If your small business makes any type of sale, odds are you’ll need a seller’s permit. But what is a seller’s permit, and how do you get one? In this guide, we’ll cover all the essentials of seller’s permits, including how you can apply for one, a few variations of the permit, and more.
A seller’s permit is a license granted to businesses that sell qualifying goods or services. Some states call it a sales tax permit, a retail license, or another name. When you hold a seller’s permit, you prove that you’ve registered your business with your state tax department and you’re legally permitted to collect sales taxes and pass them on to the state.
Every state has slightly different requirements for their seller’s permit, so you’ll have to contact your state’s Department of Revenue for location-specific guidelines.
Let’s be clear: a business license is not the same as a seller’s permit. Granted, both are types of permits that you might need. But they’re distinct from each other. A business license is required in certain states (or cities or counties) for the privilege of doing business of any kind. A seller’s permit applies for sales taxes only. Not all businesses that need a business license will also need a seller’s permit.
For both license types, you should check your state requirements to make sure you’re adhering to your state’s business guidelines.
A seller’s permit is visual, tangible proof that you’ve registered with the state and you’re qualified to collect sales taxes. Applying for your permit also helps you get a tax account set up with your state agency. You should have your permit posted in a visible location (or accessible for reference if you sell online) where you make your sales.
You’ll also need the correct type of license for your business; we’ll cover different varieties later in this guide.
Every state has slightly different requirements for who needs to obtain a seller’s permit. Generally speaking, a seller needs a sales tax permit if they’re conducting business and selling any sort of tangible good to the public. Some states also require certain service providers — such as lawyers and accountants — to charge sales tax. Every state is different.
California, for example, requires any business that sells or creates tangible property for a customer to have a seller’s permit for sales taxes. In contrast, South Carolina has a special retail license for artists who sell at craft shows and then a different one for regular retail sales. Be sure to check with your state’s revenue department to learn if your business qualifies.
Online sales are usually subject to sales taxes, which means you’ll probably need a seller’s permit. But where you pay sales taxes (and get your permit) can seem a little complicated. After all, when you sell online, you have customers from lots of states. Do you need a seller’s permit for each state you have a customer in?
Generally speaking, you need to have a seller’s permit where you have a physical location (or conduct the bulk of your business). One-off or infrequent sales to other states typically don’t subject you to sales tax requirements in that location. That said, many states impose sales thresholds that, when met, require you to get a seller’s permit there. It’s called the sales tax nexus. If in doubt, consult with a tax professional to see if you need a permit in multiple states.
A resale certificate is a little different from a seller’s permit. If your business will be buying items to sell to your customers — for resale — you may be able to give a resale certificate to the seller. As long as the sale qualifies and you provide the certificate, you won’t have to pay taxes on the items. That’s because, generally speaking, states tax items when they’re sold to the final consumer.
In some states, to be able to use a resale certificate, you also need to have a current reseller permit (sometimes called a resale permit).
That said, every state has slightly different standards and procedures for resale certificates; some states also require a similar resale license. Be sure to consult with your state’s Department of Revenue to be sure you’ve fulfilled your responsibilities.
Some states offer temporary seller’s permits for certain businesses that only sell for a portion of a year. For instance, if a business wants to sell Christmas trees in Washington state, they could register for a temporary registration certificate provided they meet the state criteria. In Washington, that means they can only conduct business for two events that are both a month or shorter.
If your business only makes retail sales at a few events per year, you might be eligible for a temporary seller’s permit. This might even apply to garage sales and rummage sales, depending on what state you’re in. As always, every state varies, so you’ll need to check if yours allows temporary permits.
In most states, you can easily apply for a seller’s permit through your Department of Revenue. Most states provide a paper or online application for you to fill out. Depending on the type of business entity you have, you’ll either need to provide your Social Security number or Employer Identification Number (EIN) as part of this license application, along with some other basic information about your business. You’ll also likely need to pay an application fee; keep in mind that submitting a paper application form will probably take longer.
Once you have the permit, you should post it in a conspicuous location within your store (or booth if you’re running a temporary setup). You should also check the city or county agency responsible for taxes to see if they charge a local sales tax.
Whenever you make a sale, you can add your state (and county and/or city, if applicable) sales tax to the sale. For example, if your state charges a 6% sales tax and you sell $50 worth of goods, you’d charge your customer $53.00 total. Then you can pass that tax money along to the state. Every state does this a little differently; in some states, you’ll file a monthly sales tax return, and others might let you file quarterly. You can use our sales tax calculator to figure out what you owe.
When you first apply for your sales tax permit, learn how you should file your sales tax return in your state. Many states offer online services for these tax returns, but every state has its own procedure, and it’s your responsibility to know it.
Starting a business and staying compliant doesn’t have to be a solo endeavor. Here at ZenBusiness, we’ll help you navigate red tape so you can focus on what makes your business unique and successful. Whether you need help starting your first limited liability company (LLC), a business license report to find out about all your licensing needs, or anything in between, we’ve got your back.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
The cost of a seller’s permit varies from state to state. You should check with your state’s revenue department to learn how much a permit costs in your area.
It depends, but usually, online sellers need a sales tax permit for the state where they have a physical presence and conduct business. Online sales for other states usually fall under that umbrella if they’re limited in number. For example, if you sell custom T-shirts from your home in Tennessee to a customer in Michigan, you won’t need a Michigan tax permit — just one for Tennessee. However, if you established a “nexus” of doing business in Michigan, you might need one.
What exactly constitutes “conducting business” or otherwise qualifying for sales taxes varies from state to state. We highly recommend consulting with a local tax attorney if you have questions about your business’s unique tax situation.
In most cases, you don’t have to pay taxes on items that you purchase to sell to customers — provided you give a resale exemption certificate to the business you’re purchasing from. You have to pay taxes on items that you are the final consumer of, like supplies and equipment.
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