How Do I Get a Seller's Permit for Sales Taxes?
Getting a Seller's Permit to Collect Sales Tax in Your State
What is a Seller's Permit?
When you start a business or begin to sell products, you will need a seller's permit. A seller's permit is a permit you apply for from your state to allow you to sell products or services and collect sales tax. The purpose of a seller's permit is to allow the state to control the process of collecting, reporting, and paying sales tax in that state.
A seller's permit may also be called a "resale permit, resell permit, permit license, reseller permit, reseller number, resale ID, state tax ID number, reseller license permit," or certificate of authority, depending on your state.
Most businesses must deal with sales tax on taxable products and services by collecting taxes from customers, reporting on those taxes, and paying them to their state. Sales tax is a trust fund tax because your business collects it on behalf of the state, your business holds it in trust, and you must turn it back to the state.
Seller's Permit vs Resale or Wholesale Certificate
A seller's permit and a resale certificate are two different things. Businesses often buy products or materials for resale purposes. For example, a retail business may buy snacks from a wholesaler to sell in their store. These purchases are not taxable in some states; the tax is paid when the retailer sells the snacks. The retailer must get a resale certificate from the state so it's clear that the sale is not taxable; sometimes this is an annual certificate. Check with your state's taxing authority to find out about resale certificates.
Does My Business Need to Get a Seller's Permit?
If you plan to sell or to lease (in some states) any products or services in your business, you must apply for a seller's permit, even if you don't think you need to collect sales taxes. Some states also require sales tax to be paid on shipping charges and gift wrapping.
Several states (Alaska, Delaware, Montana, New Hampshire, and Oregon) do not have a statewide sales tax, You don't have to get a seller's permit in these states. Of these, Alaska and Montana do allow localities to charge sales taxes, so you will need to check with these states to see whether you need to collect local sales taxes.
Sales taxes are imposed on most products and many services sold by businesses. Sales taxes vary by state, in terms of
- Types of products subject to sales tax,
- Types of services subject to sales tax, and
- Whether sales tax is imposed on online transactions.
As you start your business and add products and services, you will need to check with your state's department of revenue or taxing authority to determine whether your business must handle sales taxes and which products and services are taxable. Each state has its own specific requirements.
Seller's Permits and Online Sales
If your business is selling online, you may be wondering if you need a seller's permit. The online sales tax situation is changing. A recent Supreme Court ruling gives states more authority to tax internet sales and states are setting up laws to take advantage of this new situation.
Some states have a minimum threshold of either sales or transactions. For example, some states have a $100,000 yearly minimum on internet transactions. If you are under the state's minimum, your business would not have to collect, report, and pay sales taxes in that state.
The sales tax laws in various states are continually changing. This chart from the Sales Tax Institute shows the current online sales tax situation for each state.
Before You Apply for a Seller's Permit
When you have determined that your products or services are subject to sales taxes, there are some things you will need to do in order to get a seller's permit to sell these taxable products and services in your state.
Business Tax ID Numbers. You will need to get a tax ID number for your business. It's called an Employer ID (EIN), but you'll need it even if you don't have employees. The EIN is a federal tax number like a Social Security number. You can apply for and get an EIN online. You may also need to get a state EIN, depending on your state.
NAICS Code. The U.S. government classified businesses by the types of products or services they provide. You will need to show the NAICS code for all of the different types of taxable products and services you want to sell.
Information about Your Business. You will need to include your business legal type, and possibly the date your business was started. You will also need to include information about your business bank account.
The Seller's Permit Application
Most states allow you to file your application for a seller's permit (or other sales tax registration) and pay online. Go to the website of your State Department of Revenue (or other designation) to find the online link.
Here are some common questions you will be asked and information you will need to provide to complete the sales tax registration in your state, in addition to the information above.
- Your business name, business type, and date your business began.
- Monthly sales, including internet sales
- Information about your place of business (including temporary locations)
- Calendar quarters your business operates if your business is seasonal
- The starting date for collecting sales tax in your state
- The type of products or services to be sold (or the NAICS Codes, as noted above)
- The amount of sales tax you estimate you will collect (your filing frequency is based on this amount)
- If you have more than one location, whether you will be filing consolidated returns.
You may also be required to submit documents for verification purposes:
- Your social security number (corporate officers excluded)
- A photocopy of your driver license
- The name and location of a bank where you have an account
- Names of suppliers
- Name of the person maintaining your account
- Names and address of a personal reference.
Some states charge a fee for seller's registration; others do not. The questions above appear to be common; your state may ask additional questions.
Each state has different requirements for getting a seller's permit.
In California, for example, you must state your projected monthly sales, projected monthly taxable sales, and products to be sold.
Seller's Permits in Multiple States
If you are doing business in more than one state and selling in different states, you will need a sales tax permit for every state (unless the state doesn't have a sales tax).
After You Have Registered to Collect Sales Taxes
After you have registered, you will need to set up accounting procedures to collect the sales taxes on transactions, including online transactions, if applicable. Then you will need to make sure you set up the periodic reports and payments for sales taxes.
You can read more about how to collect, report, and pay sales taxes, remembering that the process will be slightly different for each state.