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One way some Michigan LLCs earn money is selling physical products.
To address the revenue needs and profit dreams of your business, do you want to buy products at low wholesale cost then sell the same products at high retail price?
But you don’t make your own products, so you’re looking to buy in bulk all-at-once from a wholesaler/distributor, then sell each product for profit one-by-one to customers.
While staying up-to-date on Michigan's current business laws and regulations, and doing it lawfully?
While treating your customers #1, cuz they rock stars.
Let’s learn what’s needed in 2024.
I think this is a lawful way to sell third-party physical products designed, manufactured, packaged, and distributed by a company that my LLC is not currently associated with at all. Graycare is NOT a lawyer.
A Michigan Sales Tax License allows you to lawfully collect sales tax on taxable sales of “tangible personal property” to a customer in the State of Michigan.
According to Michigan.gov:
Individuals or businesses that sell tangible personal property to the final consumer are required to remit a 6% sales tax on the total price of their taxable retail sales to the State of Michigan [...including...] Wholesalers, Contractors, Services, Out-of-State Businesses. [...are required to have a sales tax license in the State of Michigan...]. [Read it on Michigan.gov]
…you need to apply for a “Sales Tax License” after completing the “New Business Registration”, both done EZ via the Michigan Treasury Online (MTO) website “Online Registration Link”. [Read more on Michigan.gov]
…you need to collect 6% sales tax from the customer.
…you must report your total sales tax collected over time, and…
…you might need to pay (some) sales tax to the State of Michigan.
That’s a summary of how sales tax generally works for Michigan LLCs selling products to Michiganders.
To sell physical products lawfully in Michigan, you must have applied for a Sales Tax Licence.
Some minutes after your online application for a Sales Tax License is submitted, you can start selling products and collecting 6% sales tax.
You don’t have to wait very long at all.
So before your Michigan LLC starts thinking about selling products and collecting sales tax from customers, you’d better have an LLC established already and have all the LLC-related documents needed to reference or submit during the Michigan Sales Tax Licence online application process.
According to Michigan.gov…
Michigan does not allow city or local units to impose sales tax. The state sales tax rate is 6%. [Read it on Michigan.gov]
So it’s easy to remember… Calculate Michigan Sales Tax by multiplying the price times 1.06, and to this every time your LLC makes a sale, and don’t forget to do it.
Michigan.gov Resource Recap: Learn whether or not your LLC needs a Sales Tax Licence for your activity in Michigan, here. Register for a new Sales Tax License for your LLC on the Michigan Treasury Online (MTO) website, here. Or keep reading…
Firearms, beer, and dairy are examples of regulated physical products, for which an LLC should get a special license in Michigan. In February 2024, the State of Michigan Licensing and Regulatory Affairs (LARA) lists over 270 different types of licenses and permits to pick from.
When selling physical products as an LLC in Michigan, it’s extra important to take the proper legal, tax, and regulatory steps to ensure lawful operation. Graycare is NOT a lawyer.
You can try to find ones you might need by reading and clicking on the LARA website, here.
Or you can use the State of Michigan (Official) State License Search, which I think is much faster and available, here.
At Graycare LLC, we want to become well acquainted with the lawful way LLCs do different business activities in Michigan, so we gathered all this good stuff into a Google Sheet and made it available to all Michiganders as the fastest-yet page to lookup Michigan licenses and permits an LLC might need to get, here.
If you just want to sell regular consumer products that don’t require a special permit because they don’t belong to any regulated category. If you want to sell regular products that safe for general use, and you’ve checked to make sure you don’t need any special permit…
…Then you don’t have stringent protocol as defined by the special permit…
…So now, as long as you follow sales tax and general LLC best practice, you need to understand how to source products from an authorized wholesaler or distributor.
You need to become an expert on quality control for the particular products you sell, and need to keep your products in perfect condition until point of sale to the customer.
Most LLCs selling regular consumer products won’t need to obtain a federal-level license or permit…
…as long as your LLC is selling products and maintaining good product quality control to ensure the customer receives the product in the same condition as you purchased it.
If the LLC’s business activities belong to a common-sense regulated category - like agriculture, wildlife, machinery, pharmaceuticals, or broadcast media - then you’d better do some more research before your LLC finds itself selling products without the required license or permit.
Even if you have your Federal- and State-level documents and operations in order, you’d still better check Local-level requirements for the type of products you want to sell there.
Many localities in Michigan require you to obtain a “General Business License” from their local government body before you sell products to people who live there.
