How to Get a Sales Tax Permit: A Step-by-Step Guide

What Is a Sales Tax Permit?

A sales tax permit is a state registration that allows a business to collect and remit sales tax when required.

The terminology varies by state.

You may hear terms such as:

• Sales tax permit
• Sales tax license
• Seller's permit
• Sales tax registration
• Sales tax certificate
• Sales tax ID

These terms can refer to similar types of state tax registrations, but the exact requirements depend on the state.

A sales tax permit is generally separate from your business license, LLC formation, and EIN.

Does Every Business Need a Sales Tax Permit?

No.

Not every business needs to register for sales tax.

Whether you need one depends on factors such as:

• What you sell
• Whether your products or services are taxable
• Where you sell
• Where your business has a physical presence
• Whether you have employees or other business activities in a state
• Whether you meet a state's economic nexus threshold
• State-specific tax rules

Some states don't have a general statewide sales tax.

Other states impose sales tax but exempt certain products or services.

The rules can also differ between states.

The U.S. Small Business Administration notes that state and local tax requirements vary by location and that businesses selling online may have sales tax obligations when they have a sufficient physical or economic presence in a state.

If you're not sure whether your business needs one, see:

→ Do I Need a Business License?

Sales Tax Permit vs. Business License

A sales tax permit and business license are different.

Business License

A business license generally authorizes a business to operate within a particular jurisdiction or conduct certain regulated activities.

Sales Tax Permit

A sales tax permit generally registers a business with a state tax authority so it can collect and remit sales tax when required.

You may need:

A business license

A sales tax permit

Both

Or potentially neither, depending on your business.

Getting a business license does not automatically register your business for sales tax.

Similarly, registering for sales tax does not automatically give you permission to operate a business that requires a separate license.

Do LLCs Need a Sales Tax Permit?

An LLC may need a sales tax permit if it sells taxable products or services and meets the applicable requirements.

The fact that your business is an LLC does not automatically determine whether you need one.

Sales tax obligations are generally based on factors such as:

• What you sell
• Where you sell it
• Where your business operates
• Your sales activity
• State-specific rules

An LLC selling taxable products may need sales tax registration even if it operates entirely online.

An LLC providing a service that isn't subject to sales tax in a particular state may not have the same obligation.

Do Online Businesses Need a Sales Tax Permit?

An online business may need to register for sales tax in one or more states.

This is one of the most important sales tax issues for modern businesses.

A business can potentially create sales tax obligations through economic nexus, meaning its sales or other activity in a state reaches a threshold established by that state's law.

Physical presence can also create sales tax obligations.

For example, a business may have a sales tax obligation because it has:

• An office
• Employees
• Inventory
• A warehouse
• A physical location

Online sellers should therefore evaluate their obligations based on each state's rules rather than assuming that operating through a website means no sales tax registration is required.

What Is Economic Nexus?

Economic nexus generally refers to a connection with a state created by reaching a specified level of economic activity there.

For sales tax purposes, states may establish thresholds based on factors such as sales revenue or transaction volume.

The exact threshold varies by state.

For example, one state might establish a threshold based on the amount of taxable sales into the state, while another state's rules may differ.

This means an online business can potentially have sales tax obligations in a state even when it has no physical location there.

Because thresholds and rules can change, businesses should check the current requirements of each state where they sell.

Step 1: Determine What You Sell

The first step is identifying the products or services your business sells.

Don't assume that everything you sell is taxable—or that everything is exempt.

Depending on the state, sales tax treatment can vary for:

• Physical products
• Digital products
• Software
• Services
• Food
• Clothing
• Prepared food
• Subscriptions
• Educational products
• Professional services

Some states tax services broadly.

Others tax only specific categories of services.

Your first step should therefore be determining how the state treats the specific products or services you sell.

Step 2: Determine Where You Have Sales Tax Obligations

Next, identify the states where you may have sales tax obligations.

