Sales tax permits: A state-by-state guide
Before you can collect and remit sales tax in a state, you’ll need to obtain a sales tax permit, sometimes known as a sales tax license or seller’s permit. Not every business is required to collect and remit sales tax, so how do you know if you need a sales tax permit? And how do you go about getting one if you do?
The answers to these and other related questions vary depending on the state and the business itself. Read on to learn more.
Who needs a sales tax permit?
You need to get a sales tax permit and comply with sales tax laws in states where you have nexus, which is another word for connection.
Nexus used to be based solely on physical presence, such as employees, inventory, or an office in a state. Having a physical presence in a state still establishes nexus, but thanks to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018), businesses with no physical presence in a state can establish nexus through economic activity, or economic nexus. Physical presence in a state is no longer requisite.
Every state with a general sales tax enacted economic nexus in the wake of the Wayfair ruling, as did Puerto Rico, Washington, D.C., and some local governments in Alaska. Yet it’s still possible to sell into a state and not establish nexus because all economic nexus laws provide an exception for remote businesses selling beneath the state’s economic nexus threshold. These thresholds vary from $100,000 in sales to $500,000 in sales and 100 transactions; details are available in this state-by-state guide to economic nexus laws.
An out-of-state business that meets a state’s economic nexus threshold must obtain a sales tax permit and start collecting and remitting sales tax according to state and local laws, just like an in-state business.
How do you get a sales tax permit?
Registering for a sales tax permit usually occurs in several stages, from the initial “Welcome, we want to make doing business in [state] as easy and friendly as possible,” to the more sobering “List of Required Forms.” In some states, additional permits or licenses may also be required.
Obtaining this all-important slip of paper is more challenging and expensive in certain states, and for certain businesses. It all depends on the state(s) in which you do business and whether you’re a temporary or permanent business, a brick-and-mortar business with one location or multiple locations in the state, a marketplace seller, or a direct online seller (with or without a physical presence in the state).
In California, for example, you need to apply for a temporary seller’s permit if you plan to make sales in one location for 90 days or less. Maryland’s temporary permits for temporary or seasonal sellers is good for up to 30 days. It’s important to confirm which type of permit a state requires for your type of business: While New York offers a temporary permit, short-term vendors that make sales at a show, entertainment event, flea market, or sporting event must obtain a regular permit; the temporary Certificate of Authority is only for vendors who “expect to make taxable sales in New York State for no more than two consecutive sales tax quarters in any 12-month period.”
It’s in every state’s interest to make the registration process as clear and straightforward as possible. Though consumers are required to self-report consumer use tax if a seller doesn’t collect applicable sales tax at checkout, it’s much harder for states to track down non-compliant consumers than non-compliant businesses.
That said, you may have to hunt for the information you seek, and the fact that different states call their permits by different names can make that a time-consuming process. For example, the California Department of Tax and Fee Administration (CDTFA) lists the California Seller’s Permit under “Permits & Licenses,” while on the New York State Department of Taxation and Finance website, you’ll find a link to “Register as a sales tax vendor” in the side menu under the “Businesses” heading. If you can’t find what you’re looking for, give the department of revenue a call.
After you apply, you’ll receive a permit in the mail that’s suitable for displaying in a conspicuous place, which is mandatory for businesses with a physical presence in the state. Different requirements may exist for remote sellers.
Pay attention to how long your sales tax permit lasts. Permits in some states (e.g., California and Texas) are good for as long as you own your business, while in other states (e.g., Connecticut and Pennsylvania), they must be renewed every one to five years. It all depends on the state. And, of course, these requirements are subject to change: Alabama requires annual license renewal as of January 1, 2021.
What’s the difference between a sales tax permit and a resale certificate?
As explained above, businesses typically need to acquire a sales tax permit before collecting sales tax on taxable sales. In obtaining a sales tax permit, a seller agrees to act as an agent for the state for the collection and remittance of sales tax, as prescribed by law.
