Anyone know anything about vendor's licenses?

[elemay17]

I live in ohio and want to sell homemade soap. It says that all TAXABLE items sold require a vendors license. How do I know if homemade goods are taxable? I looked around on the internet and can't really find much information about what is taxable and what is not. Anyone have a good website or know from personal experience. I REFUSE to get a vendors license >:( Thanks!

[tufhelp]

You may find yourself in deep yogurt if you try to fly under the radar... eBay sales are one way to skirt the issue, but you may find that some bureaucrat make take you task because you are in "business". Depends on how aggressive they are in your neck of the woods. Success many become your enemy... Word of mouth, actual advertising, satisfied customers touting your product(s) may lead the revenuers right back to you. *If you are or are perceived as a threat to your competition, they will likely lead the revenuers to you. A vendors license is usually on the city or perhaps county level, sometimes call an "occupation" license - your cost of doing business in your local. Then there is usually some type of state registration which is usually tied to sales tax on the items you sell - they want their share as well, but you of course pass this on to your customers just like the big boys do. If you're talking about making a little pin money, likely no one will take you to task, and with a cash only business, not much of an audit trail. It is all a matter of scale. If you are thinking of doing crafts shows and farmer's markets, you will likely run head on into needing official "papers" in order to participate... Not that there aren't those that flaunt these regulations quit easily and seem to operate with impunity, there are some better sides to being "officially" in business. You can take advantages of many tax breaks available only to a business... And no tax/penalty problems if someone does take you to task...

As for the taxability of your product(s), in all likelihood the short answer is yes. But your tax and revenue department would be able to help with this. They no doubt have an internet site that will have all the rules and regulations. Again this is all usually tied to sales tax. I guess the first clue would be do you have to pay sales tax on soap when you buy it? If the grocery doesn't tax it, you will probably not have to collect it and pay it to the state. Hew in New Mexico, most food in the grocery store is not taxed, but hard goods like soaps etc. are taxed.

[tomato204]

I agree with the above. If you sell anything retail, you owe sales tax according to the law. If you sell wholesale, then the retail seller pays the tax.
Some businesses or websites you will see the notice "wholesale only", that's because they don't pay sales tax. You couldn't get by with selling soap one bar at a time and call it wholesale tho.

[Anon001]

It varies by state. *Ohio I don't know. *However, like Tomato said, you won't have to pay sales tax if it is sold wholesale. *If you sell to a wholesaler, one bar or a thousand and they have a resellers tax permit (name varies by state), you can claim tax exemption based on the wholesaler.

Also, states vary in other ways as well. *If it is internet sales, many states do not require you to pay sales tax if it is sold out of state, but require you to pay sales tax if sold in state.

The other way states vary is in whether you are required to pay sales tax on each destination or not. In my state, I have to look up the sales tax rate for EVERY physical address I sell to in state, because the sales tax is based on destination.. or the place of delivery. *If it is a brick and mortar store, the destination is the store therefore one tax rate. *If it is shipped, either from the store or internet based, it may be a different sales tax rate based on where that person lives. However, in some states the sales tax is based on where it is sold from. So in that case, the sales tax would always be the same.

I have a Kansas Resellers Tax Number. *

You most likely need to go online to your state's Department of Revenue. *If not there, call any local business and ask them. *

But, all the laws vary by state. *Luckily, my websites sales are mostly out of state. *Less than 1% are shipped in state. *That is the nice thing about the internet businesses.

By the way, my tax permit did not cost me anything here. * I think I even filled out the form online, printed it out, signed it and mailed it in.

Also keep in mind that you will most likely have to file your sales tax reports and pay quarterly. *Also, if this becomes your major revenue source, you will most likely have to start paying your Federal Income Taxes quarterly after your first year in business. *Not only that, you will also have to pay Self-Employment tax which in my case was more than my income tax. lol *go figure. *

My only advice is not to mess around with anything that can come back to haunt you. *Even bartering is supposed to be included on Federal Income Tax returns. But we know how that goes. *However, if you are selling for cash, do it legally to avoid any trouble. *Last thing you want is to have to go through any audits.

Good luck,
Paul

[elemay17]

Thanks everyone! Well a vendors licence is $25 and a spot for 1 day at the farmers market is $20. Do you know how much soap I can make for $45? :P I think I will try the internet sales instead, hopefully my low prices will help me stand out in a very very flooded online soap market. Thanks again!

[Anon001]

Maybe you could post the question about soap in the crafts/soapmaking forum for better responses. However, if you have to ask how much soap you can make for $45, then I doubt you know whether you can sell it for a profit and even compete in the market. If you sell online, you will have to go the route of Craig's List, eBay, etc and hope to be able to compete. Otherwise, if you have your own website, you won't get traffic without spendin money on some type advertising like Google Adwords. The amount of traffic and sales is directly related to how much you spend on advertising.

I only spend about $150 per month but I for the sales I want, I need to be spending $300 to $350 per month.

If it was me, I would look for the cheapest ingredients online. Going with your "recipes" figure out how much it will cost your per batch and how many bars you can get out of one batch. Don't forget to figure in the cost of something to ship in. I buy small boxes for my homemade product that is 3"x3"x2". They run about 20 cents each. Also figure the cost of making your own labels (about a penny or two for each bar.) You have to figure in every expense you can think of. Also don't forget that it does cost to sell online. If you sell through eBay, you have to have PayPal or some other electronic means for accepting payment. PayPal will cost you about 2.9% on each transaction if you do less than $1,000 per month, I think. Also, you have selling fees on eBay. Those have to be calculated into you retail as well.

