SELLER’S PERMIT | SALES TAX APPLICATION
A seller’s permit is commonly known as a sales tax permit, reseller permit, resale certificate, wholesale license, sales tax exemption certificate, sales tax license or sales and use tax permit, depending on each state’s unique terminology. This permit will furnish a business with a unique sales tax number, otherwise referred to as a state tax ID number. It is essential to know that obtaining this permit is one of the first steps a business owner should take when starting a business. As the task of collecting sales tax falls on the business that makes the sales and not the consumer, any failure to remit sales tax may lead to interest charges, fines and/or criminal charges.
DO I NEED A SALES TAX PERMIT?
Many business owners wonder if they need a sales tax permit. Although each state has different requirements, here is a list of common circumstances or reasons a business may need to register to collect sales tax:
- It sells tangible goods at a wholesale or retail level. Some examples are clothing, food and meals, vending machine sales, arts and crafts, motor vehicles etc.
- It warehouses and distributes products in a new state
- Service providers (such as telecommunication providers, travel agencies, attorneys, consultants etc.)
- Temporary businesses that conduct business within a seasonal or holiday time frame
- An online business that conducts business activities through the Internet
- Storefront businesses
- Real property long term leases or short-term rentals such as Airbnb
- Wholesale companies that sell products for resale use (in most wholesale trade shows and markets across the country a business will be required to provide a state sales tax ID in order to participate)
- When the business entity structure changes (e.g Corporation to LLC)
- When an employee or contractor is hired in a new state
SALES TAX NEXUS
Virtually, every business has to comply with each state’s individual sales tax laws and obtain a sales tax permit if:
- The business primary location (online store, storefront, office etc.) where it conducts operations, is located within the state
- The ownership or staff of the business (including sales people, contractors or agents) enter the state to conduct business activities
- Personal property owned or leased in the state is warehoused
The examples above establish the physical connection (nexus) between the state and the seller. This allows the state to impose a sales tax collection obligation on the seller.
Additionally, as of June 2018, the Supreme Court of the Unites States ruled that nexus can also be established by an entity conducting economic activity in a state. This is what is known as remote seller nexus. If a remote seller has above a certain amount of sales volume and/or transactions in another state, they are required to register for sales tax. This means that all online sellers on marketplaces (Amazon, Sears, Walmart, Etsy, Big Commerce, Shopify, eBay etc.) may have to potentially collect and pay sales tax.
Another closely related permit is a resale certificate -also known as a tax exempt certificate- which grants your business the benefit of being able to buy goods without paying local sales tax on them. When doing this, you are the primary party responsible for collecting the tax from the customer when you sell the item. To complete the tax exempt form, you will need to provide your Sales Tax Number.
HOW TO GET A SELLER’S PERMIT
You can either fill out a paper application and file it in person or you can simply submit an online application. It is strongly recommended that all new businesses file for their sales tax permits through an online tax registration application as it is the easiest and fastest way to apply. For the fastest processing time, please have the following information ready to complete the online application for a Sales Tax Number:
Business name, physical/ mailing address & phone number
A short description of the business
The owner or officer’s Information
SALES TAX REGISTRATION
Apply for a Seller’s Permit Online by filling out and submitting the “State Sales Tax Registration” form. This permit will furnish your business with a unique Sales Tax Number. Once you complete the online process, you will receive a confirmation with all relevant and important information within 1-2 business days.
SALES TAX PERMIT BY STATE
SALES & USE TAX FAQS
Any business that sells merchandise or taxable services is required to collect and remit sales tax to the proper taxing authorities. This applies from small companies to large national corporations. From a business with a storefront location to a sole proprietor drop shipping merchandise from his home office. Once this is realized, the next step would be for a business to see if has what is referred to as “Nexus”. Nexus means if the business either has a physical presence or economic presence. Physical presence means the company is physically located in the state that they are collecting sales tax. The company can be there permanently or temporarily, work through a subsidiary, have an office or sales room, a distribution center, or a warehouse/ storage facility. Additionally, a business may have an agent, salesperson, or other type of representative working for them in a permeant of temporary capacity. Economic presence is when the business collects sales tax from a state but may or may not have a physical presence in the state. Economic presence usually means the company has a certain amount of gross revenue or a certain amount of transactions within a calendar year. Once a business realizes that they have Nexus, they are required to register with their local taxing authority. Registration is required before any sales are made. This must be done at the state level and further registration may be required at the local levels in order to be compliant. Once a taxable sale of merchandise or services is accomplished, sales tax must be collected from the seller. Finally, sales tax must be remitted to the correct authorities with a filed tax return. Filing frequency varies from state to state and may even required if no tax liability exists. If you make less frequent sales such as seasonal sales, you may also file less frequently.
