Robert, I read your post with concern, because it implies that anyone
who does exclusively wholesale work need not register their business
in any way with their state or deal with state taxation issues. In
many states, this isn’t true.
While you may not collect or owe sales tax, in many states all legal
business entities do need to register with and receive a business
registration number (which we offhandedly refer to as a resale
number, although it’s much more). If doing exclusively wholesale
business, then your sales and use tax return (showing no sales tax
due) would likely be due either once or twice yearly. For those
doing wholesale/retail mix or all retail, returns are usually due
more frequently (quarterly or monthly).
In some states, there is “use tax” due, as well. That use tax is
levied on materials you purchase and then use in your business. You
do not pay sales tax on your purchase of cleaning supplies, for
example, but owe a small use tax on it when you’ve used it.
Likewise, that tax is paid on materials that go into making
If you are truly a wholesaler, additionally, you don’t want to be
paying sales tax on your metals, stones, and other supplies. That
tax is levied to the end consumer of the goods, properly speaking.
You are not the end consumer of the items, and the tax is an
additional chunk of change that adds to your business expense.
Without the valid business cert, your suppliers will most likely be
charging you sales tax (unless you’re buying online or have
reciprocal state agreements with them).
Presumably, you’re not charging your wholesale customers sales tax,
right? Well, you’d better be getting THEIR resale numbers to protect
yourself – otherwise, you could be in deep trouble with your state’s
dept of revenue.
All of this is in addition to the IRS, who is usually quite happy to
attach your business tax debt to your personal social security
number. If you employ anyone other than yourself, though, you have
to apply for an EIN (Employer ID number) to use instead. The IRS
doesn’t really care about state business registration issues.
In many cases, you’ll need that business registration number to get
things like a business checking account, to register with true
wholesalers (like Stuller and some of the stone dealers I deal with),
and to set up merchant processing. So it really can pay, even for a
small concern, to get yourself “legal” in your state.
I’m not a lawyer or a tax consultant, but I recently went through a
pretty rigorous review of the tax issues in setting up a small
business in PA. I would strongly suggest reading through the
materials appropriate to your state (your small business assoc. can
usually help if you can’t find what you’re looking for online). It
could save a bunch of headaches down the road.
AND registering as a business could make you eligible to buy from
Stuller, which is where this whole discussion started.
Handcrafted and Unique Artisan Jewelry
P.S. - I should mention that some municipalities also require some
form of local registration or notification, even if you’re operating
out of your home. So don’t forget to check out that angle, too.