Have you ever wondered where eBay sellers find products at wholesale prices? Is everyone on eBay just scrounging in yard sales and flea markets to find things to sell the next week? Although many eBay sellers may be spending their weekends driving around trying to find yard sales and loving it, there are many other ways to find wholesale products to sell.
How to buy wholesale:
1. First of all, most companies who sell wholesale need to sell to a legitimate business. Selling wholesale means that you are selling to someone else who operates a business and will offer the product to retail customers. A retail customer is the person who buys the product like most of us do at a store and pays the retail sales tax due at the time of purchase. The big difference between wholesale and retail purchases is whether a product is subject to tax or not at the time of the sale. The one exception is that a retail seller can offer products to out of state customers without charging taxes the majority of the time (subject to change based on state, local and interstate commerce laws).
2. Decide what kind of business you want to start. Before you start a business, do a little light reading on the difference between types of companies - Sole Proprietorship, Partnership, LLP, S Corp, and Corporation. Anyone can start a Sole Proprietorship at any time, but you may want to think about creating a Partnership if you are planning to work with someone else, or even an LLP or Corporation (has different taxation rules and limits your personal liability). Good sources of information are the Small Business Administration at sba.gov , SCORE at score.org , and your local state government web site.
3. If you want to start up a business, it's pretty easy to get started. The absolute minimum requirement is to apply for a Federal tax id (EIN) - can be done quickly online in a few minutes at irs.gov. Next step is to check your state and local laws and regulations on starting up and registering a business. In most locations, you will need to register as a business and apply for a sales tax permit for both your state and local government (may take a couple of weeks to get all your permits and it does cost a bit - usually around $100 depending on your location). If you do want to set up a partnership, LLP or Corporation, please contact a lawyer or legal information source because you will need to file extra papers and legal documents for these types of businesses.
4. Now that you have a business, where do you find things to sell? The one thing to remember is that anyone who manufactures a product only makes money when they sell it to someone. You may not be able to go straight to a manufacturer and get them to sell a product to you at wholesale, especially if you are starting out small and only want to buy a couple of items. The biggest manufacturers sell by the pallet and ship to legitimate business addresses only (means you have to have a retail store site). However, there are many smaller manufacturers and wholesale distributors who are interested in selling at smaller volumes and will be delighted to do business with you. A wholesaler or distributor should ask you for a copy of your retail sales tax license before they will agree to sell to you tax free at wholesale prices. If you have a wholesale merchandise mart close to you or if you can attend a wholesale trade show, these are great sources for finding products to sell at retail prices.
One good source of information is Wholesale Central (wholesalecentral.com). At this site, if you have a federal tax number (EIN), you can register for free as a buyer and they have information on companies interested in selling their products to you at wholesale prices. Wholesale Central also has a free monthly publication called "Web Wholesaler" that gives you lots of tips on how to find products, a seller company index, and good articles. (I am not personally associated with Wholesale Central - just have found it to be a great source of information)
5. If you really love yard sales and flea markets, then by all means, spend the time to find a few treasures overlooked by everyone else, and make a small fortune after cleaning them up and sell them for huge profits at ebay. Seems like many of the yard sales in my area just have old furniture and used clothes, hope they offer much better quality items in your neighborhood. Lots of people also seem to make money on eBay by finding items at a low price and then reselling them at a higher price. Works great for high value items selling at low prices, but it means you have to find someone offering a product on eBay who has no clue how much their stuff (or treasure to you) is really worth.
Hope this guide was useful to you and I wish you much Happy eBay selling!
Dana Fox, MBA
Disclaimer: Please consider this article as a guide only. I am not a lawyer or CPA, and cannot provide legal and financial advice appropriate for your own individual situation. The information in this article on starting up a business applies primarily to the United States, and may not be the same in other countries.