One of the first steps towards sales tax compliance in the US is to register for a sales tax permit. Also commonly referred to as a sales tax licence, seller permit or retailer permit, these permits grant businesses the permission to collect sales tax from customers in a particular state.

Collecting sales tax without a permit is illegal, so it's important not to skip the registration step. Below, we'll explain how to get a sales tax permit in each US state and answer a few common questions regarding sales tax permits.

Note that this is general sales tax information, and you should consult an expert for advice specific to your business.

What's in this article?

• Do I need a sales tax permit?
  
• Are sales tax permits different from resale certificates?
  
• Do I have to renew my sales tax permit?
  
• How to register for a sales tax permit in each US state
  

Do I need a sales tax permit?

In the US, businesses are required to collect sales tax from customers when they exceed certain thresholds. These thresholds are referred to as economic nexus thresholds, and they are revenue based, transaction based or both. Because sales tax is governed at the state level, these thresholds vary across the country.

For example, in Nevada, businesses only need to collect sales tax from customers if they have exceeded US$100,000 in revenue or 200 transactions from customers in Nevada. Certain US states only have revenue thresholds, while others require businesses to exceed the revenue and transaction thresholds before collecting sales tax.

Businesses can also meet sales tax obligations by having a physical presence or physical nexus in a state. Examples of business activities that can create physical nexus include:

• Location: An office, warehouse, shop or other physical place of business. Storing inventory often creates physical nexus.

• Employees: Having an employee, contractor, salesperson, installer or other person doing work for your business in a state.

• Events: Selling products at a trade show or other event.

Once you've determined that you have sales tax obligations in a state, your next step is to register for a sales tax permit. These permits are specific to each state, so you must register for a permit in each state where you have sales tax obligations. However, there is a streamlined registration process for certain states, which we'll explain later.

Are sales tax permits different from resale certificates?

Sales tax permits and resale certificates are two types of tax documents. A resale certificate allows retailers to avoid paying sales tax at the original point of sale when they are buying items that they intend to resell. Instead, the retailer's customer will pay sales tax when they purchase the product.

Depending on your business requirements, you may want to consider applying for a sales tax permit and a resale certificate. We discuss resale certificates in further detail in this article.

Do I have to renew my sales tax permit?

A few states require businesses to renew their sales tax permit periodically. Although certain states require businesses to take action to renew their permit, other states renew it automatically. It's important to check with your state(s) to determine the renewal process.

These states require businesses to renew their sales tax permit:

• Alabama: Taxpayers are required to renew their Alabama tax permit annually.

• Arizona: The state's transaction privilege tax (Arizona's version of sales tax) permit must be renewed every year by 1 January.

• Colorado: Colorado sales tax permits must be renewed every two years.

• Connecticut: Connecticut sales tax permits must be renewed every two years.

• Indiana: Indiana automatically renews sales tax permits every two years.

• Louisiana: Expiry time frames vary for each business, but the business must renew its permit within 30 days of the expiry date.

• Michigan: Michigan renews sales tax permits automatically.

• New York: New York notifies businesses when they have been "selected for renewal".

• Oklahoma: Oklahoma sales tax permits are issued on a probationary basis for six months and are automatically renewed for 30 months. They are then renewable in three-year increments as long as the business's account remains in good standing.

• Pennsylvania: Sales tax permits must be renewed no less than every five years.

• Rhode Island: Sales tax permits are valid for one year and must be renewed every July.

• Washington: Expiry time frames vary for each business, but the business must renew them within 90 days of the expiry date.

There are a few scenarios in which you should consider updating your sales tax permit:

• Business structure changes: For example, changing your business from a sole proprietorship to a limited liability company (LLC).

• Business ownership changes: For example, if a partner leaves the business or the business is sold.

• Business location changes: For example, if your business's home state changes. Even if you are an e-commerce business, if you move your "business location" to another state, you should update your sales tax permit accordingly.

How to register for a sales tax permit in each US state

Typically, these are the steps to register with a state to collect sales tax:

1. Gather business and contact information.

2. Visit your state's department of revenue website.

3. Go to the "Sales and Use Tax" section of the website to register your business.

You must register individually to collect sales tax in each state where you have met the tax registration requirements. To register for a sales tax permit, go to the state tax authority website. You can find the link for each state here.

There is an exemption for states participating in the Streamlined Sales and Use Tax Agreement (SSUTA). This agreement was created to simplify the sales tax registration process with the Streamlined Sales Tax Registration System (SSTRS).

Twenty-four states have passed legislation to conform with the SSUTA: Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.

Sellers can register for the SSTRS here. Once they have registered, users will need to set up accounts with each state individually and also register separately if they have sales tax obligations in any state that does not conform with the SSUTA.

If you've met the tax registration requirement in a state but have not yet registered, you have a few options. If a few months have passed since you exceeded the tax registration requirement, consult sales tax experts to determine the best way forward for your business. Most states have a voluntary disclosure programme to help sellers resolve sales tax liabilities, and you might be eligible to participate in a state's amnesty programme to come into compliance. Do not begin collecting tax until you have properly registered with the state or local tax authority.