Crowd Funding Resellers License Question

[pathrunner]

Hello all,

This is my first post, and I have a question that I can't seem to get a straight answer from, even from Kickstarter or Indiegogo.

I am starting a new business. It's based on an invention I have been working on based on over two decades of experience.

I have decided to raise funding through CrowdFunding (CF) and in that am getting pricing quotes for all the machining and manufacturing I am going to need. CF has a rewards system which includes a Tier that will be giving a product if a certain milestone is donated to.

My question is whether I need to have a resellers license for this. I spoke to the Franchise Tax board and they were literally of no help. I spoke to Kickstarter and Indiegogo to ask them and they both came back with two different answers.

Granted, the one I liked was that because we are giving the item, we would not need to have a resellers license, but the other said because we are giving an item as an exchange for funding we would.

Thoughts, opinions, laws? Kinda stuck here.

[Harold Mansfield]

The best answer I can give is to contact your state. If there is tax or licensing requirements for your specific situation they would be able to tell you.
As far as the feds go, yes crowd funding money has to be reported, but the IRS can better tell you know it needs to be reported.

Maybe others can be of better help.

[Business Attorney]

I'm not surprised that your state Franchise Tax Board was not helpful. Crowdfunding is still a relatively new phenomenon and it takes a while for regulators to catch up.

In my view, you are not "giving" the participants a product any more than they are "giving" you money. I think the site that gave you the answer that you are giving the product in exchange for the funding is the correct answer. You are receiving consideration for the future delivery of a product. That is a sale.

I believe that does mean that you should get a reseller's license. Whether the sale is taxable is another question. Most states do not impose sales taxes on interstate sales. For example, if you are located in California and the order comes from Illinois and the product is shipped the buyer in Illinois, the sale to Illinois would not be subject to sales tax in California. Your company would also not be required to collect and remit a sales tax to Illinois unless you had sufficient nexus with the state of Illinois.

Sales taxes can get very complicated and each state is slightly different in how their laws are written and how they are interpreted, so this response is a generalization and should not be taken as a definitive answer to your specific situation.