Do EBay Sellers Need an EIN?
This question comes up again and again. Many people starting out on EBay want to know if they should get an employer identification number, or EIN. This is also known as a Federal Tax Identification Number and is typically used to identify business entities. If you are small, one or two person business, the chances are that you will not need an EIN. An EIN is generally required if you have employees, but for those of us running our businesses by the seat of our pants, this will generally be unnecessary. You can always apply for and get an EIN–it is free, after all–but it is not always a requirement. But how can you know for sure? Here are some basic rules of thumb.
According to irs.gov, you will be required to obtain a new EIN if any of the following statements are true.
A corporation receives a new charter from the secretary of state.
You are a subsidiary of a corporation using the parent’s EIN or you become a subsidiary of a corporation.
You change to a partnership or a sole proprietorship.
A new corporation is created after a statutory merger.
You will not be required to obtain a new EIN if any of the following statements are true.
You are a division of a corporation.
The surviving corporation uses the existing EIN after a corporate merger.
A corporation declares bankruptcy.
The corporate name or location changes.
A corporation chooses to be taxed as an S corporation.
Reorganization of a corporation changes only the identity or place.
Another common, related question is whether or not you need a sales tax permit. This may be more to the point. If you are an EBay seller and you plan on purchasing products from a true wholesaler–a wholesale business licensed as a wholesale business–then you will need a sale tax permit. This is sometimes known as a resale certificate. Bascially, the tax permit allows you to buy goods from true wholesalers without paying sales tax. You, in turn, will charge sales tax when sell the goods to residents of your state. Generally speaking, when you sell goods over the Internet to residents of other states, you do not have to charge sales tax.
How do you get a sales tax permit? Nothing could be simpler. Simply apply online with your state–do a Google search for sales tax permit + you state. It will take you about 10 minutes to do this online–and it is usually free. You could be authorized to purchase from real wholesalers in the next 10 or 15 minutes.
What does this have to do with drop shippers? Well, unless the drop shipper is also a licensed wholesaler, nothing. However, if a drop shipper is a true wholesaler, then that drop ship company will be required–as with any wholesaler–to have proof of your sales tax permit. That is also how you can identify true wholesalers from retailers. If the company requires proof of your tax permit, it is a real wholesaler. If it doesn’t, its a retailer, and that’s true regardless of how much the business throws around the word “wholesale.”
Aid and Trade International Directory of Wholesale Product Suppliers
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[tags]tax permit,EIN,EINs,wholesale tax permit,drop ship tax permit[/tags]
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