Related information:
Who must have a sales tax license? — General
guidelines
A sales tax license is proof that a business
is properly registered with the Department of Revenue and is authorized
to make tax-free purchases of merchandise for resale and collect
tax on the sale of the merchandise. If your business sells tangible
personal property, either retail or wholesale, you must obtain
a sales tax license and maintain a sales tax account with the state
in which you live. If you have more than one location where sales
are made, a separate license is required for each location. For
example, if a company has a chain of stores, each store must have
a license. In addition, if a business makes sales at a location
other than its regular business location, a “special event” license
must be obtained. Examples of events are craft or collector’s
shows. This special event license is required whether or not you
have a permanent business location. An individual who makes retail
sales from a private residence that total $1,000 or less in a calendar
year is not always required to have a sales tax license. However,
taxes on these sales must be collected and paid by April 15 of
the following year on the Combined Annual Retail Sales Tax Return
(DR0100A).
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Types of licenses
Four types of sales tax licenses are usually
available:
- Standard Retail License—for businesses
with a permanent location where retail sales are conducted on
a regular basis.
- Wholesale License—for businesses that
make sales only to other licensed vendors for resale.
- Single Event License—an individual, organization
or vendor plans to conduct retail sales at a location other than
the regular business location (if any). The license is valid for
one event only. Examples would be a craft or collector’s
show. Organizers of an event may choose to obtain a single event
license and collect and remit tax on behalf of the participating
vendors.
- Multiple Events Sales Tax License—a two-year
license for those engaged in retail sales at more than one special
event in a two-year period. It is more cost-effective than the
single event license for vendors who plan to sell at more than
one event in a two-year period.
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Tax deposit for new businesses
Most states require a one-time tax deposit (usually
around $50) to help ensure that only legitimate businesses acquire
sales tax licenses. The deposit is usually refunded to the retailer
after remittance of $50 in state sales tax on the sales tax return.
If your business closes for any reason before you have collected
and remitted $50 in sales tax, only the amount of sales tax actually
remitted to that point would be refunded. Applicants for the wholesale
license, single event license, and the multiple events license
are not required to pay this deposit.
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Obtaining a sales tax license
Locate your nearest state Department of Revenue.
You can usually find this information in your local phone book.
Most cities have a local office that you must visit in order to
fill out and turn in the information. Complete a State Business
Registration and pay the appropriate fee(s) when you turn in your
application. Request “Instructions for Business Registration” and
any materials related to starting a small business. These offices
are usually very helpful and also have printed information and
online booklets that can guide you through the process. You will
get your sales tax number and a temporary license immediately.
After DOR receives your license application, allow up to four weeks
for processing and mailing. Your sales tax license must always
be displayed in a visible place at the business. Notify the DOR
of changes in name, address and ownership. There is usually no
charge for license changes.
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Related information
Naming your company — trade names
Here’s the fun part...you get to name your
company. A trade name is a name other than the full first and last
name(s) of the owner(s) of a business entity, including a general
partnership. For a corporation, a trade name is any name other
than its true corporate name. For a limited partnership, a trade
name is any name other than its true limited partnership name.
For a limited liability company, a trade name is any name other
than its true limited liability company name. The following are
examples of trade names:
John Doe’s Jewelry Supply,
Jane Doe’s Chiropractic Clinic,
John Doe and Associates,
Jane Smith DBA Jane’s Little Piggy Toe
Rings.
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Registration
All companies with trade names doing business
in their state must register their trade names. Sole proprietorships
(the type of business most commonly used for setting up a small
home-based business with no other employees) and general partnerships
must also register their trade names with the Department of Revenue.
Corporations, limited liability companies and limited partnerships
must register with the Secretary of State. The DOR cannot register
limited partnerships or corporations, but can register sole proprietors,
and general partnerships. Registration of a trade name with the
DOR does not guarantee exclusive rights to that name. To trademark
a trade name within your state, contact the Secretary of State.
For national registration of trademarks, contact the U.S.
