Running a business involves plenty of overhead costs. Some required costs bypass you completely and fall straight into the hands of the customer. Your customers are required to pay sales tax on many of the things that they buy, and you’re required to direct their sales tax payments to the state.
Your business must use tax permits to legally complete the process. Thankfully, Mosey can help you maintain sales tax compliance. Let’s learn more about sales tax permits by state.
What Is a Sales Tax Permit?
A sales tax permit — also called a seller’s permit, a reseller’s permit, a resale certificate, or a certificate of authority — is a permit that allows you to collect sales tax on tax-eligible goods and remit that tax to the state. The name of the permit may vary from state to state, but all similar permits exist for the same purpose.
When a customer or client pays you a sales tax, they’re trusting you to forward that tax to the appropriate authority. Your sales tax permit gives you the authority and trustworthiness necessary to do so while clearly defining your responsibility to pass along the tax money you’ve collected to the appropriate place.
When Should I Get a Sales Tax Permit?
States have different rules for when businesses should get a sales tax permit. Some states have strict rules about when a sales tax permit is necessary. If you make taxable sales or perform taxable services, it may be best to obtain one at the time of business registration.
If you’re doing business in California, you need to be very mindful about proper permits and licenses. California is particularly vigilant about proper sales tax permit usage, only allowing people who occasionally privately sell items to temporarily do business without an official sales tax permit.
Some states are more lenient, setting a yearly dollar amount threshold for a sales tax permit. This is to prevent unnecessary hassle for small crafters or occasional resellers who operate a small business from their home or through consignment at another store.
For example, Tennessee only requires a sales tax permit for businesses making more than $4,800 a year. If you’re an artist who occasionally sells handmade jewelry or clothing without a physical place of business or an exclusively online business, you don’t have to collect sales tax from a slightly profitable hobby.
Does Every Business Need To Collect Sales Tax?
Not every business is required to collect sales tax. If your business doesn’t provide taxable goods (like retail sales) or services, you may not need a sales tax permit. If you do provide taxable goods or services, you’re required to have a permit.
Some states have entirely abolished sales tax. Business owners in the following states will never need a sales tax permit:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
If your business is based in any of the 45 other states, you need to comply with federal and state requirements for sales tax.
What Is a Taxable Good or Service?
States have different definitions of taxable goods and services. Any good that isn’t deemed federally sales tax exempt usually requires sellers or resellers to collect sales tax. The differences between a taxable and a non-taxable good are often subtle, so it’s best to double-check sales tax requirements before assuming an item’s status.
Unprepared groceries, like whole, unprocessed foods, aren’t usually taxable. If you’re selling whole apples or oranges from a basket, you don’t need to charge sales tax. If you’ve turned them into juice beverages, you’ve processed them. They’re now subject to sales tax.
In some cases, sales tax is added to services performed for a client or customer. It’s best to check with your state laws regarding where you should and should not charge sales tax for services or labor you perform. You may have to charge sales tax on materials you use that become a part of your work’s finished product.
Can I Collect Sales Tax Without a License?
If your state requires a sales tax license for the goods or services you sell and you meet or exceed the minimum requirements for a sales tax license, you need to have one.
Your sales tax certificate is your official permission to charge sales tax to your customers and remit the money to the state Department of Revenue. Every customer is a taxpayer, so if you’re collecting their sales tax without legal permission, there may be serious issues.
Some states enforce the rule by fining businesses that collect small amounts of sales tax without a permit. If you have the proper amount of sales tax to match the amount due on your sales tax returns and you’re ready to remit it, you haven’t committed a serious infraction. You’ll pay a penalty and be required to get a sales tax license.
If you’ve been collecting sales tax without a license and you aren’t properly remitting it to the state, this may be considered fraud. You’re charging your customers money under the premise that they’re paying the sales tax they owe on goods they’ve purchased.
If the state perceives that you’re keeping the money or you aren’t properly remitting it, your actions could be considered theft.
What Are the Sales Tax Permits Requirements by State?
There are 45 states that require businesses to obtain sales tax permits based on their eligibility. These rules and requirements can be significantly different. The sales tax registration process varies by availability, as do sales tax exemption requirements.
The state will set an economic nexus, or total profitability, to determine a threshold for a mandatory sales tax permit for businesses with no physical presence in the state. If your business is registered in the state or if you meet the economic nexus, you’ll need a sales tax permit.
Alabama
- Economic nexus: $250,000 in sales
- Permit is free
- Apply online only
Arizona
- Economic nexus: $100,000 in sales
- A permit is $12 per location, plus additional local fees
- Apply online or by mail with a paper form
Arkansas
- Economic nexus: $100,000 or 200 eligible transactions
- A permit is $50
- Apply online or by mail with a paper form
California
- Economic nexus: $500,000 in sales
- A permit is free
- Online registration only
Colorado
- Economic nexus: $100,000 in sales
- Permit fees vary between $4 and $16. Mandatory $50 security deposit
- Application is online or by mail with a paper form
Connecticut
- Economic nexus: $100,000 in sales plus 200 transactions. Must meet both requirements.
