Obtain a Wholesaler License

Wholesalers are companies that purchase products in bulk and resell them at a discounted price to retailers, who, in turn, sell the products to the public. The wholesale company usually does not sell directly to the end user. Wholesalers often purchase large quantities directly from the manufacturer or importer. Since most wholesalers only deal with other retail businesses, they need a special license to exempt them from paying or collecting sales tax. The regulations and requirements outlined in this article refer primarily to the United States. The general concepts may be the same in other countries, but you should research your own local regulations.

Steps

Researching General License Requirements

1. Understand the purpose of a wholesale license. Someone in the wholesale business is a kind of “middleman.” In general, your business is to buy large quantities of some product from one or more manufacturers and then resell them to retailers. The retailers then sell the product directly to customers. Federal, state and local governments regulate wholesalers and issue licenses for several reasons:
   • State and local governments have an interest in collecting sales taxes on the items you provide. As a general policy, the same item should not be taxed multiple times on its way from manufacturer to consumer. Therefore, a wholesale license allows you to buy from the manufacturer and sell to the retailer without paying tax.
   • The federal government is concerned with controlling safety and participation in a variety of particular fields. The federal government also oversees interstate commerce, so if you are involved in distributing products across state lines, you may need a federal license.
2. Identify the state or states where you do business. This seems obvious, but “doing business” sometimes has a legal definition that you will need to review. There may be states where you operate only temporarily, and determining whether your operation constitutes “doing business” will be necessary before seeking a license.
   • For example, the California Board of Equalization considers businesses to be “engaged in business” in that state, even if the principal place of business is in another state. A company is “engaged in business” in California if it maintains a sales representative, agent, or canvasser in the state. Receiving rental payments for property that is in California also constitutes doing business in the state.
   • You should review the licensing laws of every state with which you have contact of any kind. Work with a local attorney to get help with interpreting the laws.
3. Decide if you need a license for your business or product. Not every business type needs to be licensed. You should review the official site of the U.S. Small Business Administration (SBA) to find out if your product or service is one that is subject to licensing.
   • For example, the federal government licenses, among other things, companies that deal with alcohol or firearms.
   • Every state makes its own decisions about what types of businesses require licensing. The SBA provides an interactive website that connects you to each state, to determine their licensing requirements. You can access this information at https://www.sba.gov/starting-business/business-licenses-permits/state-licenses-permits.
4. Look for any reasons for denials. Each state sets its own eligibility requirements and reasons for denying a wholesaler license. Also, different agencies will establish their own expectations and reasons for denial. When you review the regulations for your particular license, look for these eligibility requirements.
   • For example, if you are in Ohio and are applying for a wholesale pharmaceutical license, you can be denied if you have been convicted of a felony, particularly related to drug use, if you are addicted to alcohol or drugs, or if you have previously been disciplined by the Ohio pharmacy board.
5. Determine the tax issues related to your business. Although the IRS does not issue business licenses, there are important tax implications to operating a wholesale business. You will need to register with the IRS and with the tax offices of any state where you will operate.
   • Most businesses will need to register with the IRS to obtain a Federal Employer Identification Number (FEIN). To apply for an FEIN, visit the official IRS website at www.irs.gov. Under the “Tools” heading, select “Apply for an Employer ID number.” From there, follow the instructions to apply for an FEIN.
6. Be prepared to pay a licensing fee. Each state or federal agency that issues licenses will most likely charge an administrative licensing fee. The fee will vary from agency to agency or from one type of business to another. You may also be required to pay a higher fee if you have more than one business location. Information about licensing fees will generally be found together with the application materials.
   • For example, if you are applying for a license as an alcohol wholesale distributor in New Hampshire, you will find information about the license fees on the same page as the application information.

