Sales tax permits: A state-by-state guide
- Sales and Use Tax
- Mar 29, 2019 | Gail Cole
A sales tax permit, sometimes known as a sales tax license or seller’s permit, is something a business must obtain before it starts collecting and remitting sales tax in most states. But how do you know if you need a sales tax permit? How do you go about getting one? What’s the difference between a sales tax permit and a resale certificate? Do marketplace sellers need a sales tax permit? Do you have to pay to get a sales tax permit?
As usual when it comes to sales tax, the answer to each of these questions varies depending on the state, and perhaps also 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, or a connection. Nexus used to be based on physical presence, such as having employees, inventory, or an office, store, or warehouse in a state. However, that changed on June 21, 2018, when the Supreme Court of the United States found the physical presence rule to be “unsound and incorrect.”
Physical presence in a state still triggers nexus, but with the Supreme Court ruling in South Dakota v. Wayfair, Inc., nexus can also be established solely by economic activity in a state (economic nexus). In pioneering South Dakota, for example, economic nexus is established when a remote seller has more than $100,000 in sales or at least 200 transactions in the state in the current or previous calendar year.
Approximately 35 states have adopted economic nexus since the Wayfair ruling. Out-of-state businesses that surpass the economic nexus thresholds in these states are required to obtain a sales tax permit and collect and remit sales tax according to state and local laws.
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 some states than others, and for some businesses than others. It all depends on the state(s) in which you do business, whether you’re a temporary or permanent business, a brick-and-mortar business with one location or multiple locations, or an online seller with no physical presence in the state.
To obtain a sales tax permit, visit the state tax authority website for your home state and for any other state(s) where you do (or intend to do) business. There you’ll find rules regarding the collection and remittance of sales tax and the type of permit(s) you’ll need to do business.
For example, some states (e.g., California) require temporary or seasonal vendors to obtain a regular sales tax permit, while others (e.g., Maryland) have temporary permits for temporary or seasonal sellers. It’s not always clear what type of permit a state will require: While New York offers a temporary permit, short-term vendors that make sales at a show, entertainment event, flea market, or sporting event are required to obtain a regular permit.
It’s in every state’s interest to make the process as clear and straightforward as possible. When sellers don’t collect sales tax at checkout, consumers generally owe the state the equivalent consumer use tax — and 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 complicate matters. 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, 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.
Once 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.
What’s the difference between a sales tax permit and a resale certificate?
As explained above, businesses typically have to acquire a sales tax permit before making taxable sales in a state. 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: The purchaser must provide the seller with a valid resale certificate in order to avoid paying the tax on a taxable transaction. 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 double taxation.
Although free to obtain, resale certificates do need to be updated periodically. If a seller doesn’t have a valid resale certificate for a buyer that made a tax-exempt purchase, the seller could be held liable for the uncollected tax.
Do marketplace sellers need a sales tax permit?
Just like other any other vendor, businesses that sell through a marketplace (marketplace sellers) generally need a sales tax permit in states where they have nexus. That can be more than one state. Marketplace sellers like those participating in the Fulfillment by Amazon (FBA) program can have nexus in any state where they have inventory stored for sale, and most marketplace facilitators like Amazon have fulfillment centers and warehouses in numerous states.
Yet these rules are in flux: Who’s responsible for collecting sales tax on marketplace transactions is a hot topic these days.
More and more states are requiring the marketplace facilitator or provider to collect and remit tax on behalf of all businesses that make sales through the marketplace (marketplace sellers). Some states, like Connecticut, still require sellers with nexus to obtain a sales tax permit and file returns. But some, 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.
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 (2019)?