- A permit is $100
- Applications are accepted online or by mail
Florida
- Economic nexus: $100,000 in sales
- A permit is $5 by mail or free online
- Applications accepted electronically or by mail
Georgia
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Electronic applications only
Hawaii
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is $20
- Applications are accepted online or by mail
Idaho
- Economic nexus: $100,000 in sales
- A permit is free
- Apply online or by mail
Illinois
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Applications are accepted online or by mail
Indiana
- Economic nexus: $100,000 in sales
- A permit is $25
- The application is online only
Iowa
- Economic nexus: $100,000 in sales
- A permit is free
- Apply online or by mail
Kansas
- Economic nexus: $100,000 in sales
- A permit is free
- Apply online or by mail
Kentucky
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Applications are accepted online or by mail
Louisiana
- Economic nexus: $100,000 in sales
- A permit is free
- Online applications only
Maine
- Economic nexus: $100,000 in sales
- A permit is free
- Applications are accepted online or by mail
Maryland
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Applications are accepted online or by mail
Massachusetts
- Economic nexus: $100,000 in sales
- A permit is free
- Applications are only accepted online
Michigan
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Applications are accepted online or by mail
Minnesota
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Apply online or by mail
Mississippi
- Economic nexus: $250,000 in sales
- Permit is free for businesses with a physical presence in the state. If you are a remote seller, you must pay a sales tax bond.
- Electronic applications only
Missouri
- Economic nexus: $100,000 in sales
- Permit is free, but some businesses may require a bond
- Apply online or by mail
Nebraska
- Economic nexus: $100,000 in sales or 200 transactions
- A permit is free
- Apply online or by mail
Nevada
- Economic nexus: $100,000 or 200 transactions
- Permit is $15 per location or $15 flat for businesses without a physical location in the state.
- Apply online or by mail
New Jersey
- Economic nexus: $100,000 or 200 transactions
- A permit is free
- Online or mail applications
New Mexico
- Economic nexus: $100,000 in sales
- A permit is free
- Online or mail applications
New York
- Economic nexus: $500,000 in sales and 100 transactions. Must meet both.
- A permit is free
- Online or mail applications
North Carolina
- Economic nexus: $100,000 in sales or 200 transactions
- Permit is free
- Online or mail applications
North Dakota
- Economic nexus: $100,000 in sales
- Permit is free
- Online or mail applications
Ohio
- Economic nexus: $100,000 in sales or 200 transactions
- Permit is $25 for in-state businesses, free for out-of-state businesses
- Apply online or by mail
Oklahoma
- Economic nexus: $100,000 in sales
- Application is $20 base fee plus $10 per location
- Must apply online or in person
Pennsylvania
- Economic nexus: $100,000 in sales
- Application is free
- Online registration only
Rhode Island
- Economic nexus: $100,000 in sales or 200 transactions
- The application is $10
- Apply online or by mail
South Carolina
- Economic nexus: $100,000 in sales
- The application fee is $10
- Apply by mail or online
South Dakota
- Economic nexus: $100,000 in sales
- Application is free
- Online applications only
Tennessee
- Economic nexus: $100,000 in sales
- Application is free
- Online applications only
Texas
- Economic nexus: $500,000 in sales
- Application is free, a bond is sometimes required.
- Apply online or by mail
Utah
- Economic nexus: $100,000 in sales or 200 transactions
- Application is free
- Apply online or by mail
Vermont
- Economic nexus: $100,000 in sales or 200 transactions
- Application is free
- Apply online or by mail
Virginia
- Economic nexus: $100,000 in sales or 200 transactions
- Application is free
- Apply online or by mail
Washington
- Economic nexus: $100,000 in sales
- The application is $50
- Apply online or by mail
Washington DC
- Economic nexus: $100,000 in sales or 200 transactions
- Application is free
- Apply online only
West Virginia
- Economic nexus: $100,000 in sales or 200 transactions
- Application is $30
- Apply online or by mail
Wisconsin
- Economic nexus: $100,000 in sales
- Application is $20
- Apply online or by mail
Wyoming
- Economic nexus: $100,000 in sales or 200 transactions
- The application is $60
- Apply online or by mail
Always verify with state law to ensure you’ve followed the process correctly. This is particularly important if you’re an out-of-state business doing business in another state.
Do You Need Help With Compliance?
Every state does things a little differently, and it can be a lot to keep track of, especially for a new business. There are different sales tax rates, tax forms, and state tax laws.
Mosey’s compliance automation tools help business owners make sure they’re complying with state laws. You can even automate sales tax registration through Mosey. You can concentrate on building your business while Mosey works in the background to help you manage business compliance.
Schedule a demo with Mosey to learn how we can optimize your business.