Applying for Federal Wholesale Licenses

1. Visit the official US Small Business Administration website. The SBA website provides a wide variety of information necessary for small businesses to succeed. Among other things, the SBA assists with licensing. You can find the information about federal licensing at https://www.sba.gov/starting-business/business-licenses-permits/federal-licenses-permits.
2. Look up your business type. The SBA federal licensing page lists the business areas that are subject to federal licensing. Many of these fall under federal jurisdiction because of interstate commerce or for other special reasons. The business areas that require federal licensing are:
   • Agriculture.
   • Alcoholic Beverages.
   • Aviation.
   • Firearms, Ammunition and Explosives.
   • Fish and Wildlife or Commercial Fisheries.
   • Maritime Transportation.
   • Mining and Drilling.
   • Nuclear Energy.
   • Radio and Television Broadcasting.
   • Transportation and Logistics.
3. Investigate whether wholesalers are included in the licensing regulations. For each federally regulated business field, you will need to determine whether the license requirements apply to wholesalers or only to manufacturers, retailers or some other business types. Select your business area from the list on the SBA website, and you will find links to licensing regulations.
   • For example, under Alcoholic Beverages, the description clarifies that a license is required “if you manufacture, wholesale, import or sell alcoholic beverages.” Therefore, you will need to read further and apply for a federal license if you are engaged in alcohol wholesaling.
   • Other businesses are not as immediately evident but are based on the actions of the business. For example, under “Maritime Transportation,” there is no direct reference to wholesale businesses. However, investigating the link further leads to the requirement that any company in the U.S. that arranges cargo movement to international destinations or dispatches shipments from the U.S. via common carriers needs a license as an Ocean Freight Forwarder from the Federal Maritime Commission.
4. Follow the posted instructions to apply for the required license. Each license, from each licensing agency, will have its own application procedures. You need to read the website closely and complete all steps.
   • For example, if you are involved in overseas shipping, you can find the application form for an Ocean Freight Forwarder on the website of the Federal Maritime Commission, at http://www.fmc.gov/resources/forms_and_applications.aspx. Selecting the link to the form will open an online application page. Complete the application and submit the form electronically for your application to be considered.

Applying for State Wholesale Licenses

1. Begin at the SBA website. As with federal licenses, the U.S. Small Business Association provides links to useful information about licensing for many businesses. From the home page, www.sba.gov, choose the “Starting and Managing” link, and then select “Business Licenses & Permits.” From there, choose “State Licenses and Permits” to find a list of all 50 states and several territories.
2. Investigate your state’s licensing requirements. Clicking on the name of the state will lead you to that state’s official government website for business. You will need to research that site for the licensing requirements for your particular business.
   • For example, if you select New Hampshire, you will be redirected to the New Hampshire business page. On that page, under the right-hand column, you will find the heading for “Licenses and Permits.” Under this heading, you will find links to Environmental Permits, Food Service Licensing, Licensed Occupations in NH (this one will require more in-depth review), Alcoholic Beverages, Meals & Rentals Tax License, Oversize/Overweight Permits, and Professional Licensing. If any of these fields apply to your business, you will need to select the link for further application materials.
3. Complete the application materials. After selecting your state and field of business, you will need to review that state’s licensing requirements. Some of these may consist of a simple, online application form, while others may lead to more complicated application procedures. Whichever it is, be sure that you read the application instructions carefully, follow all the steps, and complete the forms as directed.
   • For example, if you want to become an alcohol wholesaler in New Hampshire, you will select the links to New Hampshire, then Alcoholic Beverages, and then “Apply for a License.” This will direct you to the New Hampshire Liquor Commission’s page for licensing applications.

Tips

• Some wholesalers, also called distributors, buy goods in bulk to resell to retailers. Others are the manufacturers of products and sell them directly to retailers.
• If you are in a country other than the United States, you should consult with a local attorney about your country's laws and regulations regarding wholesalers.

Warnings

• Some wholesale permits or licenses do not allow the wholesaler to sell directly to the consumer. This varies by state.
• You may be asked to provide proof to the state that the businesses you are selling to are exempt from paying sales tax. Keep accurate records, including the retailers' seller permit or sales tax license numbers.
• You are required to collect and remit sales tax to the state you are located in if you sell to consumers.

Sources and Citations

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• Get a Liquor License
• Make Money As a Wholesaler