If you intend to sell goods in California, even if only on a temporary basis, you’ll likely need a California seller’s permit. Seller’s permits are necessary for businesses and individuals who want to exchange goods for money in nearly every setting. Here’s what entrepreneurs (both large and small) in California need to know about the process of obtaining a seller’s permit.
What Are Seller’s Permits?
A seller’s permit is a permit that allows anyone (from an individual to a small business to a large organization) to sell any tangible property (like physical goods) that would be subject to sales tax. In short, anyone who sells anything taxable needs a seller’s permit.
A seller’s permit allows states to keep track of people or businesses that are collecting and remitting sales tax to the state. It acts as both protection for the state and the consumer. The state gets the sales tax that they’re owed by law, and consumers know that their sales tax is going where it’s intended to go. That’s why a seller’s permit is sometimes referred to as a sales tax license.
Why Is a Seller’s Permit Important?
You are not legally permitted to sell any taxable goods in the state of California unless you’ve obtained a seller’s permit, even if your sales operation is only temporary. A seller’s permit is the only document that legally permits you to collect and remit sales tax. You won’t be able to comply with tax laws if you don’t have a seller’s permit.
Sales permit requirements apply to everyone, even if they don’t operate a traditional business or sell goods consistently throughout the year. If you participate in rummage sales or set up a sales booth for a weekend, you’re required to have a temporary seller’s permit with a 90-day validity period. There are no workarounds for the rule.
You can apply for a seller’s permit as soon as you’ve registered your business with the state of California. Having your seller’s permit ready before your business opens will ensure you’re compliant from the moment you begin accepting transactions.
Who Typically Needs a California Seller’s Permit?
Anyone who sells anything that is subject to sales tax needs a seller’s permit in California. This includes limited sales events like pop-up shops and garage sales. You’re also required to obtain a seller’s permit if you’re performing a service for a customer or client that involves rendering them a tangible good.
For example, selling a customer a necklace is a direct sale that involves rendering a tangible good. A retailer who sells necklaces is required to collect and remit sales tax. If you were a jewelry maker and you replaced the clasp on a customer’s necklace, you would need a seller’s permit. You’ve effectively sold the customer a necklace clasp. If you’ve only repaired the existing clasp, you don’t need a seller’s permit. Your work would purely be labor as it doesn’t involve the sale of a new good.
How Do You Apply for a California Seller’s Permit?
The California Department of Tax and Fee Administration has an online tool that you can use to apply for a seller’s permit. The tool will also check for other permits or licenses you may require to conduct business in the state of California. Most permits, licenses, and official requests or deadline extensions for California businesses are funneled through the CDTFA website.
What Information Do You Need To Provide To Get a California Seller’s Permit?
A seller’s permit is a necessary business document, and the process requires applicants to provide certain information — and you need to provide this information for everyone who is considered an owner or partner in your venture.
This information may include:
- A valid photo ID, such as a driver’s license or a Permanent Resident Card
- Social security number or a taxpayer ID number (IDIN)
- Email address and contact information for yourself and your bookkeeper or accountant if you use a professional for those services
- California Secretary of State Entity Number (for your LLP, LLC, etc) and FEIN
- The same information for your partners if you aren’t operating as a sole proprietor
You will also need to make educated estimations. These figures don’t have to be exact — they only need to be reasonably close, and you won’t be penalized if you’re a little off the mark.
Estimations on the following may be necessary:
- How much money in sales of taxable goods you expect to make in a month
- How much money in general sales you expect to make in a month
- What you intend to sell (you can use general categories rather than list each item individually)
There is no fee to apply for a California seller’s permit, but you may be required to place a sales tax security deposit. Your deposit will vary based on the circumstances and your tax situation. You won’t know if there will be a required deposit or how much the deposit will cost until the time you file for your seller’s permit.
When Do You Need More Than One Seller’s Permit?
A seller’s permit isn’t directly issued to the seller. It’s issued to a particular business venture on behalf of a seller. Holding a single seller’s permit doesn’t allow someone to sell goods in different places. If you have multiple businesses or sell your goods in more than one location, you may need a separate permit for each place you’re retailing taxable goods.
In some circumstances, the California Department of Taxes and Fee Administration may be able to provide you with something called a consolidated permit. If the business you’re conducting in multiple locations is essentially identical (i.e. you offer the same sales tax-eligible goods for the same price in each location), it’s possible for a single permit to cover replications of the same business operation.
What Are the Next Steps After Obtaining a California Seller’s Permit?
The most important thing to do after you obtain a California seller’s permit is to collect and remit sales tax. That’s the purpose of the permit. Verify that your current recordkeeping system is thorough and accurate. Every dollar you make in sales needs to be accounted for, and you must remit an accurate amount of tax to the state of California.
As a seller’s permit holder, you’re required to report any important changes to the California Department of Tax and Fee Administration. Changes you must report include:
- Closing your business or no longer selling products. You must return your permit to the state for revocation.
- A change of address or ownership
- Losing or adding a business partner
- Selling your business
- Buying another business, whether it’s a second location for your current business or a completely separate venture.
Unless you’ve obtained a short-term permit, your permit is valid for as long as you’re actively using it as intended. Failure to report changes or to remit your seller’s permit if you ever discontinue selling products can impact your standing with CDTFA. Be sure to abide by the guidelines and use your seller’s permit properly.
How Can Mosey Assist With Obtaining a California Seller’s Permit?
Mosey organizes business compliance in one compliance management platform, and even automates steps along the way that make it easier for small to medium-sized business owners to keep track of everything they need. Mosey can provide you with helpful reminders and information on local laws or regulations you need to abide by while you’re conducting business. “Having the right resources in your corner when you apply for such a complicated permission is very valuable. The time frame to obtain a permit can be long and drawn out if your application is not in good order,” highlights Taylor Fike, Partner at Fike Advisors and Expert Contributor for Mosey.
The purpose of a California seller’s permit is to keep your business on track with sales tax compliance. Tax compliance is a major concern for businesses of all sizes, which is exactly why Mosey has designed solutions to make it easier for businesses to maintain compliance. Schedule a demo with Mosey to learn how our solutions can simplify your business.
Securing Your Seller’s Permit
A California seller’s permit is almost always necessary, even if you only intend to sell taxable goods for a very short period of time. CDTFA requires a wealth of information to issue your business a seller’s permit and may require a sales tax deposit at the time the permit is issued. Once you’ve obtained your seller’s permit, it’s crucial to keep your information current with CDTFA to maintain the validity of your permit.
Permits, taxes, and other compliance issues are high-priority issues for businesses, and Mosey is here to help. Our automated compliance platform can help you keep track of taxes, permits, and licenses so you can put your focus on running the day-to-day operations of your business.
