What are sales tax permits and does your business need one?

Every state with a sales tax requires businesses to register for a sales tax permit before collecting and remitting sales and use tax in the state. Yet businesses aren’t necessarily required to hold a sales tax permit or collect sales and use tax in all states where they make sales. How do you know whether you need a sales tax permit? How do you go about getting one if you do?

Jump ahead to our guide to state sales tax permit costs.

What is a sales tax permit?

A sales tax permit is a document that authorizes a business to make taxable retail sales and collect sales tax from customers. Other terms for “sales tax permit” are retail license, sales tax license, sales and use tax permit, seller permit, seller’s permit, or vendor’s license. 

In most states, businesses act as intermediaries and collect sales and use tax on behalf of the state. In a handful of states, tax is imposed on the business itself, which can pass it on to the customer. Thus:

  • Arizona has a transaction privilege tax (TPT) license

  • Hawaii has a general excise tax (GET) license

  • New Mexico requires businesses that make taxable sales of tangible personal property in the state to register to obtain a New Mexico Business Tax Identification Number for gross receipts tax (GRT)

There’s no statewide sales tax in Alaska, Delaware, New Hampshire, Montana, or Oregon. However, many cities and boroughs in Alaska, including Ketchikan, have a local sales and use tax and require certain businesses to register for sales tax.

Businesses also typically need one or more state or local business licenses. Exact requirements vary depending on the location and nature of your business. 

Who needs a sales tax permit?

You’re required to hold a seller permit in states where you have nexus, which is basically a connection with a state that’s significant enough to trigger a sales tax obligation.

There are several ways for a businesses to establish nexus with a state:

  • Economic activity in the state (e.g., $100,000 in sales or 200 transactions in the state during the current or previous calendar year) 

  • Physical presence in the state (e.g., employees, inventory, real property)

  • Referrals from in-state entities 

  • Ties to affiliates in the state 

States can require a business to register as soon as nexus is established, so it’s important to track your nexus in the states where you make sales.

Some states may require you to get a temporary or occasional sales tax permit if you make occasional or temporary sales in the state. For example, while you don’t need a sales tax permit if you only sell one or two taxable items during a 12-month period in Texas, you need a Texas sales tax permit if you make three or more sales of taxable tangible personal property in the state during a 12-month period. In Arizona, you’re required to register for TPT if you plan to rent your property out during the 2023 Super Bowl (and only for the 2023 Super Bowl).

Nexus can last longer than you think, so be sure to confirm you no longer have nexus with a state before allowing your sales tax permit to expire.

Do online businesses need a seller’s permit?

Like brick-and-mortar businesses, online businesses must obtain a seller’s permit and comply with all applicable sales and use tax requirements in states where they have nexus. Since nexus can be established through affiliates (affiliate nexus), sales or transaction volume (economic nexus), or referrals (click-through nexus), you can have nexus in states where you don’t have a physical presence.

That said, some states provide an exception for out-of-state, online businesses that only sell through a registered marketplace facilitator.

Do marketplace sellers need a sales tax permit?

All states with a general, statewide sales tax now require marketplace facilitators that have nexus to register for a seller’s permit then collect and remit sales tax on behalf of third-party (marketplace) sellers. 

Registration requirements for marketplace sellers vary depending on the state and the circumstances. In Iowa, for example:

  • An in-state marketplace seller is required to register for a sales tax permit even if it only sells through a registered marketplace that handles sales tax on its behalf

  • A remote marketplace seller is not required to register for a sales tax permit or file returns with the Iowa Department of Revenue if it only sells through a registered marketplace that handles sales tax on its behalf

  • A remote marketplace seller is required to register for a sales tax permit and file returns if it also makes direct sales into Iowa and has nexus with the state

How do you get a sales tax permit?

Obtaining a seller permit is more straightforward in some states than others, though it’s in every state’s best interest to make the process as simple and streamlined as possible. Often, the biggest hurdle is finding the information you need to find on the department of revenue website.

Most states now encourage businesses to register for a seller’s permit online; it tends to be the quickest option. Registering by mail or in person is typically allowed but often discouraged.

