Preparing How to Get Wholesale Dealer License
For those who would like to sell vehicles outside of a retail environment, it is crucial to know how to get a wholesale dealer license. Many states have a maximum allowable amount of private sales that can be made, but other states completely ban these types of sales.
5 Cars per Year Rule
This is one of those cases where you should not believe everything you read on the web. This “5 cars per year” rule does not actually exist. It is a misrepresentation of a phrase from the Used Motor Vehicle Dealers’ and Used Motor Vehicle Parts Dealers’ Registration Act. This phrase states that if someone is found to have sold 5 or more vehicles, then it is evident that they are actually engaged in the business of selling cars for profit, which is illegal.
Why “Car Flipping” is Illegal
First of all, buying a car is the second largest purchase a consumer will make. In order to protect consumers from the whims of auto dealers, each state has passed dealer licensing regulations.
To avoid taxes and fees, a car flipper may not register the car in their name before selling it. They’ll either slip the title or keep it as an “open title,” which leaves the fees and tax for the person who buys the vehicle. This is tax evasion. The penalties of this crime include fines and prison time. An addition, you may be prevented from ever getting a dealer license in the future.
How to Get Wholesale Dealer License
Now that you know the penalty for operating illegally, here are a few of the basics about how to get a wholesale dealer license. Note: this is only a brief overview. It is recommended that you seek help before trying this process on your own. Most people end up getting frustrated and spending a lot of time and money before eventually getting assistance.
First, you need a Doing Business As (DBA) name, or a Fictitious Name that you are using as a business name. You will need a DBA certificate from your state, making it legal to do business with a business name that is different from your real name. There is an application and a fee involved.
Next, you will need to obtain a business license from your state. This will ensure any consumers that you are operating legitimately. This application also has a fee.
On top of all this, the law requires a legal address. You must do business from a physical location that has been zoned commercially for vehicle sales.
Finally, you need insurance to protect your customers from bad vehicle purchases, and then you will have to take the final step of actually applying for the wholesale license.
US Dealer Licensing
Obviously, this is a small portion of what you will have to do. That’s why it’s important to seek help from US Dealer Licensing for a proper and quickly obtained wholesale dealer license.