So, selling online isn't just a matter of throwing together some product, listing it, and collecting a lot of money. Just like ANY business online or not, you must do your research and a lot of it. You research will also be ongoing after you get up and running.

What is a vendor's license? Where did you find the $25.00 fee listed? Is this just for selling in farmers' markets, or what?

[Anon001]

Thanks everyone! Well a vendors licence is $25 and a spot for 1 day at the farmers market is $20. Do you know how much soap I can make for $45? *:P I think I will try the internet sales instead, hopefully my low prices will help me stand out in a very very flooded online soap market. Thanks again!

I was just looking at this Types of retail licenses in Ohio. (http://tax.ohio.gov/divisions/sales_and_use/license.stm) It appears that if you are going to be in farmer's markets or different places, you would need a Transient License rather than a Vendor License. It looks to me like a Vendor License is for a brick and mortar store. Or if you are selling online, it looks like you would need a Delivery License instead. I don't know for sure, but that is the way it looks to me. If it was me, I would first call the toll free number at (888) 405-4089. Tell them what you want to do and see which license you will need. Also, be sure to ask if this is a one time fee or if it is a renewable fee every year or every two years, etc.

[elemay17]

I was just kidding about the comment of how much I can make for $45.00. I meant it as -I could make a whole lot of soap for the cost of the license and the show. Sorry, I should have used a "!" instead of a "?" I have priced everything out, know how much it costs per bar and add in for the labels and packaging I use. I have a logo made and a card with ingredients listed as well as a contact information card and pricing sheets. I do indeed need the transient (sp) vedors license, I found that on local tax pages, I just wasn't sure what they were considering "taxable goods" as that is what they have listed as requiring a license. In my opinion, I already paid taxes on the goods to make my soap, why should it be paid twice, but thats just me. ;D I don't want any trouble, in fact I want the government as far away from me as possible! ;) I am thinking of selling on Etsy, their fees are considerably lower than ebays.

Sorry for the confusion. But I would like to thank you again, it seems whenever I have a question most everyone on here is a valuable wealth of information and a great help! :)

[Anon001]

...I just wasn't sure what they were considering "taxable goods" as that is what they have listed as requiring a license. In my opinion, I already paid taxes on the goods to make my soap, why should it be paid twice, but thats just me.
You don't have to pay taxes on the items you buy if you buy it wholesale. You should be able to buy wholesale with your license. Also, you can probably find the ingredients cheaper online than you can locally and you most likely won't pay taxes online either.

I am thinking of selling on Etsy, their fees are considerably lower than ebays.
That's a good option, but you can't beat eBay for the volume of traffic. If you have a good product and are price competitive and if you product is packaged attractively, you will sell more on eBay than Etsy. But, I would definitely go with Etsy. However, if you are looking for cash flow, eBay is a good way to get the cash flowing until you can build enough business to do something else.

...it seems whenever I have a question most everyone on here is a valuable wealth of information and a great help!
Well, heck... just ask anyone on here and they'll tell you they're smart! LOL
Joking aside, it is a great group of people that are very knowledgeable, helpful and enjoy sharing.

Paul

[tufhelp]

Yep, you'll owe tax on the value added to the materials you purchase, and once you have your state tax certificate, they should provide you with paperwork you can give to your wholesalers to avoid paying taxes on your materials. Stuff bought out of state will usually be without taxes. They will get their pound of flesh from your customers when you collect the sales tax on you effort and the materials.

I forgot another really important item to consider: Liability insurance - it is very litigious out there these days... When I was in the Audio/Video business a few years ago, I produced a set of motivational audio tapes for a guy who sold them on line and at shows. Someone cut their finger opening the packaging and he had a suit on his hands. It isn't just the fact that you may be innocent, it costs money to defend yourself... Just check with your broker, they all usually represent some type of commercial insurance that will cover the small business man. You should probably look for at least 1 million coverage - surprisingly it doesn't cost much more than a few thousand or hundred thousand coverage.

[reedb66]

I had to get a sales tax license in missouri to run my food stand and my drive in resteraunt which saves me the sales tax on my purchaces but reguires me to charge sales tax on all sales.This is to be paid quarterly to the state and is 7.5 %.The license cost me a 25 dollar bond and about 1 hour on line .saves me a lot in tax I dont pay while doing business.also get this ,,,,I found out the other day that if you buy a car in mo and you end up selling it within 60 days of purchase you can get a full refund of taxes paid on it!!I am selling my old truck now that I bought another one and I havent had my old one 60 days yet ,the lady saw this and told me to bring in a copy of the bill of sale and she would credit me the taxes back ;D...I like her!!!!

[Anon001]

Reed,
Here, I don't think my sales tax permit cost me anything. Oh.. and our state sales tax is only 5.9% :P

[tufhelp]

Same here in New Mexico, nothing for the sales tax certificate, but the city/county take a bite ($35.00 a year) to do business within their bailiwick. Part of the sales taxes are local was well, but all sales taxes collected are paid to the state and they dole the local tax back to the local gooberment.