anwar ali
Asked September 05, 2016

Legal implication of carrying out second sale

  • 1 Answer
  • 91 Views

Dear sir/madam i want to buy products from ecommerse companies like snapdeal,amazon,flipkart,etc and further sell it by adding some profitable margin to its cost.i will pay vat also on the profit.is it legal or not. as these companies while selling has terms and condition to not resale and buy only for persnal use.can i resale or not according to indian laws.

Answer 1

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SAURABH KUMAR

Generally, it’s not illegal to resell an item that you have legitimately purchased. Once you have purchased something at retail it is yours to do with as you choose. Manufacturers tend to have little or no control over a product past the first customer they sell to.

However, if you are planning to do this as a business, a couple of issues arise-

  • First, you will have warranty issues. If you run this business not as an official reseller but as an "under the table" reseller without an arrangement with the manufacturer, you risk invalidating the warranties that they provide to the first consumer, but not to the customers to whom you’ve resold the goods.
  • Second, there are trademark issues. If you’re using manufacturers' logos to advertise the products you’re reselling, you need their permission. Without it, you run the risk of getting embroiled in a trademark infringement lawsuit -- especially if your business does well and no longer flies under the radar.
  • Third, there are sales tax issues. With your current business model (buying retail and then reselling), you’ll have two levels of sales tax. You’ll need to pay to obtain the goods, and your purchaser will need to pay when you sell the goods. You could look into getting a reseller’s permit, but to get a reseller’s license you first have to enroll with your state tax department, which involves getting a sales tax ID number. And messing up on sales tax can involve penalties and interest being inflicted on you personally. You can’t hide behind your corporate entity if they arise.
  • In short, you have some thorny legal and accounting issues here. It is advisable not to go ahead with the business proposition without clear legal clearances.

    Agree Comment 0 Agrees about 1 year ago

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