There are currently 45 states with sales or use tax requirements. The 5 states with no sales tax are Alaska, Delaware, Oregon, Montana, and New Hampshire. Even though these states don’t have a statewide sales tax, many of them have other similar taxes such as excise taxes, meal and lodging, and telecommunication taxes. In recent years, as businesses have started to do business and ship merchandise out of their home state, states have begun to impose what is known as use tax.
Sales tax is levied on all retail transactions and taxable services. Use tax is levied on purchasers who consume tangible personal property that is used or stored in the state. This applies to purchase from out of state sellers who are not required to collect tax on their sales. Sellers that do not have nexus within a specific state may still be required to collect the sales tax even if it is not paid by the consumer. There will always be either sales or use tax required, but never both on the same transaction.
The short answer is that probably yes. If you make taxable sales and deliver the merchandise within the state where you have nexus, then you are required to collect sales tax regardless if the customer is located within your state. The only way around this is if the customer can provide you with a valid exemption certificate within your state. If you are shipping merchandise to a customer outside your state, then you must see if you have nexus within that state. If the customer decides to pick up the merchandise within your state then you would collect sales tax based on your home states rate. An example of this would be if seller is in Nevada and they make a taxable sale to a customer in Nevada they will be required to collect sales tax. If the Nevada company ships the merchandise to a company in California and they have nexus, then they will also be required to collect sales tax on the taxable sale. This would fall in line with economic nexus. Current legislation is in progress in regard to economic nexus and is continually being updated. Recently, in the precedent setting court case of South Dakota vs Wayfair, the court overruled the former physical presence rule for establishing sales tax nexus requiring sellers to collect and remit taxes to states where they have economic nexus.
If a seller does not have nexus within the state then the state cannot require the seller to collect sales tax from the customer. If the seller does not collect the sales tax it does not mean that the item is not taxable. If it is a taxable item than it would be up to the purchaser to pay the tax on the item where it is being consumed. A seller should never collect sales tax in a state where it has not established nexus.
If a seller collects sales tax and fails to remit it to the state this may be considered an illegal fraudulent activity and the seller can receive serious penalties. Also, if a seller has nexus in a state and fails to register and collect sales tax, the company can be held responsible for the entire taxable sale unless it can prove that the purchaser paid use tax on the sale. If a seller determines that he has a tax liability, then most states have voluntary programs where the seller can come forward and resolve prior period liabilities.
A resale certificate is used by a buyer who acquires items in their current state or as parts of other items. A company can only use the resale certificate for items it intends to resell. A company cannot use a retail certificate for items that it will consume in normal business operations. A good example of this is an electronics retailer that purchases a television. If there is an intention to resell the television then a retail certificate can be used, but if it will put the television in the store as a display used for marketing purposes then a resale certificate cannot be used.
