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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15731
Experience:  15years with H & R Block. Divisional leader, Instructor
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I am wanting to start a small business (hobby) mainly to be

Customer Question

I am wanting to start a small business (hobby) mainly to be able to buy wholesale. What exactly do I need? Tin or Ein? What is the difference? Sales use license? What is that? I live in Illinois. Thanks so much!
Submitted: 2 years ago.
Category: Tax
Expert:  Robin D. replied 2 years ago.
Hello and thanks for trusting me to help you today. I am a tax adviser with over 20 years of experience.
First you will need to know the difference in a business and a hobby (as it relates to taxation).
In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. Deductions for hobby activities are claimed as itemized deductions on Schedule A (Form 1040).
With that explanation out of the way, if this is a business you do not have to have an EIN but you can apply for one even as a Sole Proprietor. An ITIN is issued when a SSN is not allowed to be obtained.
You must register with the Illinois Department of Revenue if you conduct business in Illinois, or with Illinois customers. This includes sole proprietors (individual or husband/wife/civil union), exempt organizations, or-government agencies withholding for Illinois employees.
Sales tax is a combination of “occupation” taxes that are imposed on sellers’ receipts and “use” taxes that are imposed on amounts paid by purchasers. Illinois Sales Tax has three rate structures — one for qualifying food, drugs, and medical appliances; one for items required to be titled or registered; and another for all other general merchandise.
If you are not going to be reselling your items then you would not need to have a sales tax license. You would not be required to have an EIN but some companies that sale wholesale do require the EIN when selling to the buyer.
Expert:  Robin D. replied 2 years ago.
Please advise if you need more information or clarification.
Customer: replied 2 years ago.
I completely do not understand, however I do not want to pay any more money. But thanks anyway. I didn't realize each question cost more money. So I will just leave as is.
Expert:  Robin D. replied 2 years ago.
You do not have to pay more to respond here.Let me make it really simple, you do not have to have an EIN.
Expert:  Robin D. replied 2 years ago.
Just post below on what part you did not understand.
Customer: replied 2 years ago.
When I did the public notice for the paper to run for 3 weeks they told me to go to Illinois dept of revenue. I did and went under business and it asked for my SSN, it popped up a page with a number on it but I have clicked off it so fast I couldn't print the page. So I don't know what that was, so today I sign up for a EIN number and it gave me a number. I got a email for my REG-1. Under account type it say Sales/Use Tax & E311 Surcharge. Account ID/License no. What have I done???
Expert:  Robin D. replied 2 years ago.
You have registered to be a business in Illinois that will be selling items.Did you intend to order wholesale and resell?