A resale certificate allows a business to make tax-free purchases of taxable goods for resale. As the Nevada Department of Revenue explains, “The certificate represents the purchaser’s assurance that the property is for eventual resale and the tax will be charged then.” Resale certificates prevent goods from being taxed twice.
Although free to obtain, resale certificates do need to be updated periodically. Sellers that fail to obtain a resale certificate to validate tax-exempt sales could be held liable for the uncollected tax.
Do marketplace sellers need a sales tax permit?
If you sell through a marketplace, whether you need to register for a sales tax permit depends on a few factors, such as whether you have a physical presence in the state, if you make direct sales in addition to marketplace sales, and the volume of your sales.
Having a physical presence in a state creates nexus and a need for a sales tax permit, as noted above. Most states consider physical presence to include inventory held in a marketplace facilitator’s warehouse or fulfillment center, so it’s important for marketplace sellers to track the location of inventory. Not knowing you have marketplace inventory in a state won’t protect you from tax liability.
With the exception of Missouri, all states with a sales tax now require marketplace facilitators to collect and remit tax on behalf of their third-party sellers (Missouri’s marketplace facilitator law will take effect January 1, 2023). Some states, like Iowa, don’t require individual sellers to register for a sales tax permit or file returns if all their sales in the state are made through collecting marketplaces; yet a marketplace seller with a physical presence in Iowa would still need to register, as would a direct remote seller whose sales exceed Iowa’s economic nexus threshold.
Some states require marketplace sellers to obtain a sales tax permit and file a sales tax return even if they only sell through a registered marketplace and don’t have a physical presence or make direct sales in the state. That’s the case in Connecticut. See our state-by-state registration requirements for marketplace sellers for state-specific details.
In short, sellers that sell through multiple channels in a state, including their own ecommerce store, generally need to obtain a sales tax permit. Sellers that sell only through marketplace(s) that collect and remit on their behalf may or may not have to obtain a sales tax permit. It depends on the state.
How much do sales tax permits cost (2022)?
Just as naming conventions for sales tax permits vary by state, so does the cost of doing business.
Below is a list of what permits cost in each state, as of January 2022. As with just about everything else related to sales tax, this information is subject to change.
|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 can 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 currently $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 currently $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 currently $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 currently $100. The permit expires every two years and is automatically renewed and mailed to you at no cost by the Connecticut Department of Revenue Services, as long as your 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 currently $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.|
The cost to register for an Indiana Registered Retail Merchant Certificate (RRMC) is $25. 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 tax permit.|
|Kansas||$0||It’s free to register as a business in Kansas.|
|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 Tax ID Number in Minnesota.|
|Mississippi||$0||It’s free to register for a Mississippi sales tax permit or registration license, which 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, a business with no permanent place of business in the state may be required to post a Sales Tax Bond or Surety Tax Cash Bond.|
|Missouri||Variable||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 currently $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 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||$10||The cost to register for or renew a Rhode Island retail sales tax license is currently $10. A renewal fee is assessed each year.
However, the fees to apply for or renew a sales tax permit have been eliminated for periods after July 1, 2022.
|South Carolina||$50||The cost to register for a South Carolina retail license is currently $50. 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 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 currently $30. Transient vendors must post a security deposit (bond, cash, certified check, or irrevocable letter of credit) in the amount of $500.|
|Wisconsin||$20||There's a $20 fee to obtain the first Wisconsin seller's permit. There's no charge for additional tax permits, and no charge for a consumer's use tax certificate.
|Wyoming||$60||The cost to register for a Wyoming sales and use tax license is currently $60.|
All states impose penalties, fees, and maybe even criminal charges on businesses that fail to register as required. So, before you start collecting sales tax, be sure to get any necessary sales tax permits right from the start. Avalara Sales Tax Registration can help with that process in all states.
Updated January 2022; originally posted March 2019.
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