What are sales tax permits and does your business need one?

Every state with a sales tax requires businesses to register for a sales tax permit before collecting and remitting sales and use tax in the state. Yet businesses aren’t necessarily required to hold a sales tax permit or collect sales and use tax in all states where they make sales. How do you know whether you need a sales tax permit? How do you go about getting one if you do?

Jump ahead to our guide to state sales tax permit costs.

A sales tax permit is a document that authorizes a business to make taxable retail sales and collect sales tax from customers. Other terms for “sales tax permit” are retail license, sales tax license, sales and use tax permit, seller permit, seller’s permit, or vendor’s license. 

In most states, businesses act as intermediaries and collect sales and use tax on behalf of the state. In a handful of states, tax is imposed on the business itself, which can pass it on to the customer. Thus:

• Arizona has a transaction privilege tax (TPT) license

• Hawaii has a general excise tax (GET) license

• New Mexico requires businesses that make taxable sales of tangible personal property in the state to register to obtain a New Mexico Business Tax Identification Number for gross receipts tax (GRT)

There’s no statewide sales tax in Alaska, Delaware, New Hampshire, Montana, or Oregon. However, many cities and boroughs in Alaska, including Ketchikan, have a local sales and use tax and require certain businesses to register for sales tax.

Businesses also typically need one or more state or local business licenses. Exact requirements vary depending on the location and nature of your business. 

You’re required to hold a seller permit in states where you have nexus, which is basically a connection with a state that’s significant enough to trigger a sales tax obligation.

There are several ways for a businesses to establish nexus with a state:

• Economic activity in the state (e.g., $100,000 in sales or 200 transactions in the state during the current or previous calendar year) 

• Physical presence in the state (e.g., employees, inventory, real property)

• Referrals from in-state entities 

• Ties to affiliates in the state 

States can require a business to register as soon as nexus is established, so it’s important to track your nexus in the states where you make sales.

Some states may require you to get a temporary or occasional sales tax permit if you make occasional or temporary sales in the state. For example, while you don’t need a sales tax permit if you only sell one or two taxable items during a 12-month period in Texas, you need a Texas sales tax permit if you make three or more sales of taxable tangible personal property in the state during a 12-month period. In Arizona, you’re required to register for TPT if you plan to rent your property out during the 2023 Super Bowl (and only for the 2023 Super Bowl).

Nexus can last longer than you think, so be sure to confirm you no longer have nexus with a state before allowing your sales tax permit to expire.

Like brick-and-mortar businesses, online businesses must obtain a seller’s permit and comply with all applicable sales and use tax requirements in states where they have nexus. Since nexus can be established through affiliates (affiliate nexus), sales or transaction volume (economic nexus), or referrals (click-through nexus), you can have nexus in states where you don’t have a physical presence.

That said, some states provide an exception for out-of-state, online businesses that only sell through a registered marketplace facilitator.

Do marketplace sellers need a sales tax permit?

All states with a general, statewide sales tax now require marketplace facilitators that have nexus to register for a seller’s permit then collect and remit sales tax on behalf of third-party (marketplace) sellers. 

Registration requirements for marketplace sellers vary depending on the state and the circumstances. In Iowa, for example:

• An in-state marketplace seller is required to register for a sales tax permit even if it only sells through a registered marketplace that handles sales tax on its behalf

• A remote marketplace seller is not required to register for a sales tax permit or file returns with the Iowa Department of Revenue if it only sells through a registered marketplace that handles sales tax on its behalf

• A remote marketplace seller is required to register for a sales tax permit and file returns if it also makes direct sales into Iowa and has nexus with the state

Obtaining a seller permit is more straightforward in some states than others, though it’s in every state’s best interest to make the process as simple and streamlined as possible. Often, the biggest hurdle is finding the information you need to find on the department of revenue website.

Most states now encourage businesses to register for a seller’s permit online; it tends to be the quickest option. Registering by mail or in person is typically allowed but often discouraged.

You usually need to provide a lot of information when registering for a sales tax permit, including:

• The name and address of your business, along with a description of the business

• The name and address of each business owner

• Your Federal Employer Identification Number (EIN) and Tax ID number

• Your social security number

• Your banking information

• The North American Industry Classification System (NAICS) codes for products you sell

• An estimate of your annual sales in the state

It can take up to four weeks to obtain your sales tax permit once you complete your registration, so plan accordingly.

Businesses with a physical presence in the state are required to post their sales tax permit in a conspicuous place. Different requirements may exist for remote sellers.

Do I need to renew my sales tax permit?

Sales tax permits in some states (e.g., California and Texas) are good for as long as you own your business. In other states (e.g., Connecticut and Pennsylvania), sales tax permits expire and need to be renewed. 

See our state-specific sales tax permit information, below, for more details.

A sales tax permit authorizes a business to collect and remit sales tax on taxable sales of products and services, as required by law. A seller’s permit isn’t the same as a resale certificate.

A resale certificate allows a business to make tax-free purchases of taxable goods they plan to resell. The resale certificate prevents goods from being taxed twice. Sellers that fail to obtain a resale certificate to validate tax-exempt sales could be held liable for the uncollected tax.

The cost of a sales tax permit varies by state and is subject to change.

Failing to register your business as required — or registering where you aren’t required to register — can create compliance problems and even trigger financial penalties or criminal charges. Avalara Sales Tax Registration can help you secure the sales tax permits you need in any or all states. 

Updated January 19, 2023.