Consider:

• Where your business is located
• Where employees work
• Where inventory is stored
• Where you have offices
• Where you have other physical business activities
• Where you make significant sales
• Where you may meet an economic nexus threshold

For an online business, this step can be particularly important.

You may have sales tax responsibilities in states where you don't have a physical storefront.

Step 3: Check the State's Sales Tax Rules

Once you've identified the states that may apply, check each state's current requirements.

The appropriate agency is generally the state's tax or revenue department.

The name varies by state.

For example, the agency may be called:

• Department of Revenue
• Department of Taxation
• Tax Commission
• Department of Finance
• Comptroller
• Revenue Services

The SBA maintains state tax-agency information to help businesses identify the appropriate state tax authority.

Don't rely on a generic nationwide rule.

Sales tax requirements are state-specific.

Step 4: Determine Whether You Need to Register

Before registering, determine whether you actually have a sales tax obligation in that state.

Questions to consider include:

• Do I sell taxable products or services?
• Do I have a physical presence in the state?
• Do I have employees there?
• Do I store inventory there?
• Do I meet the state's economic nexus threshold?
• Does the state require registration for my type of business?
• Are any of my sales exempt?

If the answer is yes, registration may be required before you begin collecting sales tax.

Step 5: Gather Your Business Information

Once you've determined that registration is required, gather the information needed for the application.

Depending on the state, you may need:

• Legal business name
• DBA or trade name
• Business address
• Mailing address
• Business structure
• EIN
• Owner information
• Business start date
• Description of business activities
• Products or services sold
• Expected sales activity
• Locations
• Banking information
• Contact information

Requirements vary by state.

Having this information organized can make the registration process easier.

Step 6: Register With the State Tax Authority

Once you've gathered the required information, complete the state's sales tax registration.

Many states allow businesses to register online.

The registration process may ask questions about:

• Business structure
• Business activity
• Products sold
• Locations
• Expected sales
• Filing frequency
• Start date

Follow the state's instructions carefully.

Don't assume that forming your LLC automatically completes this registration.

Sales tax registration is generally a separate process.

Step 7: Determine Your Sales Tax Start Date

Your registration may require you to provide the date when you expect to begin collecting sales tax.

This can be important.

Your sales tax obligation may begin because of:

• Starting business operations
• Reaching an economic nexus threshold
• Establishing physical presence
• Entering a new state
• Changing business activities

The appropriate start date depends on the state's rules and your circumstances.

If you already should have been registered but haven't been, don't simply choose a future date without determining what the state requires.

Step 8: Wait for Your Sales Tax Account or Permit

After submitting your registration, the state may issue:

• A sales tax account number
• Sales tax permit
• Seller's permit
• Sales tax certificate
• Other state registration documentation

The terminology varies.

Some states may issue documentation electronically.

Others may provide a certificate or permit that should be retained with your business records.

Follow the state's instructions regarding when and how you may begin collecting tax.

Step 9: Determine What Sales Tax Rate to Charge

Getting registered is only the beginning.

You also need to determine the correct sales tax rate for taxable transactions.

The rate can depend on:

• State
• County
• City
• Special tax districts
• Customer location
• Product or service
• Type of transaction

This can become especially complicated for businesses selling online to customers in multiple jurisdictions.

Don't assume that your business's physical location is always the only factor determining the applicable sales tax rate.

Step 10: Collect Sales Tax From Customers

Once your business is properly registered and required to collect sales tax, you'll need to collect the appropriate amount from customers.

This may involve configuring:

• Your point-of-sale system
• Ecommerce platform
• Invoicing software
• Accounting software
• Payment systems

The system should be configured to apply the appropriate tax treatment to taxable transactions.

Keep in mind that sales tax collected from customers generally isn't business revenue.

It is money collected for the applicable taxing authority.

Step 11: File Sales Tax Returns

Registering for sales tax creates an ongoing compliance responsibility.

