For small business owners and entrepreneurs, understanding sales tax obligations is crucial. A seller’s permit, also known as a sales tax ID, keeps your business compliant and legally allows you to collect sales tax from customers and remit it to the state you operate in. Here’s more about how to get a seller’s permit and why it matters for your business.
What is a seller’s permit/sales tax ID?
A seller’s permit, or sales tax ID, is a state-issued authorization that allows businesses to collect and remit sales tax on taxable goods or services. Requirements vary by state, but registration typically occurs through the state’s revenue department. Once issued, you must charge customers the correct tax, file returns promptly, and remit collected funds. Without a seller’s permit, you risk fines and tax law violations.
[Read more: How Entrepreneurs Make Millions As Amazon Third-Party Sellers]
Who needs a seller’s permit?
In most states, if you’re selling taxable goods or services, you’ll need a seller’s permit. While the exact rules differ from state to state, permits are generally necessary for establishments such as:
- Retail shops and wholesalers ranging from boutiques to distributors.
- E-commerce sellers, including online shops, marketplaces, and dropshippers.
- Service providers in states where services like repairs or salons are taxed.
- Food businesses like restaurants, cafés, or vendors selling prepared food.
- Seasonal and temporary sellers such as pop-ups, craft fairs, and holiday kiosks.
If your operations involve taxable sales, chances are your business falls under one of these categories.
[Read more: What to Know About Taxes as a Seasonal Business]
The first step is to confirm whether or not your state requires a seller’s permit. You can find this information on your state’s department of revenue website.
Steps for obtaining a seller’s permit
While securing a seller’s permit may seem overwhelming, the process can be broken down into the following steps.
Determine your state’s seller’s permit requirements.
The first step is to confirm whether or not your state requires a seller’s permit. You can find this information on your state’s department of revenue website.
Usually, if your business sells taxable goods or services, or meets state thresholds for sales or transactions, you’ll need a permit. Keep in mind that while states like Delaware, Oregon, Montana, New Hampshire, and Alaska don’t require statewide sales tax permits, some local towns may have separate rules you need to follow.
Complete an application for a seller’s permit.
When applying for a seller’s permit, states often ask for your business name and address, federal employer identification number (EIN) or Social Security number, and details about your business structure and activities.
You may also need to provide your North American Industry Classification System (NAICS) code, estimated sales figures, and bank account details. In some cases, additional documents (like a business license, articles of incorporation, or partnership agreements) are required to verify ownership and operations.
Pay the application fee and submit it.
Most states issue seller’s permits at no cost, but some charge a small fee. For example, Arizona requires $12, while Arkansas and Connecticut charge $50 and $100, respectively. Other states, such as California, are free but may require a refundable security deposit. These costs can be up to $100, depending on the state, with some states also requiring renewals or bonds. Always check with your state’s department of revenue for the most up-to-date fee structure.
Keep your permit and information up to date (if required).
Your state may require you to update your registration if your business’s ownership, structure, or location changes. Some states may require renewals, while others, like California, New Jersey, and New Hampshire, typically issue permits that remain valid as long as your business is active. However, if you close your business or stop making taxable sales, you might be required to cancel your permit to avoid future tax obligations.
Common compliance mistakes small businesses make
Small errors with seller’s permits can lead to costly setbacks. Many businesses run into problems by entering outdated addresses, using the wrong NAICS code, or underestimating sales. It’s best not to assume that marketplaces cover your sales tax obligations. Direct transactions may still require reporting, and overlooking them can cause compliance issues.
Another major mistake is failing to recognize nexus — the legal connection that requires your business to collect and remit sales tax in a state — whether through inventory storage, employee presence, or economic thresholds. By staying aware of these requirements and updating your information regularly, your business can maintain compliance and keep operations running smoothly.
[Read more: A Complete Guide to Filing Your Business Taxes]
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