A sales tax permit is a state registration that lets your business collect sales tax from customers and send it to the state. If you sell taxable goods or services in any state other than Alaska, Delaware, Montana, New Hampshire, or Oregon, and you have either a physical presence or enough sales into that state to meet its economic nexus threshold, you need to register before your first taxable sale. The permit turns you into a tax collector on the state’s behalf, and skipping it can trigger back taxes, penalties, and in some states criminal charges.
Who Needs a Sales Tax Permit
Five states impose no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Some Alaska localities levy their own sales taxes, but the other four require nothing. Every other state expects you to register before you start selling taxable items.
Whether you owe registration in a given state comes down to nexus. Physical nexus is the older, simpler test: an office, a warehouse, employees, or inventory sitting in the state all create it. Economic nexus is newer. In its 2018 decision in South Dakota v. Wayfair, the Supreme Court held that a state can require sales tax collection based on sales volume alone, with no physical presence at all.1Supreme Court of the United States. South Dakota v. Wayfair, Inc.
The most common economic nexus threshold is $100,000 in annual sales into a state. Several large states set the bar higher. California and Texas each use $500,000. New York requires $500,000 in sales and more than 100 transactions. Many states originally paired the dollar threshold with a 200-transaction alternative, but at least 15 have dropped that prong since 2019, leaving only the dollar figure. Because the numbers vary, check each state you sell into rather than assuming a single rule applies everywhere.
Temporary and Seasonal Sellers
Selling at a farmers’ market, craft fair, trade show, or pop-up still requires a permit. Most states issue a temporary or event-specific permit for short-term selling. If you already hold a standard permit for a permanent location, the temporary spot usually gets added as a sub-location rather than requiring a separate registration. Returns for temporary permits are typically due shortly after the event ends.
Inventory in Third-Party Warehouses
Storing inventory in a fulfillment center creates physical nexus in that state. If you use a service that distributes your stock across multiple warehouses to speed delivery, you may have nexus in every state where your products sit on a shelf, whether or not you chose those locations.
Selling Through Amazon, Etsy, eBay, or Walmart
Nearly every state with a sales tax now has a marketplace facilitator law requiring the platform to collect and remit tax on behalf of its third-party sellers.2Streamlined Sales Tax Governing Board. Marketplace Facilitator If you sell only through such a platform, you may not need to register separately in that state. Rules are not uniform, though. Some states still require marketplace sellers to register and file returns, reporting facilitated sales as a deduction. And any sales through your own website or physical locations remain your responsibility. Check each state’s marketplace seller guidance before assuming the platform has you covered.
What to Gather Before You Apply
Having the right information ready before you open the application is the difference between finishing in fifteen minutes and getting rejected. Most states ask for:
- Entity type: sole proprietorship, LLC, corporation, partnership, or nonprofit.
- Federal Employer Identification Number (EIN). The IRS requires an EIN for LLCs, corporations, partnerships, and most other formal structures. Sole proprietors with no employees can sometimes use a Social Security Number instead.3Internal Revenue Service. Employer Identification Number
- NAICS code, a six-digit industry classification you self-assign based on your primary activity.4U.S. Census Bureau. North American Industry Classification System – NAICS
- Physical and mailing address for the business, plus the date you began or plan to begin taxable sales.
- Names, home addresses, Social Security Numbers, and contact information for all owners, partners, or officers.
- Estimated monthly sales. States use this figure to assign your filing frequency, so a rough but honest number is better than either extreme.
Make sure the EIN, legal entity name, and addresses match exactly what the IRS and your state’s Secretary of State have on file. Mismatches are the most common reason applications stall.
How to Apply
Most states run registration through an online portal at the Department of Revenue or equivalent agency. Create an account, complete the fields, certify accuracy, and submit. Online applications often produce a permit number within minutes. Paper filings, where still accepted, take considerably longer.