You may need to file sales tax returns even during periods when you have little or no taxable sales, depending on the state's requirements.

Your filing frequency may be:

• Monthly
• Quarterly
• Semiannually
• Annually

The state generally determines your filing frequency.

Track your filing deadlines carefully.

Step 12: Remit the Sales Tax You Collected

After collecting sales tax, you generally need to send the appropriate amount to the state or other applicable taxing authorities.

This is known as remitting sales tax.

The process typically involves:

Collect sales tax

↓

Track sales tax collected

↓

File the required return

↓

Remit the amount due

↓

Keep records

The exact process varies by state.

Step 13: Keep Your Sales Tax Records

Maintain records that support your sales tax calculations and filings.

Depending on your business, records may include:

• Sales invoices
• Receipts
• Tax collected
• Exempt transactions
• Resale certificates
• Returns and refunds
• Sales tax returns
• Payments
• Exemption documentation

Recordkeeping requirements vary by state.

Keep your records organized so you can support your filings if questions arise later.

Step 14: Track Changes and Renewal Requirements

Sales tax compliance can change as your business grows.

You may need to revisit your registration when:

• Sales increase
• You enter another state
• You open a new location
• You hire employees in another state
• You begin selling new products
• You begin offering new services
• Your business structure changes
• Your business address changes

Some states also require periodic renewal of sales tax registrations or permits, while others do not.

Start Tracking Your Business Compliance →

Startup to Corporate helps business owners organize sales tax registrations, licenses, filings, renewals, and other business requirements so they can see what needs to be handled and when.

How Much Does a Sales Tax Permit Cost?

Sales tax registration fees vary by state.

Some states may not charge a registration fee.

Others may charge an application, registration, or permit fee.

You may also encounter additional costs associated with:

• Required deposits
• Local registrations
• Tax software
• Accounting services
• Sales tax automation
• Professional assistance

The best way to determine the current cost is to check the state's tax authority.

Don't assume every state charges the same amount.

How Long Does It Take to Get a Sales Tax Permit?

The timeline varies by state and registration method.

Some registrations may be processed relatively quickly.

Others may require additional review or information.

Factors that can affect timing include:

• Completeness of the application
• Business structure
• Type of business
• State requirements
• Additional documentation
• Verification requirements

If you need to collect sales tax before a particular date, give yourself enough time to complete the registration process.

Do I Need a Sales Tax Permit for Every State?

Not necessarily.

You generally need to evaluate your sales tax obligations separately for each state where you may have a sales tax obligation.

A business might need registration in one state but not another.

Factors can include:

• Physical presence
• Economic nexus
• Product taxability
• Services provided
• State-specific exemptions
• Marketplace facilitator rules

If you sell nationwide, don't assume one state registration covers the entire country.

Do I Need a Sales Tax Permit for an Online Store?

Possibly.

An online store can have sales tax obligations in multiple states.

Your obligations may depend on:

• Where your business is located
• Where inventory is stored
• Where employees work
• Where you make sales
• Whether you meet economic nexus thresholds
• Whether marketplace facilitator rules apply

Online sellers should evaluate their sales activity across the states where they have potential obligations.

What Is a Seller's Permit?

A seller's permit is a term some states use for a registration that allows a business to sell taxable goods or services and collect sales tax.

The terminology differs by state.

One state may call it a sales tax permit.

Another may call it a seller's permit.

Another may use a different name.

The important thing is to identify the registration required by the state where your business has a sales tax obligation.

Sales Tax Permit vs. EIN

A sales tax permit and an EIN serve different purposes.

EIN

An Employer Identification Number is a federal tax identification number issued by the IRS.

Sales Tax Permit

A sales tax permit is generally a state tax registration associated with collecting and remitting sales tax.

You may need both.

Getting an EIN does not automatically register your business for state sales tax.

If you haven't obtained your EIN yet, see:

→ How to Get an EIN

Sales Tax Permit vs. Business License

These are also different.

