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.
It is also important to understand that a sales tax permit is required to buy goods from true wholesale distributor. If you plan on selling products distributed by real wholesalers, then you will definitely need a sales tax permit, otherwise you won't be able to buy your products. The wholesaler is actually legally required to have proof of your sales tax exemption in order to sell to you. No matter how a business promotes itself, if it does not require a sales tax permit, it is not a true wholesaler. This is very important for eBay sellers because eBay is such big business that many product suppliers represent themselves as wholesalers when they are not. I'll add that this is not a special permit that applies only to Internet business. If you are a retailer, online or offline, you must have that permit in order to collect sales tax and purchase from legitimate wholesalers. As mentioned above, it is your responsibility to turn over the tax you collect to your state treasury department.
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 add that there is no specific license or permit specifically for drop shipping products from eBay or any other selling environment, online or off. For most eBay sellers, single person businesses and sole proprietorships, this will be the only permit needed. It is not generally the case that you need an EIN unless you pay wages or incorporate. This is an area of great confusion, but the basic requirements for a sales tax permit are pretty simple. If you are planning to go into business working at home selling on eBay, then I would advise you to check your with your local city and county authorities to find out if there are any regulations concerning zoning or the need for special permits. If you are only selling from home and are stocking goods in your house or using drop shipping, the need for other licensing will probably not be a problem, but it does not hurt to be safe and check.
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