You’ll find the number of permits and red tape you need to go through increases once you operate a physical product, because you need a physical location to receive, store, and ship them.
At State-Level, Food, Fire, and Booze are tight under regulation.
At City-Level, Food, Fire, and Booze are also under tight local regulations.
Just to name a few…
This is definitely NOT a complete list of local permits, licenses, and regulatory requirements… …But this is a good list for small-time entrepreneurs starting a Michigan business wanting to sell products here.
Its up to your LLC to do your diligence to determine what permits and licenses you need at every level - federal, state, and local.
Local info about local stuff like this can usually be found on your city or county website. It’s such a drag when government workers who don't maintain a good local website ask you to call their telephone number with questions or concerns or to request further information during City Office Hours from 9:00am to 4:00pm Monday through Friday, except Thursday Office Hours end at 12:30pm due to recent staffing changes, or if you wish to leave a voice mail, please leave your name, telephone, number, and briefly describe your issue and we’ll process your request as soon as possible. By 2025, I’d call it “Lazy to Learn Wix”.
My LLC doesn't have its own product. So my LLC needs to source products from somewhere else.
The easiest way is to buy products that are ready to sell - I mean - your LLC doesn’t have to manufacture or produce special things - you just source ready-to-sell products then sell them the exact same as you bought them.
When you represent an LLC that wants to sell brand-name products to Michigander customers? You don’t make your own products, and you need a way to make money. So you’re thinking…
Why don’t I buy “One Case” for a low price per unit then sell “One Product” for a high price per unit. If I sell them all, I’ll have enough money to buy “Another Case” plus profit to keep. By selling physical products, I’ve bootstrapped my way to become a legitimate entrepreneur owning a profitable LLC in Michigan. That’s the ticket!
Your LLC and Graycare LLC have so much in common! We’re both dreamers.
When you ask how to sell name brand products, you’re asking to source products from a reputable company. One difference between starting to sell “Unknown Brands” versus “Popular Brands” is… The “Popular Brand” will have higher standards for retailers they source to. An “Unknown Brand” is more likely to wholesale their products to an LLC just starting out, but a “Popular Brand” is less likely to say yes, since your small LLC to them is the “Unknown Brand”.
Your LLC is the retailer because you sell the product to the end-customer in pretty small quantities.
It’s most common for an LLC selling a variety of well-known brand name physical to source from a wholesaler or distributor.
To situate your LLC into Michigan’s consumer product supply chain, it’s kinda like this…
There are several different types of distributors, and different words people use to describe types of distributors. Distributors - wholesalers, suppliers, wholesale suppliers, wholesale distributors, and more with nuanced difference.
When it comes to name brand products, these terms indicate a business that generally “buys huge quantity from the original manufacturer”, then “sells wholesale quantity to some end-retailers” - and of course - you are the retailer who “sells single quantity to many end-customers under the original brand name”.
It’s possible for a new LLC trying to sell their first products to buy direct from the brand name manufacturer (i.e. some manufacturers might sell directly to retailers), but usually you need to grow and establish your LLC as a working retail store through wholesalers and distributors before you level up to “manufacturer-direct buying products in bulk”.
When picking out suppliers (wholesalers or distributors who sell brand name products in bulk to retailers like your LLC), one of the first things to check is whether or not they are authorized by the brands to distribute the brand’s products.
A retailer should never buy products from an “unauthorized distributor” because you then become one yourself, you see?
Make the supplier prove with documentation from the product’s brand that they are “Authorized to Supply this Product” is true.
You need to check your entire supply chain to make sure everyone’s authorized to do what they’re doing to peddle products to people at price. Your LLC is now part of the supply chain too.
Also seek “Authorization from the Supplier that my LLC has Authorization to retail this Product”. Suppliers call this different names but most common is a “Resale Agreement”.
To have documentation in place to demonstrate your product sales are lawful, you need to prove that “An Authorized Supplier of the Brand Gave Your LLC Authorization to Re-Sell the Brand’s Products”.
A “Resale Agreement” or other contract between a supplier and you (the retailer) typically includes general business agreements, including product quality assurance standards, product retail pricing guidelines (i.e. minimums retail price and recommended retail price), minimum order quantities, or territorial restrictions (i.e. you’re only authorized to sell the product in a certain location).
These B2B agreements between a supplier and a retailer are designed to maintain the brand’s value by dictating how and where this brand’s products can be sold. It’s a brand / product / retailer policy to comply with.
