How To Get a Wholesale License: Costs and Requirements

A wholesale license is a permit that allows an individual or business to purchase goods in bulk directly from manufacturers or distributors at lower prices, usually for the purpose of reselling those goods to retailers or directly to consumers. 

If you’re starting a retail business and interested in purchasing products at wholesale prices, it’s important to get a license so you can access all those discounts from suppliers. Otherwise, you’re left paying consumer prices and little profit. Plus, you can often purchase wholesale goods tax-free with the right permit. 

Below, learn more about how to get a wholesale business license, what it is, why you need it, and how much it costs. 

Steps to getting a wholesale license

1. Register your business and choose a legal structure
2. Apply for an Employer Identification Number (EIN)
3. Obtain a sales tax permit or sales tax ID
4. Gather the required information and documents
5. Submit the wholesale license application and pay the fee
6. Wait for approval and receive your wholesale license

1. Register your business and choose a legal structure

The first step to getting a wholesale license is to make your business legit. This involves business registration, during which you’ll choose a legal structure for your business. 

Typically, retailers choose from the following business structures: 

• Sole proprietorship
• General partnership
• Limited partnership
• Limited liability partnership (LLP)
• S Corporation
• Benefit corporation
• Limited liability company (LLC)
• Nonprofit

2. Apply for an Employer Identification Number (EIN)

Once you’ve registered your business, you can apply for an EIN. This is your business’s federal taxpayer ID, so it’s what you’ll use to open business bank accounts and file your taxes, for example. 

To apply for an EIN for your business, you can go to the IRS website and follow the instructions. You’ll need your name, social security number, address, and your business name to complete the application for an EIN. Typically,you can get your EIN on the spot. 

3. Obtain a sales tax permit or sales tax ID

With your business registered and recognized by the IRS, you can apply for a sales tax permit and ID. A sales tax permit, also known as a sales tax license or seller's permit, is a state-issued document that authorizes a business to collect sales tax from customers on taxable goods and services. 

The specific requirements and regulations for obtaining a sales tax permit vary depending on the state, so it’s best to check the details with your local jurisdiction. 

4. Gather the required information and documents

You’re all set to start business, so now it’s time to get your information and documents ready to take the next step of getting your wholesale license. 

While specifics may vary depending on your business is located, a general checklist of required information and documentation includes the following: 

• Full name
• Business name 
• Taxpayer ID
• Business EIN
• Home address
• Business address
• Business contact information (email, phone, etc.)
• Business license
• Sales tax permit
• Business structure
• Nature of the business

You might not necessarily need a business license, but it could be required by your state. Even if it’s not required, getting a business license can support your case for why your wholesale license should be approved.

5. Submit the wholesale license application and pay the fee

Every state has its own process for obtaining a wholesale license. So, you’ll want to check with your local jurisdiction to find out what the application requirements are, as well as if there are any associated fees. For example, Alaska has a biennial general wholesale license fee of $2,000, while Alabama doesn’t require a wholesale license unless you’re buying or selling automobiles wholesale. 

The primary purpose of a wholesale license is to be able to legally buy products at wholesale prices, which are generally lower than retail prices, and then sell those products at a profit. Sometimes, wholesale purchases may even be tax-free. However, you still may have to collect sales tax from customers when the goods are resold.

A wholesale license is usually required for businesses that intend to sell products to other businesses (B2B) or to consumers (B2C). It’s common in industries like electronics, clothing, automotive parts, and food.

6. Wait for approval and receive your wholesale license

Once you submit your application, you wait. There may be cases where a physical inspection of your retail space is required, so it’s a good idea to be prepared for that if necessary. It’s also a good idea to make yourself available for any follow-up questions or documentation needs as your application is reviewed. 

Requirements to get approved for a wholesale license

While the requirements for wholesale licenses vary and, again, it’s best to check with your local jurisdiction, some general guidelines do apply. Typically, businesses are required to have the following to receive approval for a wholesale license: 

A valid business registration and legal structure

Your business should be registered in the state where you operate and with the proper legal structure. 

An Employer Identification Number (EIN) or Federal Tax ID

Your EIN is your business’s federal taxpayer identification number and serves as a way to identify your business as a unique, standalone entity. To get a wholesale license, you’ll first have to complete this step if you haven’t already done so. 

A sales tax permit or sales tax ID

While wholesale purchases may be tax-exempt, retailers are often required to pay sales tax for each sale they make. Some states don’t require sales tax, so it’s always best to check where you operate and where your customers are located. 

A physical business address (not a P.O. box)

As a retail business, you likely have a physical address. Many states won’t accept a P.O. box address as your official business address when reviewing wholesale license applications. Be sure to always provide your physical address. 

Proof of business insurance

Business insurance protects you against unforeseen and uncontrollable circumstances. Many states want businesses to have this layer of protection before approving wholesale licenses. 

A completed wholesale license application

To receive approval for a wholesale license, you’ll need to successfully complete the required wholesale license application for the states where you plan to do business. This may require multiple applications and fees, depending on the nature of your business. 

Payment of the wholesale license fee

While some states don’t charge a wholesale license fee, most will require some sort of payment or deposit. Again, you may have to pay multiple fees if applying in multiple states. 

Seller permit vs. wholesale license

A seller’s permit and a wholesale license are two different types of permits for retailers. A seller’s permit allows a business to collect sales tax from customers at the time of purchase. They can collect this sales tax on behalf of the local government, to which they then remit the sales tax to. 

A wholesale license, on the other hand, allows a business to purchase wholesale bulk goods at discounted rates directly from suppliers. With a wholesale license, a business can often buy goods without paying sales tax at the point of purchase. However, they must collect sales tax from customers when the goods are resold, if applicable.

How much does a wholesale license cost?

The cost of a wholesale license depends on the location. A wholesale automotive auction license in Alabama, for example, costs $125. It also depends on the type of wholesale license you’re after. In New Jersey, for example, wholesale licenses for alcohol are anywhere from $1,031 to $8,750. To get the most accurate pricing, check with your local government. 

Get a wholesale license for your retail business

Now that you know the benefits of having a wholesale license, you can get organized and gather the information you need to take advantage of having one. When you’re ready, you can launch your new products on your Shopify store and in your retail shop without worrying about penalties or small profits.