The Business of Buying Wholesale

Congratulations! Your jewelry work is catching on. You have a following on Etsy, your website is beginning to outsell your day job. You’ve been contacted by a gallery or department store. You are ready to formally go into business.

Now it’s time to take off your artist’s apron, put on your power-suit jacket, and get serious about the business end.

We’ve been talking about buying your supplies and materials at a wholesale level, and the various proofs you may need to produce to get into wholesale only shows. Some of those proofs may include a business or resale license.

A business license may or may not be required in your city. Fees for business licenses, and the way those fees are determined, vary from city to city. In Portland Oregon, for example, businesses making $25,000 a year or more are subject to an annual net income fee of 2.2 percent, with a minimum fee of $100. New York City also requires a business license for businesses grossing more than 25,000. The fee is 4 percent of the taxable income annually. Pasadena extracts an extra fee depending on the number of employees you have. Check with your local city government to get the specifics for your area.

You can start by searching on line (which is where the above information comes from). Many cities have publications on line as well as application forms and useful phone numbers. You’ll probably have to wade through several web pages to find what you’re looking for, but you can do much of the preliminary work during the hours that the business offices of most cities are not open–and you won’t have to listen to canned music.

Business licenses are revenue generating methods only, as the application for Portland, Oregon, helpfully explains. They do not include permits. So if you decide to do volume casting in your backyard, you’ll have to get the appropriate permits from the appropriate licensing office in addition to your business license. Much of this information is also available online.

Sales Tax Certificate

If your state has a sales tax, you’ll also be responsible for collecting that tax and passing it on to the appropriate state department. (Stay aware of the discussions about whether or not online sales should be subject to sales taxes in your state. It’s a topic that keeps coming up.) To do this, you have to be registered with the state and be issued a sales tax certificate. There is usually no charge for this, but it may be illegal for you to engage in business without one, as it is in the state of New York. If you go ahead and start your business anyway, New York will fine you $500 for the first day you operate without the certificate, and $200 per day for each day after that. In other words, it’s worth the hassle to get the certificate and file the tax forms. Sales taxes must be paid quarterly in some states and the penalties for not filing can be high. So be prepared for some careful bookkeeping. Your state government may have forms and publications that will help you with your recordkeeping.

The wholesale show may demand more proof that you are actually running a business, because sometimes requirements for business or resale licenses may be less than stringent. When my family had a small supply business, many of our customers had resale licenses, but really weren’t doing a volume business. You may find that the cost of a business license and the trouble to procure a sales tax certificate may pale in comparison to those other items required for entry into wholesale-only shows, namely store fronts, advertising, letterhead and business cards, websites. So let’s take a brief digression into that.

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