You usually need to provide a lot of information when registering for a sales tax permit, including:

  • The name and address of your business, along with a description of the business

  • The name and address of each business owner

  • Your Federal Employer Identification Number (EIN) and Tax ID number

  • Your social security number

  • Your banking information

  • The North American Industry Classification System (NAICS) codes for products you sell

  • An estimate of your annual sales in the state

It can take up to four weeks to obtain your sales tax permit once you complete your registration, so plan accordingly.

Businesses with a physical presence in the state are required to post their sales tax permit in a conspicuous place. Different requirements may exist for remote sellers.

Do I need to renew my sales tax permit?

Sales tax permits in some states (e.g., California and Texas) are good for as long as you own your business. In other states (e.g., Connecticut and Pennsylvania), sales tax permits expire and need to be renewed. 

See our state-specific sales tax permit information, below, for more details.

What’s the difference between a sales tax permit and a resale certificate?

A sales tax permit authorizes a business to collect and remit sales tax on taxable sales of products and services, as required by law. A seller’s permit isn’t the same as a resale certificate.

A resale certificate allows a business to make tax-free purchases of taxable goods they plan to resell. The resale certificate prevents goods from being taxed twice. Sellers that fail to obtain a resale certificate to validate tax-exempt sales could be held liable for the uncollected tax.

How much do sales tax permits cost (in 2023)?

The cost of a sales tax permit varies by state and is subject to change.

State Cost Notes
Alabama $0 It’s free to register for an Alabama sales tax permit, but other business registration fees may apply. Licenses must be renewed annually effective January 1, 2021.
Alaska N/A There’s no state sales tax in Alaska, but some jurisdictions impose a local sales tax and fees may apply. Remote sellers should register through the Alaska Remote Seller Sales Tax Commission.
Arizona $12 The cost to register or renew an Arizona transaction privilege tax (TPT) license is $12 per business location. A separate city license fee may be required. TPT licenses are valid for one calendar year and must be renewed annually by January 1.
Arkansas $50 The cost to register for an Arkansas sales tax permit is $50.
California $0 It’s free to register for a California seller’s permit but a security deposit may be required to cover any unpaid taxes that may be owed if, at a later date, the business closes. The amount of the security will be determined at the time you apply.
Colorado $16 The cost to register for a two-year Colorado sales tax license is $16 (prorated depending on the date of issuance), plus a one-time $50 deposit. The deposit is automatically refunded to the business after $50 in state sales tax has been remitted to the department. Additional fees may apply in self-collected jurisdictions. There’s no charge or deposit for a retailer’s use tax license.

Licenses are valid for a two-year period and expire at the end of each odd-numbered year. All active Colorado sales tax licenses expire on December 31 of odd-numbered years (the next expiration date is December 31, 2023) and will need to be renewed.
Connecticut $100 The cost to register for a Connecticut sales and use tax permit is $100. Permits expire every two years and are automatically renewed and mailed at no cost by the Connecticut Department of Revenue Services, as long as an account is active and in good standing.
Delaware N/A There’s no state sales tax in Delaware. Other registration requirements may apply.
Florida $0 It’s free to register as a Florida business.
Georgia $0 It’s free to register for a Georgia sales and use tax number. There’s no need to renew it because it remains in effect as long as the business entity exists with no change in ownership or structure.
Hawaii $20 The cost to register for a Hawaii general excise tax (GET) license is $20.
Idaho $0 It’s free to obtain a sales tax permit in Idaho
Illinois $0 There’s no fee to register a business in Illinois, but there are license fees for some businesses with tax responsibilities. 
Indiana $25

The cost to register for an Indiana Registered Retail Merchant Certificate (RRMC) is $25 per location. It’s valid for two years and updates automatically (for businesses in good standing) with no additional charge for renewal. If a business does not pay its tax liability, the RRMC will expire.

