Number, but that does not mean you don't need one. If this sounds a bit confusing, I apologize. I know how you feel. Possibly just starting out in your first eBay or home ecommerce venture and now you must face the complexities of meeting the legal requirements for doing business. Fortunately for us, this is not complicated. The point of this article is to spell out what you need to know about tax permits to get started selling physical products on eBay, from home, or on your ecommerce website.
What you must know is that a tax permit may be given different names depending on your state of residence. It is often called a sales tax permit, sales tax exemption, and in California is called a resale certificate. The sales tax permit is not the same thing as a business permit, which is a sort of legal authorization to engage in certain kinds of business and is granted by your local authorities. It is also not the same thing as an Employee Identification Number (or EIN), which is granted by the Internal Revenue Service (IRS). The sales tax permit is a kind of exemption from sales tax that retailers are required and granted by your state of residence if you sell to the public and need to report sales tax to the state treasury. If you are selling physical products on eBay to residents of your state, then you would be required to report your income and pay sales tax and therefore be required to have such an exemption.
You must also know that you will need a sales tax permit in order to purchase products from true wholesale businesses. Your sales tax permit grants you the legal right to purchase wholesale goods without paying sales tax. You, as a retailer (online or off), must charge sales tax to any residents of your state purchasing from you. Again, it does not make any difference if you sell the product online over the Internet. If you sell to a legal resident of your state, then you must charge sales tax. You are then required to remit any sales tax collected to your state's department of treasury at normal tax collection times. Tax collection generally occurs on a quarterly basis. A true wholesaler, by the way, is required by law to have proof of your sales tax permit in order to sell to you. In the United States, if a business does not require proof of your tax permit, it is not a true wholesale business.
How much trouble is it to get a sales tax permit? Very little if any at all. When you are ready for the permit, you will need to contact your state department of revenue. This is easily done by doing a Google search under, "state department of revenue" and add the name of your state. If it is not evident how to get the permit once you find the website, do an additional search on the site itself under, "sales tax permit" or "sales tax exemption." States generally don't charge for the permit, and most sites allow you to sign up online. The whole process can be finished in 10 or 15 minutes.
I want to briefly mention the Employer Identification Number because there are many questions about this from people starting out with eBay. Everything you need to know about getting an EIN and whether or not you need one can be found on the Internal Revenue Service website, irs.gov. However, the EIN is a permanent number and once obtained can be used for most of your Federal tax and financial business needs. Generally speaking, you may need an EIN if you have employees, operate your business as a corporation, file employment tax returns, excise or alcohol, tobacco and firearms taxes, withhold taxes on income other than wages, or are involved in trusts, stages, real estate mortgage investment conduits, non-profit organizations, and farmers' cooperatives. Chances are if you are beginning to sell on eBay and EIN won't be necessary, but check with irs.gov just to be sure.
I want to address one final question. Is a specific license or permit required to drop ship products sold in eBay auctions? No, absolutely not! There is no special permit that applies specifically to drop shipping whether you sell online on eBay or on your website or offline. For most mom and pop eBay businesses, the sales tax permit will be all you need. As mentioned above, you probably won't need an EIN unless you have employees, establish a corporation, or pay wages. If you are running your eBay business from your kitchen or home office and keeping your products at home or using drop shipping, it is very unlikely that any other licensing will apply to you. Nevertheless, I advise checking with your local officials and would go so far as to suggest a consultation with a business attorney.
More Information:
Find out more about
eBay product sourcing and
where to get products to sell on eBay right now!
Categories