The drop shipment process is where a retail seller has an order placed with them from an end user customer. The retail seller orders merchandise from a manufacturer/wholesale vendor who is a third party. The manufacturer/wholesale vendor then would ship the merchandise directly to the retail seller’s customer. The manufacturer/wholesale vendor bills the retail seller for the merchandise and the retail seller bills his end user customer. Drop shipments are in essence purchases for resale (although not always). Sales tax always ends up being paid by the end user retail customer and ultimately it is the state that the merchandise is being delivered to that would dictate which sales tax rate applies. It should be noted that while most states follow sales tax rates from the delivery state, some states impose the sales tax rate from where the merchandise is shipped from. All things held equal, a retail seller would order the merchandise from the manufacturer/wholesale vendor and be exempt from paying them sales tax. Then the retail seller would charge their end user customer the appropriate sales tax. So even though the manufacturer/wholesale vendor ships the merchandise directly to the end user customer, the retail transaction is not directly between the manufacturer/wholesale vendor and the end user and the manufacturer would not be responsible to collect sales tax. Furthermore, the transaction between the retail seller and the manufacturer/wholesale vendor is considered a resale exemption transaction and both should be exempt. Things can get tricky under a couple of different common scenarios. When a manufacturer/wholesale vendor does not have nexus in the delivery state then they are not obligated to collect sales tax. In situations where the manufacturer/wholesale vendor does have nexus in the delivery state, but the retail seller does not have nexus, then the manufacturer/wholesale vendor would be obliged to collect sales tax from the retail seller unless the retail seller has appropriate exemption documents. This is usually when the retail seller has a resale certificate in the ship to state. This will vary state to state as some states accept resale certificates from the manufacturer/wholesale vendor’s home state while others require them to register for a certificate in the ship to state. Drop shipments can become complicated situations so both manufacturer/wholesale vendor’s and retail sellers should be aware of the dynamics of each transaction and take appropriate measures. This will insure that additional costs or frustration are passed on down to the retail end user who may ultimately be required to pay use tax if the retail seller does not charge them appropriately.
Generally speaking sales tax is not levied on international shipments. If someone is visiting from outside the USA and they make a purchase when they are visiting, they are treated the same as anyone else making a purchase. There are some places that allow for a refund of sales tax paid by international visitors.
In order to calculate the sales tax, simply get the current sales tax rates (bypass this step if you already know the tax rate) and after that move to the top of this page, click on “Get Assistance” and choose the “Tax Calculator”.
A sales tax is a consumption tax imposed by the governing tax authority on goods and services. A conventional sales tax is levied at the point of retail, paid by the consumer (usually as a percentage of the retail cost), collected by the retailer, and passed on to the government.
A sales tax permit, commonly known as a seller’s permit is a type of business license that allows a business to register to collect sales tax from an end user and remit payment of such tax to the appropriate state agency.
It is extremely advisable when you receive a resale certificate from a buyer, to always verify that the buyer’s permit number is accurate and currently valid. If not, you could be held liable for the sales tax that should have been collected and remitted to the state.
A sales tax number is a unique number issued to a business in order to collect and remit sales tax to the appropriate state agency. Getting a sales tax number is one of the first steps of starting a business. Click here to learn more about how to start a business.
Click here to register for your Sales Tax Permit and obtain your Sales Tax Number (State Tax Id Number) by filling out the one page “Online Sales Tax Permit Registration” form. It is Fast, Easy and Secure. After you complete the online process, you will receive a confirmation of all your important information within 1-2 business days.
The short answer is no. They are actually totally different numbers with a different purpose. A resale number is a unique number issued to a business in order to avoid paying sales taxes on items purchased for resale to customers. An EIN number, on the other hand, identifies your business in your dealings with tax agencies. Resale numbers are the responsibility of state governments, while EIN numbers are issued by the federal government.
You will need to charge and pay sales tax if the business qualifies as having nexus in that state. It is advisable to study each state’s sales tax laws in order to determine if you have nexus in that state. In general, when a business has a physical location, warehouse (One service that may trigger sales tax for a business is warehouse storage. Fulfillment by Amazon (FBA) has caused multiple discussions on this matter, since Amazon speeds up customer deliveries by storing products in warehouses across the country), or representative acting on its behalf in a state, that business will have nexus.
There is currently a process that allows multi-state sales tax registration as part of the Streamlined Sales and Use Tax Agreement. The agreement is comprised of 24 member states that use a single registration number that is recognized in all member states. This single registration saves businesses the trouble of having to register in each member state separately. Click here to register for your multi-state Sales Tax Permit and obtain your multi-state Sales Tax Number by filling out the one page “Online Multi-State Sales Tax Permit Registration” form. It is Fast, Easy and Secure. After you complete the online process, you will receive a confirmation of all your important information within 1-2 business days.