If you are a small business owner who sells online to customers in the US or have an ecommerce store and sell to customers in the US, you may need to register for a sales tax permit in some or all of the states where you have customers. In this article, we will explain what a sales tax permit is, why you need one, how to determine if you need one in a state, how to register for one in each state, and answer some frequently asked questions about sales tax permits.
What is a Sales Tax License and How to Get It
A sales tax permit is a document that authorizes you to make taxable sales and collect sales tax from your customers in a state. It may also be called a retail license, sales tax license, seller permit, seller’s permit, or vendor’s license.
A sales tax permit is not the same as a resale certificate, which is a document that allows you to buy products for resale without paying sales tax. A resale certificate is issued by the state where you buy the products, not where you sell them. To use a resale certificate, you need to have a valid sales tax permit in the state where you sell the products.
A sales tax permit is also not the same as a business license, which is a document that allows you to operate your business in a state or locality. A business license is issued by the state or local government, not by the state tax authority. To obtain a business license, you may need to have a valid sales tax permit in the state or locality where you operate your business.
Why You Need A Sales Tax License
You need a sales tax permit if you have nexus in a state. Nexus is a legal term that means you have a significant connection or presence in a state that subjects you to its sales tax laws.
What Triggers a Sales Tax Nexus
Nexus can be triggered by various factors, such as having a physical location, an employee, an inventory, a drop shipper, or an affiliate in a state, or by reaching a certain threshold of sales or transactions in a state. If you have nexus in a state, you are required to register for a sales tax permit, collect sales tax from your customers in that state, and remit the tax to the state on a regular basis.
How to Determine If You Need a Sales Tax Permit in a State
The first step to registering for a sales tax permit is to determine if you need one in a state. This depends on whether you have nexus in that state, and if so, what kind of nexus you have.
There are two main types of nexus: physical nexus and economic nexus.
What is a Physical Nexus
Physical nexus means you have a physical presence or activity in a state, such as:
- A store, office, warehouse, or other facility
- An employee, contractor, agent, or representative
- An inventory, stock, or consignment
- A drop shipper or third-party fulfillment service
- An affiliate or referral program
- If you have physical nexus in a state, you need to register for a sales tax permit in that state, regardless of how much or how often you sell there.
What is an Economic Nexus
Economic nexus means you have a certain amount or volume of sales or transactions in a state, regardless of your physical presence or activity. Economic nexus is a relatively new concept that was introduced by the US Supreme Court in the 2018 case of South Dakota v. Wayfair, which overturned the previous rule that required a physical presence for nexus. Since then, most states have adopted economic nexus laws that require online sellers to register for a sales tax permit if they exceed a certain threshold of sales or transactions in a state within a given period, usually a year or a quarter. The threshold varies by state, but it is typically $100,000 or 200 transactions.
If you have economic nexus in a state, you need to register for a sales tax permit in that state, even if you have no physical presence or activity there.
How to Determine if You Have a Sales Tax Nexus in a State
To determine if you have nexus in a state, you need to keep track of your sales and transactions by state, and compare them with the nexus rules and thresholds of each state. You can use a sales tax software or a sales tax calculator to help you with this task. You can also check the official websites of each state’s department of revenue or taxation for more information on their nexus requirements and definitions.
How to Register for a Sales Tax Permit in Each State
Once you have determined that you need a sales tax permit in a state, the next step is to register for one. The process and the requirements may vary by state, but generally, you will need to follow these steps:
- Find the official government website of the state where you need to register, and create an account or log in if you already have one.
- Fill out the online or paper application form for a sales tax permit, and provide the required information and documents, such as:
- Your business name, address, phone number, email, and website
- Your federal employer identification number (EIN) or social security number (SSN) if you are a sole proprietor
- Your business structure, type, and industry
- Your estimated sales and tax liability in the state
- Your bank account information for electronic payments
- Your signature and date
- Pay the registration fee, if any. Some states charge a one-time or annual fee for a sales tax permit, while others offer it for free. The fee can range from $0 to $100, depending on the state.
- Receive the confirmation and the permit number. Once your application is approved, you will receive a confirmation email or letter, and a sales tax permit number that you will use to file and pay your sales tax returns. You may also receive a physical sales tax permit certificate that you will need to display at your place of business, if applicable.
The table below shows a summary of the steps and the fees for registering for a sales tax permit in each state. You can also find a list of links to the official sources and forms for each state at the end of this article.
