The United States is a fantastic place to go into business. It is a country filled with opportunity for the right retailers in the hottest industries, but you can’t just start selling physical items and hope for the best. Though there are a few limited areas that don’t require permits at all (or you only need them at a certain sales level), the vast majority of states do legislate the approval of seller permits before you can legally sell products.
Licenses to sell online or in person ameliorate seller risks and impart serious benefits, regardless of where you’re operating your business. We’ll briefly cover the risks and then point out the advantages in this short guide.
The Risks
Selling without a permit isn’t just risky because customers may not believe you’re legitimate. Doing so can result in fines or even jail time in some areas, especially if you’re importing and exporting. Once you reach a certain level of yearly sales, the risk of fines and charges escalates because you draw more attention to yourself.
Consider that in California, selling without a Seller Permit is effectively criminal. If you lose the court case after being cited, you’re looking at a $5,000 fine and up to a full year of prison. If it seems like investing in a Seller Permit is too expensive, jail time will surely prove to be more costly.
That said, the risks aren’t the only reason to secure a permit to sell. Holding a Seller Permit can bring significant benefits to retailers, too, both from an identification and a taxation perspective.
Collect Sales Tax
Though laws aren’t the same across America state-to-state, areas that do allow sellers to collect sales tax directly almost always require retailers to maintain permits. The reasoning behind this is twofold; that piece of paper tells government officials who are selling and producing income. It also proves to customers that you’re a legitimate seller who has permission to collect sales tax at the same time.
As an example, in the state of California, a seller cannot collect sales tax without a Seller Permit. To do so is effectively illegal. Though some unscrupulous businesses do get away with this by avoiding charging tax altogether, they could face 10 or more years in jail for tax fraud if caught, and many are caught.
All it takes is a single customer to report that you did or didn’t request sales tax to the right authorities, and you could find yourself on the receiving end of criminal charges for tax fraud.
Access Wholesale Goods
Not every new seller knows this, but, in most cases, wholesalers won’t work with your business until you have a vendor permit in the first place. This effectively prevents everyday citizens from skipping the “middleman” and going right to a warehouse for a lower price, protecting retail interests for both sellers and wholesalers.
Without a seller permit, you aren’t really identifying yourself as a legitimate seller, and, thus, warehouses and wholesale companies may see you as just another average Joe attempting to go straight to the bottom of the chain.
Think you don’t need wholesale? That’s a big statement to make, especially if you plan to grow your business down the road. Buying products wholesale can grant you access to tremendous savings, and that means better profit off of each product you sell. In an increasingly challenging world for businesses, every cent counts.
Even if you don’t live in a state that requires a seller permit, warehouses won’t necessarily overlook the lack of one out of kindness. It is possible to secure such a permit through third-party services, if for no other reason than identification. It’s a boost to your business integrity and can show you did due diligence if something does go wrong later on down the road.
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