If you sell taxable goods or services to end users, you need a retail sales tax permit from every state where you have a physical location or enough sales activity to trigger economic nexus, and you need it before your first sale in that state. Forty-five states and the District of Columbia impose a general sales tax. The permit itself is usually free and issued within days, but it commits you to collecting the right tax, filing returns on the state’s schedule, and remitting what you collect on time.
Who Needs a Permit
A retail sale happens when a business transfers ownership of tangible personal property to someone who will use or consume it rather than resell it. Clothing, electronics, furniture, appliances, and similar physical goods are the core of what states tax. Many states also tax certain services provided to end users, such as landscaping, telecommunications, dry cleaning, and repair work, though which services are taxed varies significantly by state. Whether the sale rings up at a physical register or through an online checkout doesn’t matter.
Five states have no statewide general sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. A business operating only in one of these states won’t need a state-level seller’s permit. Alaska is the exception in that group because some local jurisdictions there impose their own sales taxes even though the state does not.
Selling exempt goods does not remove the registration requirement. Prescription medications, groceries in most states, and medical devices such as hearing aids and prosthetics are commonly exempt or taxed at a reduced rate. You still need a permit to sell them; you just don’t collect tax on those particular items.
How To Register
Registration runs through the state’s department of revenue, tax commission, or equivalent agency. Most states offer an online portal that lets you finish the application in one sitting. Paper applications are usually accepted too, but online submissions are processed faster.
You’ll generally need to provide:
- Legal business name and physical address.
- Federal Employer Identification Number. The IRS issues EINs at no cost through its online application, and the number is assigned immediately on approval. Sole proprietors without employees can typically use a Social Security Number instead.1Internal Revenue Service. Get an Employer Identification Number
- Ownership and officer details, including names, home addresses, and identification numbers for partners, corporate officers, or anyone with a controlling interest.2U.S. Small Business Administration. Register Your Business
- Estimated monthly taxable sales. The agency uses this to assign your filing frequency, so base the number on real data rather than a low guess.
Processing takes anywhere from a few days to about two weeks. Once approved, the state issues the permit, sometimes called a certificate of authority or sales tax license, as a downloadable file or by mail. Display it at your place of business if your state requires it.
Most states charge nothing for the permit, particularly when you apply online. A handful charge a modest fee, and some require a refundable security deposit or surety bond from new businesses. In most states the permit stays valid indefinitely, so there is no recurring renewal. Some states do issue fixed-term permits or require periodic re-registration, so check with your specific revenue agency.
A seller’s permit is not a business license. A business license grants general permission to operate commercially in a city or county; a seller’s permit specifically authorizes you to collect and remit sales tax. Many jurisdictions require both, and one does not substitute for the other.
Collecting the Tax
Once your permit is active, you’re required to collect the correct sales tax from customers at the point of sale. The rate is a percentage of the sale price, and it depends on where the transaction takes place. Many localities layer their own sales taxes on top of the state rate, so a single storefront may need to collect a combined rate that folds in state, county, and city components.
The money you collect does not belong to your business. Every state treats collected sales tax as trust fund money held on behalf of the government. That distinction has real consequences. If you spend collected tax dollars on business expenses instead of remitting them, personal liability can attach even when the business is organized as a corporation or LLC. In many states, owners, officers, or anyone with authority over the business’s finances can be held personally liable for unremitted trust fund taxes.
Filing and Remitting
States assign filing schedules based on sales volume or tax liability. The three standard frequencies are monthly, quarterly, and annual. Higher-volume businesses file monthly; smaller operations may file quarterly or annually. As a rough guide, businesses collecting more than a few hundred dollars in tax per month are typically placed on a monthly schedule, while those with minimal liability may qualify for quarterly or annual filing.
File a return even during periods with zero sales. Missing a filing deadline triggers late penalties and interest in virtually every state, even when the balance owed is zero. States can also move you to a more frequent schedule if your sales grow past your original estimate.
Buying Inventory With a Resale Certificate
Once you’re registered for sales tax in at least one state, you can buy inventory for resale without paying sales tax on those purchases by giving your supplier a resale certificate. The certificate tells the supplier the goods are not for your personal use and that tax will be collected from the end customer instead.
A valid resale certificate generally must include your business name and address, your sales tax registration number, a description of the goods, the reason for the exemption, and a signed declaration that you’ll pay use tax if the goods end up being used rather than resold. Some states accept a multistate uniform certificate; others require their own form.
