Heading into the New Year, your retail clients need to know that before collecting sales tax, they must obtain a sales tax permit (also known as a seller’s permit, reseller permit, transaction privilege tax license, vendor’s license, etc.) from the state tax authority.
Once determining the obligation to collect sales tax in a state, registering for a sales tax permit typically entails the following steps:
1. Find out where and how to register
Sales tax permits are issued by the state tax authority, such as the California Department of Tax and Fee Administration, the Florida Department of Revenue, the New York Department of Taxation and Revenue, or the Texas Comptroller of Public Accounts.
All state tax authorities have a website, though some are easier to navigate than others. For example, you can find a Sales Tax Permit Application on the home page of the Texas Comptroller, but it takes a few clicks to find the Sales and Use Tax License Applications Forms on the Wyoming Department of Revenue site. Tax authorities don’t try to hide this information, but it’s easier to find on some state sites than others.
2. Gather the necessary information
All state tax departments require taxpayers to divulge a certain amount of information about the business being registered and its owner(s). Exact requirements vary by state and may include:
Type of business (e.g., Limited Liability Company, Profit Corporation)
Legal name of business
Name and contact information of all managing members, officers, and/or partners
Date business was formed
Driver license number
Social security number
Federal Employer Identification Number (FEIN)
State Employer Identification Number (SEIN)
North American Industry Classification System (NAICS) code
Projected monthly taxable sales
3. Register the business
Some states require online registration and most encourage it. However, most states do allow businesses to register on paper then mail or drop off the form. It can take as little as a few minutes to register and obtain a permit online, while mailed paper applications can take up to eight weeks to process.
Registering for a sales tax permit is free in many, but not all, states. For example, there’s a $60 non-refundable fee in Wyoming; and in Colorado, there’s a $16 fee per two-year license plus a one-time $50 deposit that’s automatically refunded once you remit $50 in state sales tax to the Colorado Department of Revenue.
4. Renew the sales tax permit as required
While some states (e.g., Texas, Virginia) automatically renew sales tax permits, others require businesses to renew them periodically. For example, all transaction privilege tax licenses in Arizona expire at the end of each year.
In Colorado, all sales tax licenses are valid for a two-year period that started January 1, 2018. Renewal fees may apply in some states.
Gail Cole began researching and writing about sales tax for Avalara in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts and endeavors to make complex sales tax laws more digestible for both experts and laypeople.