If you are starting a new business, you should make sure that you take care of all of the little details that need done when you start a business. One of these details is making sure that all the required paperwork in relation to permits and licenses has been completed, such as a seller’s permit. While the “10 Things Every Small Business Owner Should Know About Business Licenses & Permits” was covered in another article on this blog, we’ll go into more detail about what new businesses need to take care of here.
States, and often cities and counties, have certain licensing and other administrative requirements that you must complete when starting a new business. Sometimes this is solely for taxation purposes, but in certain industries it’s also as a measure to ensure that the public’s health and safety is protected.
If your business is related to a profession, check with your local governing body to see what the requirements are in the state that you intend to work in. At a minimum, special licenses are necessary for doctors and lawyers who engage in self employment, as well as for a wide range of other professions, including hairdressers, funeral directors, contractors and more.
California Requires Seller’s Permits
If your business is in California and you intend to sell products, you will need to acquire a seller’s permit from the Board of Equalization (BOE). It is a legal requirement to be in possession of a seller’s permit if you wish to sell tangible products that would incur sales tax. The requirement to obtain a seller’s permit is applicable to: LLP’s, LLC’s, partnerships, corporations, organizations, husband/wife joint ownership and individuals (sole proprietors). This includes manufacturers, wholesalers and retailers. Also, if you intend to sell a product for a short time- up to 90 days spread across several locations- you will need a permit as well, such as setting up a fireworks booth or a Christmas tree stand.
What Happens if I Don’t Get a Seller’s Permit?
If you fail to get a seller’s permit, you may find yourself in violation of the Sales and Use Tax Law. Violating these law may subject you to a criminal citation which can lead to a court appearance to explain why you failed to obtain a permit. If you are issued a citation, you can still be offered a chance to get the permit up to 5 days from the issuance of the citation. If you fail to act then, you can expect to find yourself in court again and potentially fined up to $5,000 and/or possibly sent to jail for up to one year. See the BOE site for more info on this.
In addition to a seller’s permit, your business may be required to obtain other licenses or permits. Be sure to speak with a business attorney about what requirements your particular business is required to fulfill.
Keep in mind that this information is provided to help you make more informed decisions about your business but does not represent legal advice. We always recommend that you speak with an attorney should you have any questions or need more clarity on this subject.
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