The Physical Product

Selling The Physical Product Online

Generally speaking, to sell online you should start with a business license (self-employed or otherwise). There are many good companies to get you started with the correct type of business formation and license for your endeavor – online or off.

After the choice of a business license, you need to contact your local and state revenue departments to acquire what is necessary regarding sales taxes and permits required for your type of product and choice of venue. This is probably the most overlooked area when starting to sell online.

Legal Requirements Must Be Met

Most people want to sell online but do not understand that there are many legal requirements to meet. That includes whether you work from home or not, or if the product is hand-crafted, auctioned, retail, wholesale, or in any manner networked.

Generally, in the USA, affiliate and network marketers earn commission payments that are reported on 1099 forms. The form is constructed from information placed on W-9 forms which are required to be completed before any earnings are accrued. The problem with this,  though, is that the identifying tax reporting number must be a social security number if the form 1099 is for a non-business registered person, a self-employed person, or even a single member LLC company. The IRS uses the social security number of the entity completing the form – and will not consider the use of an EIN or other numbers to be used for reporting the commissions earned per the 1099 if the income tax form is a 1040. Whether or not that will still be true by the time you earn your commissions is presently unknown. In the meantime, if you must use your social security number on the W-9 and the 1040 to report your taxes owed, then you are vulnerable to identity theft problems.

I strongly suggest using services like the Small Business Administration (SBA) to guide you as to what you will need in order to perform in a legal manner and not incur penalties.

Visit the SBA and the IRS

The U.S. Small Business Administration provides a wealth of information and services for those interested in becoming a small business enterprise. Help involves everything from setting up your business with all the legal necessities correctly in place, starting and ongoing business education, and even financing for those who qualify. Start with the following links:

https://www.sba.gov/about-sba/what-we-do

https://www.sba.gov/learning-center

https://www.sba.gov/business-guide/launch-your-business/get-federal-and-state-tax-id-numbers

https://www.sba.gov/business-guide/launch-your-business/apply-licenses-and-permits

https://www.sba.gov/business-guide/manage-your-business/stay-legally-compliant

Regulations for Physical Products
Differ From Those for Digital Products

Selling a physical product is different from selling a digital product for a variety of very important reasons, but the first reason involves sales permits and taxation. In many areas, the sale of digital products online does not require a sales permit or the rendering of sales taxes. You must check with your state and local revenue departments.

Even when deciding upon the classification of your business activity when acquiring your business license, it is usually more involved when selling physical products. Also, with physical products, there is a great need to be aware of regulations from the Federal Trade Commission (FTC) regarding both truth-in-advertising and consumer protection laws.

Physical Products: One Size Does Not Fit All

Physical product sales come in a variety of forms. There is the selling of items you personally own but no longer want, the selling of items you have purchased but no longer need, the selling of products you create including hand-crafts, the selling of items in retail store manner, the selling of wholesale items, and, in some instances, the consideration of personal use or commercial use licenses. One thing is for certain, the sale of physical items (online or off) is not a one-size fits all situation.

A Variety of Online Options
for Selling Physical Products

Perhaps the best solution after learning about the SBA and IRS (Internal Revenue Services) rules and regulations,  will be to choose an online store to service your needs. There are many online store setup arrangements to consider. For example:

eBay, Amazon, Etsy, Wholesale Distributors, and many online stores that provide a wealth of resources from website development, to payment processors, to marketing methods, and basic support for just about any issue that arises.

Difficult At First – Gets Easier With Time

Once you get a basic understanding as to what type of product classification you are selling, and what legalities you must adhere to, it gets easier as you develop your business. However, without fully discussing the next issue, is the need to learn about rules and regulations for selling Internationally. Do not overlook the GDPR data privacy regulations, nor the Value-Added-Tax requirements, and who knows what is next as regards what country your customer comes from. It can be truly difficult to sell to your own country only.

Cheer Up! Be courageous. Better yet, be smart and do not over-extend yourself but learn and grow with experience.