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Our List of 3+ Licenses and Permits You May Need to Open a Drop Shipping Business:
A Business License is a legal document that allows a person or company to operate a business within a specific jurisdiction. It is required by law in most states and cities to operate a business. You might need a Business License to start a Drop Shipping Business because it is considered a business activity. Even if you are operating from home, you may still need a license to legally do business in your area. Additionally, some suppliers may require you to have a Business License before they will work with you. Having a Business License also adds credibility to your business and can help you establish relationships with other businesses and potential customers.
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A Sales Tax License or Permit is a legal document that allows a business to collect sales tax from customers and remit it to the state government. This license is required by law in most states for businesses that sell tangible goods or services.In a drop shipping business, the seller does not physically hold the inventory but instead purchases products from a supplier who ships them directly to the customer. However, since the seller is still making sales and collecting payment from customers, they are still required to collect and remit sales tax to the state.Therefore, a drop shipping business will need a Sales Tax License or Permit to comply with state laws and avoid penalties for failure to collect and remit sales tax.
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An Employer Identification Number (EIN) is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify a business entity for tax purposes. You might need an EIN to start a drop shipping business because it is required by the IRS for businesses that have employees or are classified as a partnership or corporation. Even if your drop shipping business is a sole proprietorship, you may still need an EIN if you plan to hire employees or if you want to open a business bank account. Additionally, some suppliers may require an EIN to establish a wholesale account with them.
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