State Registration Information
| State | Online Registration | Paper Forms | Cost/Fee | Filing Method |
|---|---|---|---|---|
| Alabama | My Alabama Taxes | Online Only | $0 | Form or Online |
| Arizona | AZ Taxes | JT-1 | $12 per location. Individual cities have additional fees ranging from $1 to $50 | |
| Arkansas | Arkansas Taxpayer Access Point | AR-1R | $50 | |
| California | Tax and Fee Administration | Online Only | $0 | |
| Colorado | MyBizColorado | CR 0100AP | $4 – $16 plus a $50 deposit | |
| Connecticut | Department of Revenue Services | Online Only | $100 | |
| Florida | Department of Revenue | DR-1 | $5 by mail, or free if completed online | |
| Georgia | Georgia Tax Center | Online Only | $0 | |
| Hawaii | Hawaii Tax Online | BB-1 | $20 | |
| Idaho | Idaho Business Registration | IBR-1 | $0 | |
| Illinois | MyTax Illinois | REG-1 | $0 | |
| Indiana | InBiz | Online Only | $25 | |
| Iowa | Department of Revenue | 78-005 | $0 | |
| Kansas | Department of Revenue | CR-16 | $0 | |
| Kentucky | Kentucky One Stop Business Portal | 10A100 | $0 | |
| Louisiana | GeauxBiz | Online Only | $0 | |
| Maine | Maine Revenue Services | Paper Form | $0 | |
| Maryland | Interactive Web Services | CRA | $0 | |
| Massachusetts | MassTaxConnect | Online Only | $0 | |
| Michigan | Michigan.gov | 518 | $0 | |
| Minnesota | Department of Revenue | ABR | $0 | |
| Mississippi | Department of Revenue | Online Only | $0 | |
| Missouri | MyTax Missouri | 2643 | $0, but a bond may be required | |
| Nebraska | Nebraska One-Stop Business | 20 | $0 | |
| Nevada | NevadaTax | APP-01 | $15 for each in-state location. Out-of-state sellers pay the minimum $15. | |
| New Jersey | Division of Revenue | NJ-REG | $0 | |
| New Mexico | Taxpayer Access Point | ACD-31015 | $0 | |
| New York | Department of Taxation and Finance | DTF-17 | $0 | |
| North Carolina | Department of Revenue | NC-BR | $0 | |
| North Dakota | Office of State Tax Commissioner | SFN 21950 | $0 | |
| Ohio | Ohio Business Gateway | STEC-B | $0 | |
| Oklahoma | Oklahoma Tax Commission | Packet A | $20 | |
| Pennsylvania | PA Enterprise Registration | PA-100 | $0 | |
| Rhode Island | Division of Taxation | BAR | $10 | |
| South Carolina | MyDORWAY | SC-1110 | $0 | |
| South Dakota | Department of Revenue | Tax Application | $0 | |
| Tennessee | Tennessee Taxpayer Access Point | RV-F1300701 | $0 | |
| Texas | Webfile | AP-201 | $0 | |
| Utah | Taxpayer Access Point | TC-69 | $0 | |
| Vermont | myVTax | BR-400 | $0 | |
| Virginia | iReg | R-1 | $0 | |
| Washington | Department of Revenue | Business License Application | $19 | |
| West Virginia | Business for West Virginia | SST-100 | $30 | |
| Wisconsin | Department of Revenue | BTR-101 | $0 | |
| Wyoming | Department of Revenue | ETS Form 101 | $0 | |
| District of Columbia | MyTax.DC.gov | FR-500 | $0 |
Frequently Asked Questions About Sales Tax Permits
In this section, we will answer some of the most common questions that small business owners have about sales tax permits, such as:
- How do you get a sales tax license?
- When to register for a sales tax permit?
- Do I need to renew my sales tax permit?
- What’s the difference between a sales tax permit and a resale certificate?
- How much do sales tax permits cost in each state?
How do you get a sales tax license?
A sales tax license is another term for a sales tax permit. To get a sales tax license, you need to follow the steps and the requirements of the state where you need to register. You can find a summary of the steps and the fees for each state in the table above, and a list of links to the official sources and forms at the end of this article.
When to register for a sales tax permit?
You should register for a sales tax permit as soon as possible after you establish a nexus in a state. Nexus is the connection or presence that you have in a state that subjects you to its sales tax laws. You can have nexus in a state by having a physical presence or activity, such as a store, an employee, or an inventory, or by reaching a certain threshold of sales or transactions, depending on the state’s rules.
Do I need to renew my sales tax permit?
Most states do not require you to renew your sales tax permit, as long as you remain in business and file and pay your sales tax returns on time. However, some states may require you to renew your sales tax permit annually or periodically, and pay a renewal fee. You should check the renewal requirements and the deadlines of the state where you are registered, and make sure to renew your sales tax permit before it expires.
What’s the difference between a sales tax permit and a resale certificate?
A sales tax permit is a document that authorizes you to collect and remit sales tax to the state government on the sales of taxable goods and services. A resale certificate is a document that allows you to buy goods or services for resale without paying sales tax to the seller. A resale certificate is also known as a sales tax exemption certificate or a seller’s permit.
You need a sales tax permit if you have nexus in a state and sell taxable goods or services to customers in that state. You need a resale certificate if you buy goods or services for resale from a seller in a state where you have nexus, and you intend to resell them to your customers in the same or another state.
To use a resale certificate, you need to provide it to the seller at the time of purchase, and keep a copy of it for your records. You also need to make sure that the goods or services you buy with a resale certificate are actually resold, and not used for your own consumption or business purposes. If you use the goods or services for your own use, you will owe sales tax on them.
How much do sales tax permits cost in each state?
The cost of a sales tax permit varies by state. Some states offer sales tax permits for free, while others charge a one-time or annual fee. The fee can range from $0 to $100, depending on the state. You can find the fee for each state in the table above, and a list of links to the official sources and forms at the end of this article.
Conclusion
In this article, we have explained what a sales tax permit is, why you need one, how to determine if you need one in a state, how to register for one in each state, and answered some frequently asked questions about sales tax permits.
We hope that this article has helped you understand the basics of sales tax permits and how to register for them in the US..
Sales tax is a complex and dynamic topic, and the rules and regulations can change frequently. Therefore, it is important to stay updated and compliant with the sales tax laws of the states where you have nexus and customers. Failing to do so can result in penalties, interest, audits, or legal actions from the state authorities.
If you need more help or guidance on sales tax permits or any other sales tax issues, you can contact us at AtomicTax.