Using a resale certificate to avoid tax on items you personally consume is treated seriously. On audit, you’ll owe the unpaid tax plus interest, and most states add civil penalties. Intentional misuse can rise to fraud and carry criminal penalties in some states. Suppliers who accept certificates in good faith are generally protected, so the responsibility falls on the buyer.
Selling Into Other States
Before 2018, a state could only require you to collect its sales tax if you had a physical presence there. The Supreme Court changed that in South Dakota v. Wayfair, Inc., holding that states could establish sales tax obligations based on economic activity alone.3Congressional Research Service. State Sales and Use Tax Nexus After South Dakota v. Wayfair
Nearly every state with a sales tax now enforces an economic nexus threshold. The most common trigger is $100,000 in sales into the state during the current or previous calendar year. Some states also use a transaction count, typically 200 separate sales, as an alternative trigger. A few states set higher bars. California and Texas both use $500,000, and New York requires $500,000 in sales combined with at least 100 transactions. Once you cross a state’s threshold, register for a permit in that state and start collecting its tax.
If you sell into multiple states, the Streamlined Sales Tax Registration System offers a free, centralized way to register in all 24 participating member states through a single application.4Streamlined Sales Tax. Sales Tax Registration SSTRS For states outside the Streamlined system, register individually through each state’s revenue agency. Track your sales by state on an ongoing basis. Crossing a threshold mid-year means you register and start collecting promptly, not the following January.
Use Tax When Sales Tax Is Not Collected
When a seller doesn’t collect sales tax on a taxable purchase, the buyer generally owes an equivalent use tax to their home state. The rate is usually identical to the sales tax rate that would have applied. For a retailer, use tax matters in two ways: your customers may owe it on purchases where you weren’t required to collect, and you owe it yourself on business supplies bought from out-of-state vendors who didn’t charge tax.
Selling Through a Marketplace
If you sell through a platform like Amazon, Etsy, eBay, or Walmart Marketplace, you may not need to collect sales tax on those transactions yourself. Most states with a sales tax have marketplace facilitator laws that require the platform to collect and remit tax on behalf of its third-party sellers.5Streamlined Sales Tax. Marketplace Facilitator State Guidance The platform handles calculation, collection, and remittance for the sales it facilitates.
You are not off the hook entirely. You may still need to register in states where you have economic nexus, and you remain responsible for tax on sales made outside the marketplace, such as through your own website or at craft fairs. Confirm what your specific platform covers, because the legal definition of “marketplace facilitator” varies by state and not every platform qualifies in every state.
Records To Keep
The IRS requires businesses to retain records supporting income, deductions, or credits until the applicable limitations period expires. The general rule is three years from the date you filed the return. If you underreport income by more than 25%, the period extends to six years. If you never file or file a fraudulent return, no expiration applies.6Internal Revenue Service. How Long Should I Keep Records
State sales tax audit windows often run similar, though some states reach four years or longer. Keeping sales receipts, exemption and resale certificates, and filed returns for at least four years covers the federal baseline and most state requirements. Store them in a format you can actually retrieve if audited.
What Happens if You Don’t Comply
Operating without a permit, failing to collect tax, and collecting tax without remitting it each carry their own consequences, and they escalate quickly.
- Selling without a permit. Most states treat this as an immediate violation subject to fines. Some also hold you personally liable for all tax that should have been collected during the unregistered period, plus interest calculated back to each sale.
- Late filing or underpayment. Penalties typically start as a percentage of the unpaid tax and accrue interest daily or monthly. Small balances grow fast.
- Failure to remit collected tax. Because the money is trust fund property, keeping it is treated similarly to misappropriating government funds. Personal liability attaches to responsible individuals regardless of business structure. Persistent failure can lead to criminal charges, with penalties ranging from misdemeanor fines to felony convictions carrying prison time.
- Permit revocation. States can revoke your permit for continued non-compliance, which effectively shuts down your legal ability to make retail sales.
Specifics vary widely. Some states impose misdemeanor fines starting around $500, while others classify willful tax evasion as a felony with fines reaching $50,000 and multi-year prison sentences. The pattern across states is consistent: penalties for collecting tax and keeping it are far harsher than penalties for honest reporting mistakes. If you’ve fallen behind, contacting your state’s revenue agency proactively almost always results in better treatment than waiting for the state to find you.