License to Sell: Your Guide to Applying for a Sales Tax Permit
Many businesses need to collect sales tax from customers. But before you can start collecting it, you must obtain a sales tax permit with the state. Find out how to apply for a seller’s permit by state to keep things legal.
What is a sales tax permit?
A sales tax permit, or sales tax license, is a certificate that allows businesses to collect sales tax from customers. Businesses required to collect sales tax must apply for a permit to operate. In addition to sending a physical or electronic seller’s license, the state also assigns businesses a unique sales tax ID number.
Do you need a permit?
Again, you only need a permit if you’re required to collect sales tax. As a refresher, sales tax is a pass-through tax that is a percentage of a customer’s total bill. Customers are responsible for paying sales tax; sellers are responsible for remitting it.
Before applying for a sales tax permit with a state, verify that you must collect the tax. You must collect sales tax for a state if:
· You have sales tax nexus (presence) in the state
· The state has sales tax laws
· The state applies sales tax to the products you sell
Five states do not have sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Hawaii also does not have sales tax, but they do impose a general excise tax (GET). As a result, you must apply for a GET license. New Mexico also has a gross receipts tax (GRT) in place of a sales tax, so you will need to apply for a GRT permit.
Seasonal businesses aren’t off the hook when it comes to getting sales tax licenses. If you run a seasonal business, you must either apply for a temporary or permanent permit, depending on the state.
When should you get your sales tax permit?
You must apply for a sales tax permit before you can begin making sales in your business. Applying for a sales tax license is part of registering your business with the state.
Other responsibilities you may need to do before operating include registering your business, creating an unemployment insurance account, and setting up a new hire reporting account with the state.
Using your seller’s license
Once you receive your sales tax license and ID number from the state, you can begin selling your products to customers and collecting sales tax.
Include your seller permit number when remitting and reporting collected sales tax to the state.
Seller’s permit vs. resale certificate: What’s the difference?
You may have also heard about a resale certificate. Resale certificates are not synonymous with sales tax permits.
A seller’s permit allows a seller to collect sales tax from its customers. On the other hand, a resale certificate exempts a buyer from paying sales tax when they purchase goods.
Resale businesses or companies that use purchased goods as part of their offerings can apply for a resale certificate. When you purchase qualifying goods from a business, you do not pay sales tax. Instead, you will later collect sales tax on those goods from your customers.
If you decide to apply for a resale certificate, you still need to have a sales tax permit. That way, you can legally collect sales tax from your customers. Apply for a seller’s license before applying for a resale certificate.
How to apply for seller’s permit by state
Apply for a seller’s permit with the state you are responsible for collecting sales tax for. If you have sales tax nexus in multiple states, you may need to apply for more than one permit.
The application for obtaining a seller’s permit depends on the state. Some states charge businesses an application fee while others do not.
The application process for obtaining a sales tax permit varies by state, but there are a few general steps you have to take.
Before we get into the nitty-gritty of state-specific requirements for applying for a seller’s permit, take a look at some general steps:
1. Gather business information
2. Go to your state’s website
3. Apply online or by mailing in a paper form
4. Pay the seller’s permit fee, if applicable
What business information do I need?
Don’t start the application process without the right information. Most states require the following on the permit application form:
· Business name
· Business structure
· Federal Employer Identification Number (FEIN)
· Social Security number
· Date you started doing business in the state
· Filing frequency
· Estimated sales subject to sales tax
· Contact information (e.g., address, phone number)
· Information about your products or services
· Information about your employees
Keep in mind that this is general business information that may appear on your permit application form. You may need more or less depending on your state.