Some states charge a registration fee; others issue permits free. Where fees exist, they typically range from a few dollars to around $100 per location, and a few states prorate the fee based on when in the year you register. Once approved, you receive a downloadable certificate or a mailed document. Most states require you to display it at your place of business where customers can see it.
Registering in Several States at Once
If you have nexus in multiple states, the Streamlined Sales Tax Registration System offers free, single-point registration covering 24 member states, including Indiana, Michigan, Ohio, Georgia, North Carolina, and Washington.5Streamlined Sales Tax Governing Board. Sales Tax Registration SSTRS You complete one application, pick the states, and the system routes your information to each tax authority. California, Texas, New York, and Florida are not members, so you still have to register with those states directly.
Buying Inventory Tax-Free With Your Permit
A sales tax permit is not only a collection license. It also lets you purchase inventory and raw materials without paying sales tax to your suppliers, by presenting a resale certificate that your permit number validates. The items get taxed when you sell them to the end customer, so taxing them at wholesale would be double taxation.
The exemption applies only to items you genuinely intend to resell or build into products for sale. Using a resale certificate for personal purchases is fraud, and states pursue it. Penalties vary but can include the unpaid tax plus interest, an additional 10 to 25 percent penalty, permit revocation, and in some states misdemeanor charges carrying fines up to $5,000 or jail time. Office supplies, equipment for your own use, and anything else you will not resell are taxable to you like any other consumer.
Keeping the Permit in Good Standing
Registration is the easy part. Staying compliant means filing on schedule, every period, without exception. The state assigns your frequency based on sales volume: monthly for higher-volume businesses, quarterly or annually for smaller ones. Each return reports total sales, taxable sales, exempt sales, and tax collected, along with the payment.
The single most common mistake is skipping a return because you had no sales. A zero return still has to be filed. Missing it triggers penalties and can prompt the state to estimate your liability and bill you on that estimate. Some states charge a flat late fee of $50 or more per return regardless of whether any tax was actually due.
You also need to notify the state when your business changes: a new address, an ownership change, an added or closed location. Some permits are valid indefinitely; others require periodic renewal. Letting the registration lapse, or collecting sales tax without a valid permit, is a separate violation on top of any unpaid tax.
Vendor Discounts for Filing on Time
Roughly 30 states let you keep a small percentage of the sales tax you collect as compensation for the work of collecting it. Vendor discounts typically run from about 0.5 percent to 5 percent of the tax due, often with a monthly or annual cap. The discount applies only when you file and pay on time. One day late and you lose it for that period. It is not large money, but over a year it adds up, and it costs nothing to claim.
Records
Keep sales records, receipts, resale certificates accepted from buyers, and copies of filed returns for at least four years. That is the retention period most states require and matches the typical audit lookback window. If you are audited, your records are your defense. Incomplete records almost always lead the auditor to estimate your liability, and those estimates rarely favor the business.
Buying an Existing Business
If you are purchasing a business rather than starting one, you face a risk unrelated to your own compliance. Many states impose successor liability: the buyer can inherit the seller’s unpaid sales tax debts, and the transfer of inventory, equipment, or even a customer list can trigger it.
Before closing, request a tax clearance certificate from the state’s tax authority. The certificate either confirms the seller owes nothing or tells you exactly how much is owed so you can withhold that amount from the purchase price. Some states also require advance notice of the sale, and failing to give it can leave you personally liable for what the previous owner owed. This detail routinely gets overlooked and turns into an expensive letter from the state months after closing.
Closing the Permit
When you stop selling in a state, formally close the account. Simply not filing does not end the obligation; it produces penalties and an estimated assessment. Contact the tax authority or use its online portal to request closure, and file a final return covering the period through your last day of business.
One trap on the way out: inventory you originally purchased tax-free using a resale certificate but never sold becomes subject to use tax. Whether you give it away, convert it to personal use, or simply keep it, you owe tax on what you paid for those items. The final return is where you report this. Once the state processes the closure and confirms no outstanding balance, the obligation ends.