How do I get a federal tax id number to buy wholesale?

Question

I am wondering how I go about getting a federal tax id number in order to buy wholesale. I am a crafter and although most of the items I make, I give away, it would be nice to have a tax id number in order to buy supplies wholesale. I would only sell the occasional item so I don't know if I need a resale license or not. Also, if I have a federal tax id number, does this impact the way my taxes are filed for my "regular" job? Is there a downside to having an id number if I am not going to turn a profit?

Answer 1

To get an EIN for your business (and don't listen to the other guy - you can get one for a sole proprietorship which is what your crafting "job" is - they aren't just for corporations).  You can apply online or download and either fax or mail a Form SS-4.

If you sell anything you make for profit, you are required to report that profit on your taxes every year.  Typically hobbies like your don't make a lot of profit but any profit is required to be reported.

It would not s***w up how you do your taxes every year but it would add one form to your return.  You fill out Schedule C and carry the profit that you calculate on that form over to your regular 1040 form and add it to your taxable income.  Not a big deal.  If you happen to make over $400 profit, you have to also fill out Schedule SE and attach it to your 1040 also.  Also not a big deal.  While you are at irs.gov filling out your EIN application online or downloading SS-4, you might want to download Schedules C and SE and see what you think of them.  Schedule C might seem intimidating at first, but realize that on yours, you will only have entries on a few of the lines so it isn't a big deal.

Answer 2

A federal employer identification number (the tax ID number used for businesses and business taxes) gives you no special rights. They are issued to sole proprietors, partnerships, corporations and similar entities. State laws determine what you can buy without paying sales tax.  

In my state, California, you would have to pay sales tax on all the materials you buy.  The occasional item you sell would be considered a casual sale not subject to collection of sales tax from the buyer so you could figure in all your costs including sales tax you paid.

Answer 3

The federal tax id is issued to corporations.  You would need to form one first.

All that's needed to buy wholesale is a business license for resale in the city, county or state where you conduct your business.  The license issuer will want to make sure retail taxes are collected and paid, and only your net profits would affect your personal taxes.  Keep in mind that the IRS has much bigger fish to fry, and they really don't know anything unless you tell them.