When and How to Get a Seller's Permit

Almost every US state requires business owners to register for a sales tax permit before collecting and remitting sales and use tax to the state. But how do you know when you need a sales tax permit? And what states do not require you to register?

We’ll walk you through everything you need to know about sales tax permits, including registering for a sales tax permit in every state or registering for multiple states via the Streamlined Sales and Use Tax Agreement (SSUTA).

What Is a Sales Tax Permit?

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: 

1. 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.
2. Sell taxable items in your nexus state(s) or local jurisdictions. Some states don’t tax certain items, like grocery food, medication, or clothing. You may not need a sales tax permit if you only sell non-taxable items in that state or local area. 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. 
3. 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 they only sell on marketplaces that collect and remit for them. 

Once you are registered to collect sales tax in a state, you are required to collect sales tax from buyers in that state. 

When to Register for a Seller's Permit

States generally require retailers to hold valid seller's permits before making their first sale in the state.

However, more confusing factors are 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 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. 

Therefore, 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).

What Do You Need to Register for a Seller’s Permit?

When filing for a seller’s permit in a state, you will generally need:

• Federal Employer ID Number (EIN) or Social Security Number (for sole proprietorships only)
• Business legal name
• Activity start date for your business
• Contact number for a business representative
• Physical and mailing address
• Activity start dates, filing frequencies, and fiscal months for each tax type you are registering for

You may also need articles of incorporation/articles of organization, SS4 (IRS Determination letter), and a corporate income tax return. Remember that this is not an exhaustive list, and there may be other documents you must present to the state when registering for a sales tax permit.

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 remember that even if you elect to register this way, you may still have to register individually in other non-member states. 

How Much Do Seller’s Permits Cost?

As mentioned above, you must have a seller’s permit before paying state tax. Here’s a look at how much a sales and use tax permit may cost you by state:

Sales Tax Permit: Conclusion

If you sell in a state with a physical presence or hit economic nexus, you must register for a sales tax permit. Those who do not register are likely to face hefty fines in every state in which they operate. 

Automated sales tax solutions, like Zamp, manage the sales tax process for you, including registering you in states where you need to. Want to learn more about how we can take the headache out of sales tax compliance for you? Book a call below.