A sales and use tax license is a state-issued permit that authorizes your business to collect sales tax from customers, remit it to the state, and self-report use tax on taxable purchases you made without paying tax at the point of sale. Every state that imposes a sales tax requires this registration before your first taxable sale, and the obligation reaches online sellers who meet certain revenue or activity thresholds in a state. Applying is usually free, done through the state department of revenue’s website, and takes 15 to 30 minutes if you have your business details ready.
What the License Covers
Sales tax is charged at the point of sale on tangible goods and, in many states, certain services. The seller collects it from the buyer and sends it to the state. Use tax is the other side of the same coin. It applies when a business or consumer buys something taxable without paying sales tax, usually because the seller was out of state and had no obligation to collect. The rate is the same. What differs is who reports and pays.
For businesses, use tax comes up most often on supplies, equipment, or inventory bought from out-of-state vendors that didn’t collect tax. A single sales and use tax license covers both duties: collecting on your own sales, and reporting use tax on untaxed purchases.
Who Needs to Register
Whether you need to register in a given state comes down to nexus, a legal term for having enough of a connection to the state that it can require you to collect its sales tax. Two kinds of nexus can trigger the registration requirement.
Physical Presence
The traditional trigger. An office, warehouse, or retail location in the state creates nexus, but so do things owners don’t always expect. Storing inventory in a third-party warehouse, having employees or sales reps working in the state, delivering goods with your own vehicles, or exhibiting at a trade show can all cross the line.
Economic Nexus
In 2018, the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. ended the rule that a business needed physical presence in a state before that state could require it to collect sales tax.1Supreme Court of the United States. South Dakota v. Wayfair, Inc. Every state with a sales tax now imposes economic nexus rules, so your sales volume alone can require registration. The most common threshold is $100,000 in annual sales into the state. A handful set higher bars, and roughly 15 to 17 states still include an alternative transaction-count trigger, typically 200 separate sales. The direction is toward dropping the transaction count and keeping only the dollar figure. Once you cross the threshold in a state, you must register there before your next sale.
If You Sell Through a Marketplace
If all your sales run through platforms like Amazon, Etsy, or Walmart Marketplace, the platform itself may be handling collection. Every state with a sales tax has a marketplace facilitator law that shifts the collection and remittance obligation from the individual seller to the platform for sales made through that marketplace. If your entire revenue flows through a facilitator, you may not need to register in every state where the platform is collecting for you.
The relief only reaches sales made through the platform. If you also sell through your own website, at trade shows, or from a physical location, you’re still personally responsible for those sales and need your own license wherever you have nexus. Some states also still require marketplace sellers to register even when the platform handles collection, so check the individual state rules.
How to Apply
Most states let you register online through the department of revenue website. Have this ready before you start:
- Federal Employer Identification Number (EIN) from the IRS. Sole proprietors without employees can often use a Social Security number instead.2Internal Revenue Service. Employer Identification Number
- Business structure and exact legal name (sole proprietorship, LLC, partnership, or corporation).
- Physical and mailing addresses for the business and for each owner or officer. Many states also ask for driver’s license numbers of the responsible parties.
- NAICS code, the six-digit industry classification for what your business does.
- Estimated monthly sales. States use this to assign your filing frequency, so a wild overestimate can put you on monthly filing when quarterly would have worked.
- Start date of taxable sales. Some states require registration at least 20 days before that date.3New York State Department of Taxation and Finance. How to Register for New York State Sales Tax
Processing times range from immediate approval to a few weeks depending on the state and whether you filed online or by mail. Online is faster. Once approved, the state issues a certificate or permit that is your legal authority to collect tax.
Fees and Bonds
Most states charge nothing to register. Around a dozen charge fees from $5 to roughly $100, with most under $50. Some waive the fee for online applications and charge only for paper filings.
A surety bond may be required before the permit is issued, especially if your business has no permanent location in the state, works in certain industries like alcohol or tobacco sales, or has a history of tax delinquency. The bond amount is based on your estimated tax liability and guarantees that collected taxes will be remitted. If a bond is required, you’ll learn about it during the application. Premiums are a fraction of the face value, often a few hundred dollars for small businesses.
Registering in Multiple States at Once
If you sell into many states, registering with each agency one at a time is slow. The Streamlined Sales Tax Registration System (SSTRS) is a free centralized portal that lets you register for sales and use tax in all 24 member states through a single application.4Streamlined Sales Tax. Sales Tax Registration SSTRS Large markets outside the agreement, including California, Texas, New York, Florida, and Illinois, still require you to register directly with each state’s tax agency. The SSTRS can also connect you with Certified Service Providers that file and remit across member states.