Iowa $0 It’s free to register for an Iowa sales and use tax permit.
Kansas $0 It’s free to register for a Kansas sales and use tax permit.
Kentucky $0 It’s free to register for a Kentucky sales and use tax permit.
Louisiana $0 It’s free to register for a Louisiana sales tax certificate. However, local governments may impose additional requirements and fees.
Maine $0 It’s free to register for a Maine retailer certificate.
Maryland $0 It’s free to register for a Maryland sales and use tax license.
Massachusetts $0 It’s free to register for a Massachusetts Sales and Use Tax Registration Certificate, which is required for each business location.
Michigan $0 It’s free to register for a Michigan sales tax license.
Minnesota $0 It’s free to register for a sales and use tax number/account in Minnesota. 
Mississippi $0 It’s free to register for a Mississippi sales tax permit, and it doesn’t expire or require renewal provided the holder continues in the same business at the same location (a separate permit is required for each location). However, some businesses may be required to post a Sales Tax Bond or Surety Tax Cash Bond
Missouri $0 It’s free to register for a Missouri sales tax license. However, a business making retail sales in Missouri must post a bond equal to two times the average monthly sales and use tax.
Montana N/A There’s no state sales tax in Montana. Other registration requirements may apply.
Nebraska $0 It’s free to register for a Nebraska sales tax permit. A separate permit is required for each business location unless you apply through the Streamlined Sales and Use Tax Agreement.
Nevada $15+ The cost to register for a Nevada sales and use tax permit is $15 for each location. In addition, businesses must remit a security deposit as follows: Monthly filers must remit three times the estimated tax due per month; quarterly filers must remit twice the estimated average tax due per quarter; annual filers must remit four times the estimated tax due annually. If the calculated tax for a business is less than $1,000, no deposit is required. Businesses may apply for a security deposit waiver after three full years of perfect reporting. 
New Hampshire N/A There’s no state sales tax in New Hampshire. Other registration requirements may apply.
New Jersey $0 It’s free to register for a New Jersey Certificate of Authority.
New Mexico $0 It’s free to register for a New Mexico Business Tax Identification Number.
New York $0 It’s free to register for a New York sales tax Certificate of Authority.
North Carolina $0 It’s free to register for a North Carolina Certificate of Registration.
North Dakota $0 It’s free to register for a North Dakota sales and use tax permit, and a permit remains active until the taxpayer cancels it. However, a bond may be required; taxpayers who file accurately and on time for two years may request a bond refund.
Ohio $0 or $25 The cost for in-state vendors to register for an Ohio vendor’s license is currently $25, and a separate license is required for each fixed place of business. The license is free for out-of-state sellers who make taxable retail sales in the state.
Oklahoma $20 The cost to register for an Oklahoma sales tax permit is currently $20, with additional locations costing $10 each. The license must be renewed every three years by the date the permit was issued. This video provides more details.
Oregon N/A There’s no state sales tax in Oregon. Other registration requirements (e.g., for the bicycle excise tax) may apply; see the Oregon Department of Revenue.
Pennsylvania $0 It’s free to register for a Pennsylvania sales tax license, which must be renewed every five years.
Rhode Island $0 The cost to register for or renew a Rhode Island retail sales tax license was $10 and a renewal fee was assessed each year.

However, the fees to apply for or renew a sales tax permit were eliminated effective July 1, 2022
South Carolina $50 The cost to register for a South Carolina retail license is $50 and a separate retail license is required for each location. The license is valid for as long as the same retailer operates the business at that location (unless revoked by the Department of Revenue). Separate local business licenses may also be required.
South Dakota $0 It’s free to register for a South Dakota sales tax license.
Tennessee $0 It’s free to register for sales and use tax in Tennessee. However, most businesses also need a business license, which costs $15 and is issued from a county and/or clerk’s office.
Texas $0 It’s free to register for a Texas sales tax permit. However, businesses may be required to post a security bond.
Utah $0 It’s free to register for a Utah sales and use tax license.
Vermont $0 It’s free to register for a Vermont sales and use tax license.
Virginia $0 It’s free to register for a Virginia sales tax certificate.
Washington Variable The cost to obtain a business license in Washington varies from $0 to $90.
West Virginia $30 For most businesses, the cost to register as a business in West Virginia is $30. Transient vendors must post a security deposit (bond, cash, certified check, or irrevocable letter of credit) in the amount of $500.
Wisconsin $20 A $20 fee must be paid to obtain a Wisconsin seller's permit, which is good for two  years. A $10 renewal fee is due at the end of the two-year period. 
Wyoming $60 The cost to register for a Wyoming sales and use tax license is $60.

 

Failing to register your business as required — or registering where you aren’t required to register — can create compliance problems and even trigger financial penalties or criminal charges. Avalara Sales Tax Registration can help you secure the sales tax permits you need in any or all states. 

 

Updated January 19, 2023.

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