Scrap dealing is licensed, and the licence is the cheap part. Mississippi charges $500 for a dealer registration and Minnesota $50 a year. What actually gates the business is the record-keeping: photo ID, seller affidavits, daily law-enforcement reporting in some states, and California fines reaching $10,000 for buying metal from someone who cannot prove ownership.
Start with the law, not the truck
Most guides to this business open with equipment. That is the wrong order, because in most jurisdictions you cannot lawfully buy a pound of metal until you are registered, and the compliance obligations shape everything you buy afterwards.
Expect three to six months from planning to operating, and treat licensing as the critical path rather than a formality.
What you actually need to register
Five separate things, and people routinely obtain one and assume it covers the rest.
A scrap metal dealer registration. This is the industry-specific one. Fees and issuing authorities vary widely:
| State | Fee | Term |
|---|---|---|
| Mississippi | $500 dealer, $2,000 processor | 2 years |
| Minnesota | $50 | annual, with Commissioner of Public Safety |
| California | up to $500 for a copper selling licence | annual, Contractors State License Board |
| Some states | no dealer licence at all | but record-keeping still applies |
That last row matters. One state repealed its dealer licence requirement through HB 305 while keeping the record obligations intact, which tells you where the regulatory weight actually sits.
A general business registration. State-level through the Secretary of State or Department of Revenue, or city and county level through the county office.
A sales tax permit, from the State Department of Revenue, to collect and remit on taxable transactions.
Environmental permits. Waste management, stormwater discharge and hazardous material handling all apply to a yard, and the EPA sits behind them.
Vehicle and transportation permits, including business plates for any vehicle used to haul scrap.
The record-keeping is the real barrier
This is what separates a compliant operation from an expensive one, and it is more demanding than most newcomers expect.
A typical transaction log must capture:
- Date, time and location of the purchase
- Seller's full legal name, address and date of birth
- Photo identification number, usually a driver's licence
- Vehicle plate number and description
- Description and weight of every material purchased
- Amount paid and payment method
- The identity of the employee who handled the transaction
- A signed statement from the seller affirming lawful ownership
Several states add more. Mississippi requires a photograph or video in which the seller's facial features and the metal being sold are both clearly visible. Some jurisdictions require thumbprints. Retention periods run from two years in Mississippi and California to four years elsewhere, and records must be produced on demand for law enforcement inspection.
Minnesota goes further still. Dealers must register with the LeadsOnline database, complete training on it, and enter all motor vehicle and detached catalytic converter transactions by the close of business each day. They must also display a sign, conspicuously placed, informing customers that transactions are reported to law enforcement daily.
Payment rules that change your cash flow
Two constraints that catch new operators out, because they affect working capital rather than compliance paperwork.
Hold periods. Many states require dealers to hold payment for a set period rather than paying on the spot.
Payment method. Several require payment by cheque rather than cash, which changes both your banking arrangements and what customers expect at the counter.
Plan for both before you set pricing, because a competitor paying cash immediately in a state that permits it is offering something you may not be able to match.
Converters and copper carry extra rules
The two most stolen categories attract the most regulation, and 2026 tightened both.
California's AB 476 took effect on 1 January 2026 and it is the clearest signal of direction:
- Maximum fine for knowingly purchasing stolen metals rose to $10,000, from $1,000
- Possessing protected infrastructure materials without documentation: $5,000, up from $3,000
- The protected list expanded to streetlights, traffic signals, EV chargers, solar lighting components and air quality sensors
- Anyone selling scrap copper needs a licence from the Contractors State License Board, up to $500 annually, with licensed electricians and plumbers exempt
Minnesota allows the Commissioner of Public Safety to cancel or deny a registration for a felony conviction relating to unlawful possession or purchase of catalytic converters, and requires converter-handling staff to be specifically trained.
If you intend to buy converters, read the used converter guide before you buy the first one, because the documentation rules there apply to dealers more strictly than to individuals.
The minimum equipment
Once the paperwork is in order, the kit is modest.
| Item | Cost | Why |
|---|---|---|
| NTEP legal-for-trade scale | $325 bench, $895 for a 4 by 4 floor scale | Legally required when price is set by weight |
| Magnet, file, cutters | $13 to $43 | Grading, and the difference between paying right and paying wrong |
| Camera and ID capture | phone or dedicated | Required in several states |
| Record system | spreadsheet to purpose-built software | Must survive inspection and produce reports |
| Haulage | trailer or truck | Sized to your typical load |
The scale is not optional. Certification is legally required for any scale used in trade, and inspectors can halt weighing operations on the spot without it. The scale guide covers what NTEP requires and what to check.
The grading tools matter more than their price suggests, because buying material at the wrong grade is the mistake that ends operations. The sorting tools guide covers what each one proves.
Where the margin actually comes from
Not volume. Not at the start.
A dealer earns on the spread between what they pay and what a processor pays, and that spread widens with grading knowledge rather than with tonnage. Buying a mixed load as mixed and selling it as sorted grades is the whole business model in one sentence.
Two practical consequences:
Know where each material goes. A DPF is $3 at a general yard and up to $700 to a PGM recycler. A working ECU is $200 to $1,500 against $3 to $8 as board scrap. The buyer routing guide sets out the pattern, and it is the difference between a viable operation and a scale with a shed behind it.
