When you’re an up and coming business owner, you are going to be asked about two different forms of identification: the Employer Identification Number (EIN), and the Tax Identification Number (Tax ID #). Both of these forms are for identification purposes, and used to establish that you are a member of the trade, which qualifies you to work with dropship and wholesale suppliers.
Many people do not know the primary differences between these two forms of identification, and it is often a source of confusion. With that in mind, we’re going to walk through the primary differences between the two to help clarify things and alleviate some of the confusion.
The Employer Identification Number is a Federal number, which is used to identify your business, primarily for tax purposes. It shows that you are a valid, registered business with the United States federal government, but it does not necessarily show that you are qualified to be exempt from sales tax, or anything like that. You can typically obtain an EIN number from your state government website, and it is usually available for free, or for a very nominal fee. This identification form is sometimes accepted by a supplier when establishing an account with them, but many will request additional information as well.
That additional information is the State Tax Identification Number. This is a number assigned by the state government, rather than the federal government, and its primary purpose is to prove that you are a member of the trade, and therefore do not need to be charged sales tax when working with a supplier. As the legality or necessity of sales tax is very important to a supplier, this is the the most commonly requested form of identification when creating an account with a supplier. A Tax ID number typically comes with a higher fee to establish than an EIN number, and the fee can vary from state to state. When establishing a new business, this is the most important piece of documentation to obtain, as it is almost universally required by suppliers in order to work with them.
The suppliers require this information for legal and tax purposes; if you are not a member of the trade, they can actually lose their contract with a manufacturer to carry their products, and if they don’t charge you sales tax, although they should be, that will also cause problems for the supplier. It is for this reason it is of paramount importance to get things set up legally as you move in to starting your business, or else risk hitting a wall very early on.
It takes a little time, and it takes a little money, but in the long run, it is vitally important that you set your business up correctly, right from the get go, or risk running into legal troubles down the road, which will in turn cost more time, and more money that you don’t want, or need, to spend.
Posts Tagged ‘drop ship wholesaler’
ID Ideas | GoGo Dropship
January 12th, 2010Ho Ho Wholesale
December 2nd, 2009One of the most common misconceptions when someone begins working in the dropship or wholesale arena is that there is only one wholesale price, and that is what they are receiving. This in turn leads to a lot of frustration when one sees other people selling their same product for far less. If they’re receiving the wholesale price, how is it that anyone can get something cheaper?
The reason for this is that the wholesale price is generally based off of the amount of product you are willing to purchase at one time. At the dropship level, for instance, you are receiving a wholesale price, but your price point is going to be lower, because you are ordering a single item at a time. If one of your competitors approaches the supplier, and asks if they can get a better price if they purchase ten items at once, for instance, most suppliers are willing to do so.
The strength of having a dropship site is that we are not having to carry any inventory, or do any of the shipping ourselves, but that of course comes with downsides. Our profit margins can be solid, but if we are trying to compete price per price against a competitor, it is he who orders the most at once who will be able to negotiate the lower price. Purchasing at wholesale is the natural evolution of our business, which is why it is important to realize that there is not any singular wholesale price, but it is instead a fluid concept, that we can use to our advantage as our business grows!
Communicate Before Taking Action
August 10th, 2009My sister recently told me a story about her two little girls. One night, as the family was sitting at the dinner table together, her seven year old announced that she and her little sister like to talk in secret languages. The funniest thing is that she followed with “they’re so good, sometimes we can’t even understand each other”. Of course we all laughed…who wouldn’t? The point I’m trying to make is that what point is there in communicating if you aren’t on the same page as the person you’re trying to communicate with or even speaking the same language?
Let’s say you want to start an online business selling flat screen TV’s. You found a company that does wholesale electronics, now what do you do? It’s very important to establish effective communication patterns with your wholesale electronics supplier. You can do this by going to the contact page or the wholesale electronics page, if one exists. Some sites require the reseller to fill out an online form located on the contact page. It is suggested that you make contact with the wholesale electronics supplier before taking action. Ask them about their program. If you want to drop ship, you better ask them about that as well; do they allow drop shipping on eBay? It may help to write down some questions before contacting the supplier so you know exactly what you need to ask them.
Also, make sure that you understand what the wholesale electronics supplier is saying. It may be fun for my little nieces to communicate in secret languages that neither of them really understand but that is simply not the kind of connection that a person wants to have with their supplier. To be honest, a little bit of communication will go a long way in business so long as both sides are willing to give it a try.
5 Benefits of Using A Drop Ship Directory
July 29th, 2009When a company decides to use a drop ship wholesaler from a drop ship directory, they are also making the decision to not hold inventory on that product. This is a great benefit to a lot of companies as they often do not have much storage space. In fact, some companies are home-based, making it almost impossible to hold great quantities of inventory.
There are not as many risks associated with drop shipping products as storing inventory. For example, a company that fails and is not drop shipping will have to try and liquidate their inventory. A company that works with a drop shipper from a drop ship directory will not because they have no inventory to liquidate.
The retailer will not have to worry about shipping the product out, the wholesaler will take care of that part. If the wholesaler blind drop ships than the retailer can actually have their information printed on the package instead of the wholesalers information.
Drop Shipping allows a retailer to sell a broad range of products online. They also have the ability to test new products with very little risk.
There are also directories full of wholesale suppliers at your disposal. These directories make it a lot easier to locate suppliers of the various products to be sold.
