One of the first steps to sales tax compliance in the US is registering for a sales tax permit. Also commonly referred to as a sales tax license, seller permit, or retailer permit, these permits grant businesses the permission to collect sales tax from customers in a particular state.

Collecting sales tax without a permit is illegal, so it’s important not to skip the registration step. Below, we’ll explain how to get a sales tax permit in each state and answer a few common questions regarding sales tax permits.

Note that this is general sales tax information, and you should consult an expert for advice specific to your business.

What’s in this article?

• Do I need a sales tax permit?
  
• Are sales tax permits different from resale certificates?
  
• Do I have to renew my sales tax permit?
  
• How to register for a sales tax permit in each state
  

Do I need a sales tax permit?

In the US, businesses are required to collect sales tax from customers when they exceed certain thresholds. These thresholds are referred to as economic nexus thresholds, and they are revenue based, transaction based, or both. Because sales tax is governed at the state level, these thresholds vary across the country.

For example, in Nevada, businesses need to collect sales tax from customers only if they have exceeded $100,000 in revenue or 200 transactions from customers in Nevada. Certain states only have revenue thresholds or require businesses to exceed the revenue and transaction thresholds before collecting sales tax.

Businesses can also meet sales tax obligations by having a physical presence or physical nexus in a state. Examples of business activities that can create physical nexus include:

• Location: An office, warehouse, store, or other physical place of business. Storing inventory often creates physical nexus.

• Employees: Having an employee, contractor, salesperson, installer, or other person doing work for your business in a state.

• Events: Selling products at a tradeshow or other event.

Once you determine you have sales tax obligations in a state, your next step is to register for a sales tax permit. Those permits are specific to each state, so you must register for a permit in each state where you have sales tax obligations. However, there is a streamlined registration process for certain states that we’ll explain later.

Are sales tax permits different from resale certificates?

Sales tax permits and resale certificates are two types of tax documents. A resale certificate lets retailers avoid paying sales tax at the original point of sale when they are buying items they intend to resell. Instead, the retailer’s customer will pay sales tax when they purchase the product.

Depending on your business requirements, you might consider applying for a sales tax permit and a resale certificate. We discuss resale certificates in further detail in this article.

Do I have to renew my sales tax permit?

A few states require businesses to renew their sales tax permit periodically. Though certain states require businesses to take action to renew their permit, other states renew it automatically. It’s important to check with your state to determine the renewal process.

These states require businesses to renew their sales tax permit:

• Alabama: Taxpayers are required to renew their Alabama tax permit annually.

• Arizona: The state’s transaction privilege tax (Arizona’s version of sales tax) permit must be renewed every year by January 1.

• Colorado: Colorado sales tax permits must be renewed every two years.

• Connecticut: Connecticut sales tax permits must be renewed every two years.

• Indiana: Indiana automatically renews sales tax permits every two years.

• Louisiana: Expiration time frames vary for each business, but the business must renew its permit within 30 days of the expiration date.

• Michigan: Michigan automatically renews sales tax permits.

• New York: New York notifies businesses when they have been “selected for renewal.”

• Oklahoma: Oklahoma sales tax permits are issued on a probationary basis for six months and will be automatically renewed for 30 months. It is then renewable in three-year increments as long as the business’s account remains in good standing.

• Pennsylvania: Sales tax permits must be renewed no less than every five years.

• Rhode Island: Sales tax permits are valid for one year and must be renewed every July.

• Washington: Expiration time frames vary for each business, but the business must renew within 90 days of the expiration date.

There are a few scenarios when you should consider updating your sales tax permit:

• Business structure changes: For example, changing your business from a sole proprietorship to a limited liability company (LLC).

• Business ownership changes: For example, if a partner leaves the business or the business is sold.

• Business location changes: For example, if your business’s home state changes. Even if you are an ecommerce business, if you move your “business location” to another state, you should update your sales tax permit accordingly.

How to register for a sales tax permit in each state

Typically, these are the steps to register with a state to collect sales tax:

1. Gather business and contact information.

2. Visit your state’s department of revenue website.

3. Go to the “Sales and Use Tax” section of the website to register your business.

You must individually register to collect sales tax in states where you have met tax registration requirements. To register for a sales tax permit, go to the state tax authority website. You can find the link for each state here.

There is an exemption for states participating in the Streamlined Sales and Use Tax Agreement (SSUTA). This agreement was created to simplify the sales tax registration process with the Streamlined Sales Tax Registration System (SSTRS).

Twenty-four states have passed legislation to conform to SSUTA: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

Sellers can register for the SSTRS here. Once registered, users will need to set up accounts individually with each state, and they will need to register separately if they have sales tax obligations in any state that does not conform to the SSUTA.

If you met the tax registration requirement in a state but did not register, you have a few options. If a few months have passed since you exceeded the tax registration requirement, consult sales tax experts to determine the best way forward for your business. Most states have a voluntary disclosure program to help sellers resolve sales tax liabilities, and you might be eligible to participate in a state’s amnesty program to come into compliance. Do not begin collecting tax until you have properly registered with the state or local tax authority.