Not all dropshippers require a tax ID and business license, but some do. Many companies require nothing more than a name, address, and credit card on file to do business with them. However, if you want to deal with the best companies and get the best prices, you should get a tax ID and business license.
Having a tax ID number will allow you to purchase goods from a much broader range of wholesalers and perhaps even get you lower prices than you’re paying now with the dropshipper.
I am always amazed when people tell me they would do anything to have their own business then freak out when I tell them they should get a tax ID and business license. The process for getting a tax ID and business license is very simple: you fill out a form and you pay a fee. You do not have to turn over your first-born and it doesn’t cost an arm and a leg, nor does it invite the IRS to monitor your every move.
It’s up to you whether you want to do this as a hobby or as a business. If it’s going to be a hobby, then you’re probably not going to make much money and you will lose interest quickly.
If you want this to be a real business, then treat it like one and do the things required to do business in a formal manner.
You build a business. You dabble with a hobby. Getting a tax ID is not a difficult task. To get a federal tax ID just go to the IRS website at http://www.irs.gov, click on “Forms and Publications” to download Form SS-4. Fill it out and either mail or fax it to the IRS office indicated in the form’s instructions. There is no fee.
Once the IRS issues you a number, you will have to get a tax ID number from each state in which you have a business address. Again, this is a simple process that just requires a few minutes of your time. You fill out a form and pay a small filing fee. That’s it.
For a list of state tax offices and their websites, from which you can obtain the appropriate form, go to http://www.taxsites.com and click on “State and Local Tax” link.
It typically takes two to three weeks for the IRS to mail your tax ID, but if you’re in a rush you can call the IRS and get a tax ID number assigned to you over the phone.
The toll-free number is (866) 816-2065. It helps to have a completed Form SS-4 in front of you since the agent will ask you many of the same questions.