A seller’s permit is the state-issued authorisation your business needs before it can legally collect sales tax from customers. All but five US states mandate one. If you’re required to collect sales tax in a given state, you’ll need a seller’s permit to do so. But it’s not always clear when you must collect tax. Economic nexus rules mean you can exceed a threshold in a state you’ve never physically entered based purely on online sales volume.

Below, we’ll explain what a seller’s permit is, how registration works across different states, and what’s at stake if you collect sales tax without one on file.

Key takeaways

• A seller’s permit is required in many states when your business has established nexus through physical presence or by exceeding that state’s economic nexus threshold.

• Permit names, registration fees, filing frequencies, and renewal requirements vary across the 45 states that impose sales tax as well as the District of Columbia.

• Collecting sales tax without a valid permit or not collecting it could expose your business to penalties.

What is a Seller's permit?

A Seller's permit, or sales tax permit, is a state-issued authorization that lets your business collect sales tax from customers and remit it to the state. Collecting sales tax without a permit can create compliance issues. Some cities also have local regulations.

When does sales tax nexus trigger a seller’s permit requirement?

Nexus is the legal connection between your business and a state that creates a sales tax obligation. The two types are physical nexus and economic nexus. Each state has its own rules about what constitutes nexus.

Physical nexus

You can establish physical nexus in a state if any of these conditions is true:

• You have employees, contractors, or sales representatives in the state.

• You own or are leasing office space, warehouses, or retail locations there.

• You’re storing inventory in the state, including through third-party fulfilment centres.

• You’re attending trade shows or conducting in-person business above certain thresholds.

Economic nexus

The Supreme Court’s 2018 South Dakota v. Wayfair decision ruled that states could require out-of-state sellers to collect sales tax based on sales volume alone. Many states have set their thresholds at US$100,000 in gross revenue for in-state sales, after which a business is required to register for sales tax. Some states also include a transaction threshold: New York’s threshold, for example, is US$500,000 in sales and more than 100 sales in the state. If you’re selling online and revenue is growing, you’ll likely exceed economic nexus thresholds in multiple states at some point.

Nexus can be established retroactively. If an auditor determines you had nexus before you registered, your liability might start from that earlier date, not your registration date.

How do you get a Seller's permit in your state?

Many states let you register for a Seller's permit online through the relevant department of revenue or similar agency. When you register in your state, you'll typically need to provide this information:

• Business entity type and formation state

• Employer Identification Number (EIN) or SSN if you're a sole proprietor without an EIN

• Business address and contact information

• North American Industry Classification System (NAICS) code or business activity description (i.e., what you sell and how)

• Estimated monthly or annual sales volume

• Start date for sales activity in that state

If you're registering in multiple states at once, the Streamlined Sales Tax (SST) registration system lets you register in all 24 member states simultaneously with one application. Non-SST states require separate applications.

Many states have simple registration processes, but California's registration runs through the California Department of Tax and Fee Administration and might require a security deposit to cover potential unpaid taxes. New York's registration includes relatively detailed questions. Florida moved to online registration but still has a more involved application process.

What do seller's permits look like state by state?

States have different names for their seller's permits and charge different amounts to get one. Here's how each state with a statewide sales tax handles it:

Fee amounts and permit names can change, and certain states have quirks worth understanding. For example, Washington's business licence covers a broader range of activities than just sales tax licensing, and New Mexico taxes gross receipts rather than sales, which affects how registration works.

Five states – Alaska, Delaware, Montana, New Hampshire, and Oregon – have no statewide sales tax. You don't need a seller's permit in any of them, although Alaska lets local jurisdictions impose sales taxes.

How do Seller's permit renewal and filing requirements work?

In many states, Seller's permits stay active as long as your business is operating and you're filing regularly. But some states, such as Connecticut, require periodic renewal. Check the rules in each state where you're registered.

Filing frequency varies and could be monthly, quarterly, or annually, depending on the state and circumstances such as sales volume. States can reassign your filing frequency over time as your revenue changes. Missing a filing (even a zero-dollar return) can trigger late fees and eventually put your permit at risk.

What happens if you don’t comply?

The penalties for not registering can often scale with the amount owed. Operating without a seller’s permit in California, for example, can incur percentage-based penalties on unpaid taxes and a misdemeanour citation. If you don’t collect sales tax when you should have, many states assess back taxes from the date nexus was established (not the date you registered). You might also have to pay interest and penalties. Audits can reveal mistakes. If an auditor determines you had nexus before you registered, the liability can be large enough for high-volume sellers that it affects due diligence in a financing round or acquisition.

If you’ve discovered you should’ve registered earlier, voluntary disclosure is the right move. Many states have programs that let businesses come forward, register, and settle prior liability, often with reduced penalties and a limited lookback period rather than the full statute of limitations. The Multistate Tax Commission’s National Nexus Program lets you negotiate voluntary disclosures with multiple states at once.

If you collected sales tax without a permit and didn’t remit it, that’s often treated more seriously than a failure to collect. You’ve taken money from customers under the premise it would go to the state. Sustained or large-scale misappropriation of tax funds could be classified as a criminal offence.

Tools such as Stripe Tax help by tracking your sales volume across states and flagging when you’re approaching economic nexus thresholds.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, value-added tax (VAT) and goods and services tax (GST) on both physical and digital goods and services – in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details – saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax or get started today.