UBC Law Review

UBC Law Review

& Franchise Law Review

Seller’s Permit For Online Auctions

Today’s fast, competitive online market makes it easy for anyone to buy or sell goods and services on the internet. EBay and other auction sites connect buyers and sellers quickly, making them potentially profitable arenas for anyone looking to earn some extra cash. But be aware: depending on the nature of your auction site usage, you may need a seller’s permit to legally carry out your transactions.

Do I need a seller’s permit?
If you buy wholesale items (usually in bulk, at prices lower than retail) and sell them on eBay or any similar service, or if you sell any type of item wholesale, you probably need a seller’s permit for online auctions. Online transactions that require a seller’s permit usually involve taxable, tangible items; for example, if you’re selling toys, silverware, or jewelry that you did not create yourself, you need a permit.

If you run an online business through an auction site, you also need a seller’s permit, and possibly a business license as well.

What counts as an online business?
The definition of a small online business varies from state to state. Generally, if you’re selling a relatively large amount of goods each year, making a profit between about $1000 and $6.5 million, or you employ one or more other people, you have a small business. A small business is independently owned and operated, employs less than 100 people, and is not the dominant business in its industry.

I’m auctioning handmade goods or craft items online. Do I need a seller’s permit for this?
Unless you sell a lot of your items (more than 100 per month), charge a high price for them (over $100 or so), and/or employ other people for a part of the work, you probably don’t need a seller’s permit or a business license. Craft items are tangible, but they’re not usually taxable.

How do I get a permit if I need one?
Your state’s revenue or business services department will most likely issue your seller’s permit. Most states don’t charge a fee for a seller’s permit, but some require a money deposit. Enter “seller’s permit [your state]” into an online search engine to find out where you can apply.

How long can I continue to use the same permit for auctioning goods online?
In most areas, a seller’s permit remains valid as long as the holder is actively doing business as a wholesaler, retailer, or other type of seller. A seller’s permit may also be revoked if a seller:

a) stops selling tangible, taxable items;
b) does not keep adequate records of sales and purchases;
c) fails to inform the office that issued the permit if the business changes its address, ownership, or is discontinued; or
d) in certain cases if a customer lodges a complaint against the seller.

If you obtain a permit and follow the rules, auctioning your goods online can be a simple, smooth way of doing business with people around the world.