State forms, links, and fees
Use the chart below for links to the forms or online registration system as well as the cost to apply.
|
State |
How to Apply for a Sales Tax Permit |
Cost |
|
Alabama |
Online: My Alabama Taxes (MAT) |
Free |
|
Alaska |
No Sales Tax |
N/A |
|
Arizona |
Online: AZTaxes
User Account Registration |
$12 |
|
Arkansas |
Online: Arkansas
Taxpayer Access Point |
$50 |
|
California |
Online: Taxpayer Online Services Portal |
Free, but you may have to pay a security deposit |
|
Colorado |
Online (businesses
with one location): MyBizColorado |
License fee varies from $4 – $16, plus a $50 security deposit |
|
Connecticut |
Online: Taxpayer Service Center |
$100 |
|
Delaware |
No Sales Tax |
N/A |
|
D.C. |
Online: My Tax DC |
Free |
|
Florida |
Online: Account
Management and Registration |
Free |
|
Georgia |
Online: Georgia Tax Center |
Free |
|
Hawaii |
Mail: BB-1 |
$20 |
|
Idaho |
Online: Idaho
Business Registration System |
Free |
|
Illinois |
Online: MyTax
Illinois |
Free |
|
Indiana |
Online: INtax |
$25 |
|
Iowa |
Online: Business
Tax Registration |
Free |
|
Kansas |
Online: Kansas
Department of Revenue Customer Service Center |
Free |
|
Kentucky |
Online: Kentucky
Business One Stop Portal |
Free |
|
Louisiana |
Online: Louisiana
Taxpayer Access Point |
Free |
|
Maine |
Online: Tax
Registration Services |
Free |
|
Maryland |
Online: Maryland
Combined Registration Online Application |
Free |
|
Massachusetts |
Online: MassTaxConnect |
Free |
|
Michigan |
Online: Online New Business Registration |
Free |
|
Minnesota |
Online: Business Tax Registration |
Free |
|
Mississippi |
Online: Taxpayer Access Point (TAP) |
Free |
|
Missouri |
Online: New
Business Registration |
Bond based on your estimated sales tax |
|
Montana |
No sales tax |
N/A |
|
Nebraska |
Online: Register
Your New Business Online |
Free |
|
Nevada |
Online: SilverFlume |
$15 |
|
New Hampshire |
No sales taxes |
N/A |
|
New Jersey |
Online: NJ Business Gateway Services |
Free |
|
New Mexico |
Online: Taxpayer
Access Point (TAP) |
Free |
|
New York |
Online: New York Business Express |
Free |
|
North Carolina |
Online: Online
Business Registration |
Free |
|
North Dakota |
Online: Taxpayer
Access Point (TAP) |
Free |
|
Ohio |
Online: Streamlined Sales Tax Registration System (SSTRS) |
Free |
|
Oklahoma |
Online: Taxpayer Access Point (TAP) |
$20; $10 for additional locations |
|
Oregon |
No sales tax |
N/A |
|
Pennsylvania |
Online: Online Business Entity Registration (PA-100) |
Free |
|
Rhode Island |
Online: RI
Division of Taxation Combined Online Registration Service |
$10 |
|
South Carolina |
Online: MyDORWAY |
Free for online
application. |
|
South Dakota |
Online: South Dakota Tax Application |
Free |
|
Tennessee |
Online: Tennessee Taxpayer Access Point (TNTAP) |
Free |
|
Texas |
Online: Texas
Online Tax Registration Application |
Potential security bond based on your application |
|
Utah |
Online: OneStop
Online Business Registration OR Taxpayer Access Point (TAP) |
Potential security bond based on your application |
|
Vermont |
Online: Online
Business Service Center |
Free |
|
Virginia |
Online: Virginia
Tax Online Services for Businesses |
Free |
|
Washington |
Online: My DOR |
$19 business license application fee |
|
West Virginia |
Online: WV One
Stop Business Portal |
Free |
|
Wisconsin |
Online: Bus Tax Reg OR One Stop Business Portal |
$20 |
|
Wyoming |
Online: Wyoming
Internet Filing System |
$60 |
Keep in mind that you may have to renew your sales tax permit, depending on your state. Contact your state for more information.