Tax Q&A: When and where do I need to get a sales tax permit?

Our Tax Q&A series tackles common tax questions facing FBA sellers and other small business owners.

On its face, the answer to this question is simple: You need to get a sales tax permit if you’re required to collect sales tax on items you sell in a particular state — and you need to get the permit from each state where you’ll be collecting those taxes.

Of course, when it comes to sales tax, nothing is really quite that simple.

For example, what if you sell to customers in states with a “marketplace facilitator” law, and Amazon collects and remits the sales tax for you? Do you still need a permit then?

Yes, you do. But we’ll get to that in a minute.

Getting a sales tax permit

If you need to collect sales tax on your products in certain states, you first must have a permit (some states call it a license, but functionally it’s the same) — and the emphasis here is on first. This isn’t something you can do a few months down the road after you start making sales, because it’s typically illegal to collect sales tax without a permit.

Generally, the first step is to go to the state’s taxing authority (usually the Department of Revenue) and determine the regulations that apply to you. If you need a permit, you should be able to complete your application either online or by submitting a paper form. Some states require you to pay a fee and renew your permit every so often.

Keep in mind that you might need to file other applications for local jurisdictions that have additional or different taxes in place.

Some states require you to post the permit at your business as well, if customers or clients visit your location.

If you have to register in many states, Avalara Licensing can ease the hassle. We’ll help you gather the necessary information and cross all the t’s and dot all the i’s. 

What about marketplace facilitator states?

Several states have passed marketplace facilitator laws, requiring companies like Amazon to collect and remit sales taxes on behalf of the third-party sellers who use the platform (and who meet certain characteristics). But not all states have those laws, and even if they do, make sure to check that you’re covered. No matter what the law, marketplace facilitator laws don’t get you off the hook for permits and licenses, which you still need in each state. In fact, you’ll still need to file sales tax returns in those states, too.

Have a question about sales tax? Email us at smallbizstories@avalara.com.