When and How to Register for a Seller's Permit
In brief:
- Retailers (including e-commerce sellers) are required to hold a valid sales tax permit in states where they have nexus and sell taxable products
- You’re generally always required to register for a sales tax permit in your business’s home state (even if you operate your business at your kitchen table)
- Each state’s sales tax permit registration process is slightly different. We’ll walk you through how to register for a sales tax permit in every state, or how to register for multiple states via the Streamlined Sales and Use Tax Agreement (SSUTA)
When you start a business, one of the first licensing and permitting requirements you need to consider is whether or not you’re required to obtain a seller's permit.
As an e-commerce business, you are generally required to hold a seller's permit (sometimes called a sales tax license, sales tax permit or sales tax certificate) when you do the following:
- Have sales tax nexus in a state - This means your business has a physical or economic connection to a state. This can range from having an office in a state to making a certain amount of sales in a state. Read all about what creates sales tax nexus here.
- Sell taxable items in your nexus state(s) or local jurisdictions - Some states don’t tax certain items, like grocery food, medication or clothing. If you only sell non-taxable items in that state or local area, you may not need a sales tax permit. Note that some states require all retailers to register for a sales tax permit anyway, and that a sales tax permit is also required in order to purchase goods tax free for resale.
- Are responsible for collecting sales tax on those items - In the US, online marketplaces like Amazon and Walmart are required to collect sales tax on behalf of third party sellers. However, many states still require e-commerce retailers to register for a sales tax permit, even if you only sell on marketplaces that collect and remit for you.
Once you are registered to collect sales tax in a state, you are required to collect sales tax from buyers in that state. Learn more here about how to collect sales tax.
When to Register for a Seller's Permit
States generally require that a retailer hold a valid seller's permit before making your first sale into the state.
For example, as an e-commerce seller, you’ll generally always have sales tax nexus in your home state. That’s because you live and work in your business there. Unless you live in a state with no sales tax, you should generally always register first for a sales tax permit in your home state.
But there are more confusing factors at play about where an e-commerce seller should register.
Take economic nexus. As an e-commerce seller you trigger economic nexus when you meet a state’s economic nexus threshold. This is generally $100,000 in sales or 200 transactions over the period of a year. However, thresholds vary by state. And, unfortunately, there is no magic buzzer to tell you when you’ve met a state’s economic nexus threshold.
For that reason, it’s vital to keep a close eye on your sales amounts and number of sales transactions in each US state and register for a seller's permit once economic nexus has been triggered.
What if I triggered economic nexus in the past and didn’t register?
Because US sales tax laws are so confusing, this is not uncommon. Unfortunately, states do not consider “I didn’t know I had nexus” a defense and they want their past due sales tax. The first step when you discover that you have had historical sales tax nexus is to determine the extent of your exposure. Depending on your sales in a state, you may owe hundreds or thousands in past due sales tax.
From there, you have options. You can simply come clean and pay the past due sales tax then register for a seller's permit and collect sales tax going forward. If your sales tax exposure is extensive, you can contact a sales tax expert to help you with a Voluntary Disclosure Agreement (VDA).
The worst thing you can do when you discover your business has sales tax nexus is ignore the problem and hope it goes away. We recommend speaking with a sales tax expert if you discover you’ve had historical sales tax nexus.
How to Register for a Seller's Permit in every US State
Now that you know you’re required to register for a sales tax permit, your next step is to visit your state’s taxing authority and sign up.
Forty-six US states (and the District of Columbia) have sales tax. Each of these states is allowed to make their own sales tax rules and regulations, and that means that signing up for a seller's permit is different in each state.
In general, you’ll visit your state’s taxing authority’s website to register for a seller's permit. This is often called the “[State] Department of Revenue,” but may go by another, less intuitive, name such as the Texas Comptroller or the California Department of Tax and Fee Administration (CDTFA).
Registering for a Sales Tax Permit under the Streamlined Sales and Use Tax Agreement (SSUTA)
You may also elect to register for a sales tax permit through the Streamlined Sales Tax Registration System (SSTRS). This allows you to register for multiple states with just one application and may provide other benefits. However, not all states are members of the SSUTA so keep in mind that even if you elect to register this way you may still have to register individually in other non-member states.