Business License

Generally authorizes a business to operate within a particular jurisdiction or conduct certain activities.

Sales Tax Permit

Generally registers a business to collect and remit sales tax when required.

A business can potentially need both.

Obtaining one does not automatically satisfy the other.

What Happens If I Don't Register for Sales Tax?

If your business is required to register and collect sales tax but doesn't, it can create compliance problems.

Potential consequences can include:

• Unpaid tax obligations
• Interest
• Penalties
• Back taxes
• Collection actions
• Additional filing requirements

The consequences depend on the state and circumstances.

If you discover that your business should have registered earlier, don't simply ignore the issue.

Determine what the state requires and address the registration and filing obligations as soon as possible.

Sales Tax Permit Checklist

Before considering your sales tax registration complete, consider whether you've addressed:

• Products and services you sell
• Product and service taxability
• States where you operate
• Physical presence
• Economic nexus
• Marketplace sales
• Sales tax registration
• Business information
• EIN
• Sales tax start date
• Sales tax rates
• Filing frequency
• Filing deadlines
• Remittance requirements
• Exemption documentation
• Recordkeeping
• Renewal requirements
• Changes in business activity or locations

If you sell across multiple states, maintain a separate compliance record for each state's requirements.

Common Sales Tax Mistakes

Mistake #1: Assuming every business needs sales tax registration

Not every product or service is taxable, and not every business has the same sales tax obligations.

Mistake #2: Assuming an LLC automatically registers for sales tax

Forming an LLC and registering for sales tax are generally separate processes.

Mistake #3: Assuming an online business doesn't owe sales tax

Online businesses can have sales tax obligations based on physical presence or economic nexus.

Mistake #4: Registering only in your home state

A business can potentially have sales tax obligations in other states.

Mistake #5: Forgetting local sales tax

Sales tax rates can include state and local components.

Mistake #6: Collecting the wrong amount

Incorrect tax rates or taxability decisions can create problems with customers and tax authorities.

Mistake #7: Forgetting to file

Registration creates an ongoing compliance responsibility.

Depending on the state, you may need to file returns even when you have no taxable sales.

Mistake #8: Spending the sales tax you collected

Sales tax collected from customers generally needs to be held and remitted rather than treated as ordinary business revenue.

Mistake #9: Forgetting to update your registrations

Moving, expanding, adding products, or changing business activities can affect your sales tax obligations.

Sales Tax and Ongoing Business Compliance

A sales tax permit is only one part of your overall business compliance requirements.

Depending on your business, you may also need to track:

• Business licenses
• Annual reports
• Tax registrations
• Sales tax filings
• Sales tax payments
• Registered-agent requirements
• DBA registrations
• Professional licenses
• Permits
• Government filings
• Renewal dates
• Other state and local requirements

Some requirements happen once.

Others repeat every month, quarter, or year.

Others are triggered when your business changes.

Stay on Top of Your Business Requirements →

Startup to Corporate helps business owners organize registrations, licenses, filings, deadlines, renewals, and other compliance requirements so they can see what needs to be handled and when.

The Bottom Line

Getting a sales tax permit is an important step for businesses that are required to collect sales tax.

The process generally looks like this:

Determine what you sell

↓

Identify where you may have sales tax obligations

↓

Check each state's requirements

↓

Register with the appropriate tax authority

↓

Determine the correct tax treatment and rates

↓

Collect sales tax

↓

File returns and remit the tax

↓

Track ongoing requirements

And remember:

Sales tax registration isn't the end of your responsibility.

Once you're registered, you may have recurring filing, payment, recordkeeping, and renewal requirements.

As your business grows into new states, adds products, or changes how it operates, your sales tax obligations can change too.

Get Your Business Organized →

Startup to Corporate helps business owners keep track of registrations, licenses, filings, deadlines, renewals, and other compliance requirements in one place.

Know what your business needs. Know when it needs to be done.