Establish three outlets before you buy anything. One for ferrous, one for non-ferrous, and one specialist for whatever high-value material you expect to see. Buying material you have nowhere to sell is how yards fill up with inventory they cannot move.
What can go wrong
Worth naming, because these are the failure modes rather than the risks.
Buying stolen material. The fines are now substantial and the exposure is criminal in several states. Compliant documentation protects you, which is why the record-keeping is a business asset rather than an overhead.
Getting the grade wrong on purchase. Paying a high-grade price for material that assays low is unrecoverable.
Cash flow against hold periods. You may be required to hold payment while your own outlet pays you on their terms.
Inventory you cannot move. Especially true for material that needs a specialist buyer you have not yet found.
Around the world
The pattern is consistent wherever metal theft is a problem, even where the schemes differ.
Licensed dealing, seller identification, transaction records and payment restrictions appear in most developed markets, usually with a national or regional register rather than a state one. Retention periods and reporting mechanisms vary; the underlying requirement to document who sold you what, and when, does not.
The country pages set out the identification and payment rules market by market, and they are worth reading before assuming your local practice matches what a supplier or customer expects.
The scale picker works out whether certification is legally required for your use, and the capacity and class that follow from it.
Questions people actually ask
Do I need a licence to buy and sell scrap metal?
In most states and countries, yes, and separately from a general business licence. Fees range widely: Mississippi charges $500 for a dealer registration and $2,000 for a processor, while Minnesota charges $50 a year. A few states have repealed the licence while keeping the record-keeping.
What records do I have to keep?
Date, time and location, seller's legal name, address and date of birth, photo ID, vehicle plate, material description and weight, amount paid, the employee who handled it, and a signed ownership statement. Mississippi additionally requires a photograph showing the seller's face and the metal together.
How long must I keep them?
Two years in Mississippi and California, four years in some other states, and available on demand for law enforcement inspection. Check your own state, because this is one of the most varied requirements.
How much does it cost to start?
The licence is usually the small part: $50 to $500 in the states above. The scale, grading tools and record system add roughly $400 to $1,000, and premises, haulage and working capital dominate everything else.
How long does it take to get started?
Three to six months from planning through licensing to site setup, with licensing usually the critical path rather than equipment.
Can I pay customers in cash?
Not everywhere. Several states require payment by cheque and impose hold periods before payment can be released. Both affect your cash flow, so confirm before setting your buying prices.
What is different about catalytic converters?
Almost everything. They attract the strictest documentation, dedicated staff training in some states, daily law enforcement reporting in others, and the heaviest penalties. Minnesota can deny a registration outright over a converter-related felony conviction.
How do small scrap businesses actually make money?
On the spread between what they pay and what a processor pays, which widens with grading knowledge rather than volume. Buying mixed and selling sorted is the model, which is why the $13 sorting kit matters as much as the truck.
What happens if I buy stolen metal unknowingly?
That depends on your documentation. California's AB 476 raised the maximum fine for knowingly buying from a seller who cannot prove ownership to $10,000, and complete records are the defence, which is why compliance is worth treating as protection rather than paperwork.
Licensing fees, record retention periods and payment rules cited are for the specific states named and current to 2026. Requirements vary substantially by state and change frequently; confirm with your state's licensing authority, Secretary of State or Department of Revenue before operating. Nothing here is legal advice.
Frequently asked questions
Do I need a licence to buy and sell scrap metal?
In most states and countries, yes, and separately from a general business licence. Fees range widely: Mississippi charges $500 for a dealer registration and $2,000 for a processor, while Minnesota charges $50 a year. A few states have repealed the licence while keeping the record-keeping.
What records do I have to keep?
Date, time and location, seller's legal name, address and date of birth, photo ID, vehicle plate, material description and weight, amount paid, the employee who handled it, and a signed ownership statement. Mississippi additionally requires a photograph showing the seller's face and the metal together.
How long must I keep them?
Two years in Mississippi and California, four years in some other states, and available on demand for law enforcement inspection. Check your own state, because this is one of the most varied requirements.
How much does it cost to start?
The licence is usually the small part: $50 to $500 in the states above. The scale, grading tools and record system add roughly $400 to $1,000, and premises, haulage and working capital dominate everything else.
How long does it take to get started?
Three to six months from planning through licensing to site setup, with licensing usually the critical path rather than equipment.
Can I pay customers in cash?
Not everywhere. Several states require payment by cheque and impose hold periods before payment can be released. Both affect your cash flow, so confirm before setting your buying prices.
What is different about catalytic converters?
Almost everything. They attract the strictest documentation, dedicated staff training in some states, daily law enforcement reporting in others, and the heaviest penalties. Minnesota can deny a registration outright over a converter-related felony conviction.
How do small scrap businesses actually make money?
On the spread between what they pay and what a processor pays, which widens with grading knowledge rather than volume. Buying mixed and selling sorted is the model, which is why the $13 sorting kit matters as much as the truck.
What happens if I buy stolen metal unknowingly?
That depends on your documentation. California's AB 476 raised the maximum fine for knowingly buying from a seller who cannot prove ownership to $10,000, and complete records are the defence, which is why compliance is worth treating as protection rather than paperwork.