Temporary and Event Permits
If you sell at a craft fair, farmers market, or pop-up rather than running a permanent storefront, most states offer a temporary sales tax permit. These are typically issued for a single location and cover a limited window, often 90 days or less. If you already hold a permanent permit for your regular business but plan to sell at a temporary location, you generally register that location as a sub-permit under your existing account rather than getting a separate temporary permit.
Temporary permit holders still file a return and remit any tax collected, usually within 30 days after the event ends. States track temporary permits the same way they track permanent ones, so small or brief sales don’t excuse skipping the filing.
After You’re Licensed
Filing on a Set Schedule
Once licensed, you’re on a reporting schedule set by the state based on your sales volume: monthly for high-volume sellers, quarterly for mid-range, annually for minimal sales. The assignment comes from your projected sales at registration and is adjusted later if actual volume differs.
File every period, even one where you collected zero tax. Skipping a return because there were no sales is one of the most common mistakes new businesses make. States treat a missing return as a missing return regardless of the amount owed, and failure-to-file penalties apply even when the balance due is zero. Penalties range from flat dollar amounts to a percentage of the tax owed, and interest accrues on any unpaid balance. About half of states offer a small vendor discount for timely filing, typically 0.25% to 5% of tax collected, and it disappears the moment you file late.
Displaying the Permit and Renewing It
States generally require the permit to be posted somewhere visible at your place of business, usually near the register or entrance. Online-only sellers typically don’t have a display obligation but should keep the certificate accessible in case a customer or supplier asks for the number. Many states issue permanent permits that stay valid as long as the business operates and stays compliant. Others require renewal every one to three years, usually a short verification of address and ownership through the same portal you used to register. Letting a permit lapse can strip your authority to collect tax, which creates a mess if you’ve been charging customers in the meantime.
Using Resale Certificates
Holding a sales tax license lets you issue resale certificates. A resale certificate is a document you give to a supplier stating that the goods you’re buying will be resold to your own customers in the normal course of business. Because those goods will be taxed at the end sale, you don’t pay tax on the wholesale purchase. A valid certificate generally requires an active permit, and it must include your permit number, a description of the goods, and an explicit statement that the purchase is for resale. Many states allow blanket certificates covering all future purchases from a given supplier.
Using a resale certificate to buy things for personal use or for your own business’s consumption is treated as tax evasion. Consequences include back taxes, substantial penalties, and in some states criminal prosecution. If you buy something on a resale certificate and later decide to keep it, you owe use tax on that item and should self-report it on your next return.
If You Should Have Registered but Didn’t
A business that discovers it should have been collecting sales tax and wasn’t can be assessed back taxes for every period it should have filed, plus interest from the original due dates, plus penalties. The total can threaten a small business’s survival, especially across multiple years and states.
Most states offer a voluntary disclosure agreement (VDA) as a path to come forward with reduced consequences. Through a VDA, the business registers, files for a limited lookback period, and pays the back taxes plus interest. In return, the state typically waives some or all penalties and agrees not to assess tax for periods before that lookback window.5Multistate Tax Commission. FAQ The Multistate Tax Commission coordinates a national VDA program that resolves obligations in multiple states through a single process.
VDAs are only available if you come forward before the state contacts you. Once a notice or audit has started, the door usually closes. And if you actually collected sales tax but never remitted it, the treatment is much harsher. States view collected-but-unremitted tax as trust fund money, penalties are rarely waived, and the lookback period can be unlimited.
Buying or Closing a Business
If you’re purchasing an existing business, the previous owner’s unpaid sales tax can become your problem. Most states impose successor liability, meaning the buyer of a business or its assets can be held personally responsible for the seller’s outstanding sales tax balance. A clause in the purchase agreement where the seller promises to handle old tax debts does not protect you against the state. The safeguard is a tax clearance certificate from the state tax agency confirming that all obligations are satisfied. If there’s an unpaid balance, withhold enough of the purchase price to cover it and don’t release the funds until clearance is issued.
When you stop doing business, sell it, or change legal structure, formally close your sales tax account with each state where you’re registered. Simply halting sales doesn’t close anything. The state will keep expecting returns, and when they don’t arrive it will estimate what you owe and bill you. Closing requires a final return covering the period up to your last day of business, including tax on any sales of remaining inventory, fixtures, or equipment. Most states require you to keep sales records for at least four years after closing the account in case of a future audit.