Most business owners who sell retail goods and some service providers are required to have a seller's permit in the states where they operate.
A seller's permit gives a business owner the authority to collect sales tax for the state. If you sell goods or provide a service that's subject to state sales tax, you'll likely be required to have a seller's permit. You'll probably need to get one in each state where you operate.
Businesses that provide goods and services subject to sales tax are actually acting as intermediaries for the government. Customers pay the sales tax, but businesses must collect the money and send it to the state. Seller's permits give business owners the right to collect sales tax, and they give the taxing agency a way to track payments and ensure they're made in a timely fashion.
A seller's permit can also called a:
Usually, the state's Department of Revenue will issue the permit or license. The Secretary of State, Department of the Treasury, Board of Equalization, or Department of Taxation issues it in some states.
Rules on the goods and services that are taxable vary by state. States tax the sale of most retail goods such as clothing, appliances, electronics, and liquor. Many states also charge sales tax on some services such as restaurants, equipment repair and installation, personal services like hair salons, and the leasing of some products and services.
Check with the taxing agency in the state where you operate to find out if your business is required to collect sales tax. If it is, you can usually apply to that same agency for a seller's permit.
Only five states (Delaware, New Hampshire, Oregon, Alaska, and Montana) don't impose sales taxes and don't require seller's permits. But Alaska and Montana allow local governments to levy their own sales tax. If your business operates in one of those localities, you will need to check with the city or county to learn their requirements and procedures.
Many states require online sellers to collect sales tax on purchases made in the buyers' states or delivered to those states, regardless of where the business is based. If your online business routinely sells to buyers in other states, you should check with the taxing agency in those states to learn their requirements.
Some states use the same application and permit for retailers with a physical presence and for online sellers. Other states use different types of permits for online sellers, and they might be called by a different name. For example, Arkansas requires a sellers' use tax permit for businesses that don't have a physical presence in the state and a sales tax permit for those that do. The same taxing agency is usually responsible for issuing permits whether you sell online or in a physical location.
You might think that a resale certificate is just another name for a seller's permit. After all, many businesses buy goods from one company and resell them to individuals or other businesses. However, the purpose of a resale certificate is quite different from the purpose of a seller's permit, and some business owners will need to get both.
You'll need a resale certificate to avoid paying tax on items you purchase for the purpose of reselling them. And you'll need a seller's permit to charge sales tax when you do sell the item.
For example, when you buy a chair for your office, it's taxable; when you buy it to sell in your office furniture store, it's not—until, that is, you do sell it, and then the customer pays the tax, which is based on the sale price of the chair. In a nutshell, most states charge sales tax on items you consume, not those you intend to resell. As a result, sales tax laws are set up so the same item isn't taxed twice.
The same state taxing agency that issues seller's permits usually issues resale certificates. Rules vary widely by state, and you'll need to check with the state taxing agency in the state where you're buying goods for resale if it's different from the state where you sell goods.
Once you have determined that the products you sell or the service you provide are subject to sales tax, you'll need to file an application for a seller's permit. If you do business in more than one state, you'll have to apply for a permit in each state where you operate, and some states require you to file separate applications for each location, even when the location is in the same state.
Most states allow you to file your application online, and you'll usually receive your permit faster if you choose the online option over U.S. Mail.
Fees vary by state. Many states don't charge a fee for seller's permits. But for states that do charge a fee, the cost can range from $10 to $100. A few states also require a security deposit.
State rules also vary as to the information and documentation the issuing agency requires. In general, you'll need to provide the following items:
Here are a few additional points to keep in mind when applying for a seller's permit:
If you need additional help, you can always talk to someone at your state's tax department. Many agency websites provide helpful online resources to guide you through the process. If you need additional help or have legal questions specific to your business, consider talking to a business attorney.