When setting up a business in some of the states in the US, you may come across a requirement known as a seller’s permit. That is because many states require you as a business owner to collect sales tax when selling goods and services. Then you have to pay the tax to the department of revenue regardless of whether you sell products online or physically. Read on to understand what a seller’s permit is and how to obtain one.
What is a seller’s permit?
A seller’s permit is a business license that allows you to collect sales tax on taxable goods and services. As a business owner, you are liable for paying those taxes to your state’s taxing authority. Note that seller’s permits are state-specific, meaning that they allow you to collect and remit the collected tax in the state where you acquired the state permit. For instance, a Las Vegas seller’s permit allows you to collect and remit sales tax in Nevada.
Therefore you may need more than one seller’s permit if you conduct business in more than one state. The seller’s permit comes with a state tax ID number, but it doesn’t replace the employer’s ID from the IRS obtained for federal reasons. Only five states do not require a seller’s permit: Alaska, New Hampshire, Delaware, Oregon, and Montana.
What businesses require a seller’s permit?
Depending on what you sell and where you sell it, you may require a seller’s permit or not. But in most states, you need a seller’s permit to open a retail business, whether online or physically, although some states exempt food and clothing businesses. Generally, you require a seller’s permit if you deal with any taxable goods.
Moreover, some states levy sales tax on some types of services; therefore, your business may be responsible for local sales tax in addition to state taxes. Since the rules of seller’s permits are state-specific, it is best to consult your state’s department of revenue or any other agency responsible for sales tax to find out whether or not your business will require one.
When and where to get a seller’s permit
Ideally, you should get a seller’s permit before you start selling any taxable goods or services so that you are compliant with your state laws. Keep in mind that your business is subject to penalties and fines if it doesn’t collect and remit sales tax.
Although the process is different from state to state, you can obtain a seller’s permit through your state’s revenue department. You can also check with business regulators and other tax agencies to help you get a seller’s permit.
How about doing online business?
If you are doing an online business, you should obtain a seller’s permit for the state where you have a physical location. You should collect and remit sales tax for in-state clients, but you may need to do the same for out-of-state clients if you meet a certain threshold of sales in that specific state.
The rules for seller’s permits vary from one state to another, so it is best to do your research beforehand.