Commissioner of Patents and Trademarks, (703) 308-9000. There
is a small fee to trade mark your name.
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Applications and fees
You may register your business trade name with
the Department of Revenue with a state Business Registration, the
same form used to obtain a sales tax license. If you later decide
on a trade name or you are applying for a trade name only, you
may use the simpler Trade Name Registration (DR 0592) application
form. The fee is usually $10.00 for each trade name registered.
You must fill out a separate registration form for each trade name
you register. Trade names of businesses with active business tax
accounts are renewed automatically at no charge. Trade names of
businesses with inactive business tax accounts will receive an
annual renewal notice. These businesses pay a $6.00 renewal fee
for their trade name.
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Recordkeeping
You must keep records of all of your business
transactions to enable both you and the DOR to determine the correct
amount of sales and use taxes for which you are liable. These records
must include:
Complete, accurate beginning and ending inventories,
Purchase receipts,
Sales receipts,
Invoices,
Bills of lading,
All other account books and documents pertaining
to the business.
If you make nontaxable sales to other retailers
or wholesalers (i.e., you as an individual sell a tray of rings
to a salon that has a resale number), remember to record their
sales tax account numbers and demand and keep signed statements
that purchases are for resale. Vendors must keep and preserve all
invoices of goods and merchandise purchased for resale for three
years. These records must be available for review by the Department
of Revenue (Sales Tax Regulation 26-116]. Effective for all periods
on or after January 1, 1999, all entries of state and local taxes
on the sales tax return must be rounded to the nearest dollar.
You will still collect and keep track of exact amounts of sales
tax. It is only when you fill out the return (monthly, quarterly,
annual, seasonal, and 13-month filers) that you round the numbers
you are reporting. Books, records and statements or invoices to
buyers must reflect actual tax amounts. Only the totals appearing
on the tax return are rounded.
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Other ideas
With state paperwork filed, you are now able
to open a checking account for your business. Most banks have a
free account with a minimum of transactions per month (for instance,
5 deposits and 10 checks). Ask them for their best deal and call
around! Most banks are anxious to have you as a customer. You will
also find that your company will be added to several mailing lists
once you file a trade name and resellers license with the state.
You will receive information from banks, accountants, office suppliers,
and the like. Welcome to the world of owning your own business!
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Set yourself up
Make sure that you have a comfortable area to
work in. Here are some items that you should consider as a necessary
expense to set up your business:
Invoice book,
Hanging files,
Calculator,
Sales tax charts,
Business cards,
Plastic organizer cases for rings.
Also take some time to do some Internet research
for jewelry catalogs, suppliers, and equipment. This will get you
on other mailing lists related to the industry (this applies to
any industry you are interested in, not just jewelry!).
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Is it worth it?
You might be thinking that setting up your own
business sounds too difficult—all the paperwork, licensing,
and planning. Initially, it is a bit overwhelming, but this is
the threshold that prevents many people from starting their own
business. Personally, I have traveled the road and want to encourage
you that this process also opens many doors of opportunity into
other areas that you may have never thought of. Having a valid
resale number allows you entrance into marts and wholesale shows
and the ability to buy a varierty of merchandise at cost. This
may open the doors to other ventures, or help you to expand the
small business you have always dreamed of.
There are costs to start your business, but
if you are serious, these can be very minimal. You should be able
to get going in the toe ring business for under $500. Here is a
breakdown of initial costs:
Sales tax deposit: $50
Trade name file: $10
Minimum order for rings: $200
Jewelry sizing wands and displays: $25
Shipping: $15
Checking account deposit: $100
Office supplies: $25
Business cards: $25
One great reward of business ownership is that
you are able to write off many expenses related to your home-based
business. Phone, some utilities, office space, travel, and Internet
fees might all be deductible on your next tax return. Consult your
accountant for more information.
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We can help
If you need some inspiration, we
will be glad to talk with you personally. Email us at toerings@toerings.com or
call us, 1 (877) TOE-RING (863-7464). We want
to help you be a success!
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