One thing to emphasize out of all this… Now you know how to - lawfully with the government and contractually with your supplier - sell name brand products which your LLC didn’t manufacture.
When a retailers starts to stock and sell a product, the retailer is now responsible for quality control of its inventory, to ensure the product is delivered to the customer in exactly the same condition as purchased from the supplier.
Your LLC is a professional business, so you need to follow the manufacturer’s instructions to ensure the products you sell are safe for customers.
The products you sell to your customers should literally “Pass Quality Inspection By Your LLC” because you know how to care for the product while it is in your inventory, so that customers get a great product that’s safe to use.
Cheer up, Michigan entrepreneurs young and old! If you have not got much cash to bootstrap your LLC out of inactivity, there’s hope for you.
A federal-level thing (proposition) called the “First Sale Doctrine” says it’s lawful for the current owner of a product to resell this copy of the product to someone else, who becomes the new owner of this copy of the product.
When people don’t have much money, they try to find new ways to make money.
Graycare is NOT a Lawyer. I’m pretty sure the “First Sale Doctrine” means LLCs can lawfully purchase one brand name product then resell this one product.
So then, LLCs can repeat this process again and again. You buy from an "Authorized Seller" copy #1 of the product, then you buy from an "Authorized Seller" copy #2 of this product. That's how you "inventory" a brand name product to sell to customers, but I don't think its proper "retail".
It borders on bending the rules, so please don't bet your LLCs future on this risky resale practice.
To resell according to the spirit of the “First Sale Doctrine”, you must make sure you purchase from an “Authorized Seller” and “The Product Has Maintained Quality Control Under Authorized Seller You’re Buying From”.
If any seller or retailer in this fringe “First Sale Doctrine” breaks the chain of quality control, then the product becomes no longer according to manufacturer specification (see the product manual), so the “First Sale Doctrine” is no longer valid.
The practice of buying at retail price, then selling at retail price practice just can’t be that profitable!
It’s generally frowned upon to buy and resell brand name products over and over again, so I don’t recommend it.
Corporate product managers who invest so much to boost the value of their brand (i.e. boost the price tag or profit margin compared to similar products without that brand) don’t like it.
I hope you can see the reasons why a brand doesn't want people abusing the “First Sale Doctrine” proposition.
Probably, a big brand with a good lawyer would tell you in an unwelcome way when they find you doing shady recurring resale of their brand’s products.
Even when you’re “just reselling one product”, you are responsible for the quality control according to manufacturer specifications. You cannot resell products under the “First Sale Doctrine” if you don’t handle and store the products to perfectly maintain its quality all the way to the point of sale with the customer.
Starters are starters. Try to get on that aforementioned “Authorized Track” where your LLC is an “Authorized Retailer” buying brand name products wholesale from an “Authorized Supplier”. That’s how you do good by the IRS, because that’s the most common model for LLCs starting to retail brand name physical products.
Overall, it’s my opinion that an LLC trying to make good by buying products reselling from retailers should think again.
Well-connected retail stores (like Costco, Sam’s Club, Meijer, Walmart, or Amazon) don’t want their customers reselling their products right out the door. Scarier even, brands investing millions to develop, manufacture, and market their unique product in retail stores don’t want novice Michigan LLC bootstrappers tarnishing their name.
So the answer to one big question is…
Yes, as long as you follow the “First Sale Doctrine” proposition closely, you can buy a product from Costco, Sam’s Club, Walmart, Meijer, Amazon, Etsy, Goodwill, or eBay. Graycare is NOT a Lawyer.
In 2024, the hardest part about getting this Michigan-registered for-profit social enterprise (Graycare LLC) earning money and benefiting people is the balance between ensuring a wealthy LLC’s future (“For-Profit”) and benefitting Michiganders who are good customers of ours (“Social Enterprise”).
Graycare LLC is a Michigan LLC wanting to sell physical products to customers in Michigan. We puzzled together these steps without professional help. We think (but aren’t sure) Michigan LLCs cocooned in zero sales can butterfly into lawful and profitable retail businesses selling brand-name products to consumers using the process we’ve jimmied together.
Starting a retail business where you sell brand name products from various companies through a Michigan LLC involves several steps to ensure lawful sourcing and selling.
Remember to audit every aspect of your retail-slinging LLC as a responsible member of Michigan’s consumer supply chain.
Remember to always collect that Michigan state-wide 6% sales tax from the customer in addition to the good price your LLC gives your customer.