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 March 2019. As with just about everything else related to sales tax, this information is subject to change.
|Alabama||$0||There’s currently no cost to register for an Alabama sales tax permit, but other business registration fees may apply.|
|Alaska||N/A||There’s no state sales tax in Alaska., but some jurisdictions impose a local sales tax and fees may apply.|
|Arizona||$12||The cost to register for or renew an Arizona transaction privilege tax license is currently $12 per business location.|
|Arkansas||$50||The cost to register for an Arkansas sales tax permit is currently $50.|
|California||$0||There’s currently no cost 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, plus a one-time-only $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.|
|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, so long as your account is active.|
|Delaware||N/A||There’s no state sales tax in Delaware. Other registration requirments may apply.|
|Florida||$0||There’s currently no cost to register as a Florida business|
|Georgia||$0||There’s currently no cost to register for a Georgia sales and use tax number. There is no need to renew it; 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||There’s currently no cost to register as a business in Idaho.|
|Illinois||$0||There’s currently no cost to register as a business in Illinois|
|Indiana||$25||The cost to register for an Indiana Registered Retail Merchants Certificate (RRMC) is $25. It’s valid for two years and updates automatically with no additional charge for renewal. If a business does not pay its tax liability, the RRMC will expire.|
|Iowa||$0||There’s currently no cost to register for an Iowa sales tax permit.|
|Kansas||$0||There’s currently no cost to register as a business in Kansas.|
|Kentucky||$0||There’s currently no cost to register for a Kentucky sales and use tax permit.|
|Louisiana||$0||There’s currently no cost to register for a Louisiana sales tax certificate.|
|Maine||$0||There’s currently no cost to register for a Maine retailer’s certificate.|
|Maryland||$0||There’s currently no cost to register for a Maryland sales and use tax license.|
|Massachusetts||$0||There’s currently no cost to register for a Massachusetts Sales and Use Tax Registration Certificate, which is required for each business location.|
|Michigan||$0||There’s currently no cost to register for a Michigan sales tax license.|
|Minnesota||$0||There’s currently no cost to register for a Tax ID Number in Minnesota.|
|Mississippi||$0||There’s currently no cost 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||There’s currently no cost 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 requirments may apply.|
|Nebraska||$0||There’s currently no cost to register for a Nebraska sales tax permit. A separate permit is required for each business location unless you apply through the Streamlined Sales Tax Agreement.|
|Nevada||$15+||The cost to register for a Nevada sales and use tax permit is currently $15. 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 a business’s calculated tax 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 requirments may apply.|
|New Jersey||$0||There’s currently no cost to register for a New Jersey Certificate of Authority.|
|New Mexico||$0||There’s currently no cost to register for a New Mexico Tax Combined Reporting System (CRS) Identification Number.|
|New York||$0||There’s currently no cost to register for a New York sales tax Certificate of Authority.|
|North Carolina||$0||There’s currently no cost to register for a North Carolina Certificate of Registration.|
|North Dakota||$0||There’s currently no cost to register for a North Dakota sales 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||$25||The cost 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 retailers located outside of Ohio 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. The license is renewable every three years from the date the permit was issued, if the business is in good standing.|
|Oregon||N/A||There’s no state sales tax in Oregon. Other registration requirments may apply.|
|Pennsylvania||$0||There’s currently no cost 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.|
|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||There’s currently no cost to register for a South Dakota sales tax license.|
|Tennessee||$0||There’s currently no cost to register for sales tax in Tennessee. However, most businesses also need a business license, which cost $15 and are issued from each county clerk’s office.|
|Texas||$0||There’s currently no cost to register for a Texas sales tax permit. However, businesses may be required to post a security bond.|
|Utah||$0||There’s currently no cost to register for a Utah sales and use tax license.|
|Vermont||$0||There's currently no cost to register for a Vermont sales and use tax license.|
|Virginia||$0||There's currently no cost to register for a Virginia sales tax certificate.|
|Washington||$0||There’s currently no cost to register for a business license in Washington.|
|Wisconsin||$30||The cost to register as a business in West Virginia is currently $30. Transient vendors must post a security (bond, cash, certified check, or irrevocable letter of credit) in the amount of $500.|
|Wyoming||$20||The cost to register for a Wyoming sales and use tax license is currently $60.|
Despite many states having naming, pricing, and renewal variations, all states impose penalties, fees, and maybe even criminal charges on businesses that fail to obtain the proper permit. So, before you start collecting sales tax, be sure to get any necessary sales tax permits right from the start. Avalara Licensing can help with that process in all states.