Getting Business Licenses

Q: "Do I need a retail business license to sell on eBay?"

A: Generally, you don't need a license to sell on eBay unless you are dealing with merchandise (such as motor vehicles) that can be sold only by licensed dealers in your state. Virtually all states, however, require retailers (both online and brick-and-mortar) to obtain a certificate or permit authorizing them to charge and pay sales taxes on the items they sell to in-state buyers and to claim exemption from state sales taxes for the items they source for resale on eBay (see Chapter 13). This certificate or permit goes by several names, most commonly sales and use tax permit. Some states, however, refer to their sales tax certificate or permit as a business license. If this is the business license you are referring to, then, yes, you will need one of these to sell legally on eBay.

Let me put it this way: If you are going into business, you are going to have to take care of some paperwork with the state and the federal government first—notably, registering for state and local sales taxes and getting a state and federal tax ID number. Declaring "I am now in business!" isn't good enough.

Q: "Do I need any sort of license to sell stuff on eBay?"

A: Here is Cliff's Rule when it comes to licenses: Your state probably will require you to obtain a license to sell something on eBay if that something has the potential to injure someone if it is abused. For example, since motor vehicles might injure their drivers and passengers if they are not maintained properly, virtually every state requires dealers in motor vehicles to be licensed. Same with alcohol and tobacco products (although, of course, these cannot be sold on eBay).

How can you find out whether you need a license to sell something on eBay? Virtually every state in the United States has created a licensing center—a website on which all of the state government agencies that issue licenses have banded together and created a master list of information and links describing all state and local government licenses. So, for example, the Connecticut state licensing center can be found at ct-clic.com.

To find the licensing center website in your state, go to sbaonline .sba.gov/hotlist/license.html, a directory of the licensing centers in all fifty states and U.S. possessions.

Q: "Do I need a motor vehicle dealer's license to sell cars, boats, and other vehicles on eBay?"

A: Generally, the vast majority of people selling cars and other motor vehicles on eBay fall into one of four categories:

1. Automobile dealers

2. People selling their own cars (known on eBay Motors as Fisbos, short for "for sale by owner," or FSBO)

3. People setting up eBay listings and eBay Stores for a local dealer and receiving a flat fee for their services

4. People selling other people's cars on eBay, whether or not they receive a commission or fee for their services

According to eBay University instructor and eBay Motors expert Steve Lindhorst (genuineseller.com), automobile dealers are covered by their existing state licenses, while people setting up eBay listings and eBay Stores for licensed dealers are not required to obtain a license as long as they do not take part in the sales process (i.e., the auto dealership has its own eBay user ID that is listed as the seller, answers all e-mail questions from buyers, and conveys title to the vehicle) and they receive a flat fee for their services. Lindhorst cautions, however, that "if you even so much as answer an e-mail in the process of selling a car for someone else, you are now inserted into the sale process and may need a dealer's license."

According to Lindhorst, anyone else selling a vehicle may be required to obtain a dealer's license, including:

• Anyone who sells a car for someone else, whether or not they receive compensation for doing so.

• "Fisbos" who sell a certain number of vehicles or hit a certain monetary level determined by their state dealer laws. ("For example, "says Lindhorst, "a state may require a dealer license of an individual who sells either five motor vehicles or has motor vehicle sales reaching $100,000.")

• Someone who sells cars for a local dealership and receives a percentage of the winning bid amount as his or her compensation. ("Such people might be treated the same for licensing purposes as the dealer's own salespeople," says Lindhorst.)

Even if no state dealer's license is required, people who sell more than five used cars per year are subject to the Federal Trade Commission's "used car rule" requiring them to make certain specific disclosures to buyers before each sale (for information about the FTC rule, see ftc.gov/bcp/conline/ pubs/buspubs/usedcarc.shtm).

Because state dealer licensing laws are "all over the place," Lindhorst advises that you talk to a lawyer before selling someone else's car on eBay, even if you are not being compensated for doing so. "The fines and penalties are extremely heavy for violating these rules," says Lindhorst, adding that anyone planning to sell motor vehicles on eBay should first review eBay's Dealer License policy at pages.ebay.com/help/sell/dealerlicense.html.

 
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