A seller’s permit allows you to collect the taxes owed to the state’s Department of Revenue for the sale of goods and services. Most states require you to collect sales tax when selling products or services. This amount needs to then be paid to the Department of Revenue and it may not matter if the products are sold in person or online. Let’s review what a seller’s permit is and how you go about getting one.
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What is a Seller’s Permit?
The seller’s permit, sometimes called a sales tax permit or sales and use tax permit, is a business license that allows you to collect sales tax on taxable goods and services. Your business is then responsible for sending the tax you’ve collected to your state taxing authority. Seller’s permits are state-specific, meaning they allows you to collect and remit the required sales tax in the state where the permit is issued transaction. Because seller’s permits are state-specific, you may need more than one if you conduct business in multiple states.
The seller’s permit often includes a state tax ID number. This doesn’t replace the Employer Identification Number (EIN) obtained for federal purposes from the IRS.
Types of Businesses That Require a Seller’s Permit
Whether you need a seller’s permit or not will depend on what you sell and where you sell it. Most states require retail and e-commerce businesses to collect and remit sales tax, though in some states certain items such as food or clothing are exempt. Some states also levy sales tax certain types of services. And a business may be required to collect local sales tax in addition to state taxes.
Five states do not have sales tax:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
Because the rules regarding sales tax vary by state, it’s best to contact the Department of Revenue or other agency responsible for sales tax to find out whether your business will need a seller’s permit. Also research permitting requirements in other states where you have a physical presence.
When to Get a Seller’s Permit
You’ll want to get a seller’s permit before you start selling goods or services to be compliant with state and local laws. You could face fines and penalties for failing to collect and remit sales tax.
Where to Get a Seller’s Permit
The process for getting a seller’s permit will be slightly different in every state. Most states require you to complete an application with their Department of Revenue. Check with business regulatory and taxing agencies to see what the process is in the states where your business is located.
Doing Business Online
As a general rule, online businesses need to obtain a seller’s permit for each state where they have a physical location. Businesses typically must collect and remit sales tax for sales to in-state customers, but they may also be required to collect taxes from out of state customers if they meet a certain threshold of sales in that state. However, rules vary from state to state, so it’s important to do your research.
Seller’s Permit vs. Wholesale Certificate
A wholesale certificate, also known as a resale certificate, allows your business to purchase inventory from another business without paying sales tax. It avoids double taxation of goods that are purchased for resale.
For example, suppose your business sells printed T-shirts, and you buy a supply of blank T-shirts from a wholesale distributor. If you have a wholesale certificate, you won’t pay sales tax on your T-shirt purchase. Instead, you’ll collect and pay the applicable sales tax when you sell your printed shirts to consumers. In many states, you’ll get a resale permit along with your seller’s permit, but check with your state’s Department of Revenue to make sure.
Frequently Asked Questions
Can I get a seller’s permit online?
Some states have updated their systems to accept online applications for seller’s permits. Check with your state’s Department of Revenue to see what the process is and whether you can complete it online.
What’s the difference between a business license and an LLC?
An LLC (limited liability company) is a type of business entity formed for liability and tax reasons.. A business license allows you to legally conduct business. There are many types of business licenses issued by state, local and federal governments, and your business may need more than one type of license. Any type of business entity can get a seller’s permit or other business license.
Are there any states that do not require a seller’s permit?
There are certain states that do not collect state sales tax and, therefore, do not require companies that do business there to have seller’s permits. These include Alaska, Delaware, Montana, New Hampshire and Oregon.
