Learn how to apply for a seller license when you sell goods or provide services subject to sales tax. Most business owners and some service providers who sell retail goods are required to have a seller license in the state in which they operate.
What is a seller’s license?
A seller’s license gives the business owner the power to collect sales tax for the state. If you sell goods or provide services that are subject to state sales tax, you need a seller license, and you need one in each state in which you operate.
Businesses that provide goods and services subject to sales tax are effectively government intermediaries. Customers pay sales tax, but businesses must collect the money and send it to the state. A seller license gives business owners the right to collect sales tax and provides a way for tax agencies to track payments and ensure timely payments.
A seller’s license, also known as a sales tax license, vendor license, retail license, certificate of authorization, or sales tax account, is usually issued by a state tax office. Published in some states by the Secretary of State, Treasury, Equality Commission, or Department of Revenue.
What types of businesses require seller permission?
The rules for taxable goods and services vary from state to state. States tax the sale of most retail goods, such as clothing, appliances, electronics, and alcohol. Many states also impose sales taxes on certain services, such as restaurants, equipment repair and installation, personal services such as hair salons, and rentals of certain products and services. Check with the tax agency in the state in which you operate to find out if your business is subject to sales tax. If yes, you can usually apply for a seller license from the same agency.
Only five states (Delaware, New Hampshire, Oregon, Alaska, and Montana) do not impose a sales tax and do not require a seller’s license. But Alaska and Montana allow local governments to collect their own sales tax. If your business operates in one of these areas, you will need to contact the city or county to learn about their requirements and procedures.
What about online businesses?
Many states require online CA Sellers Permit to collect sales tax on purchases made in or delivered to the buyer’s state, regardless of where the business is located. If your online business regularly sells to buyers in other states, you should consult those states’ tax agencies to understand their requirements. Some states use the same applications and licenses for retailers with a physical presence and online sellers. Other states use different types of licenses for online sellers and may use different names. For example, Arkansas requires a sales tax license for businesses without a physical presence in the state and a sales tax license for businesses with a physical presence in the state. Whether you are selling online or in a brick-and-mortar store, the same tax authority is usually responsible for issuing the license.
Is a seller’s license the same as a resale certificate?
You might think that a resale certificate is just another name for a seller’s license. After all, many businesses buy goods from a company and resell them to individuals or other businesses. But the purpose of a resale certificate is very different from that of a seller license, and some business owners need to obtain both.
You will need a resale certificate to avoid paying tax on items purchased for resale. When you sell this item, you need the California Sellers Permit permission to collect sales tax. For example, when you buy a chair for an office, it’s taxable; when you buy it to sell in your office furniture store, it’s not — until, that is, you sell it, and then the customer bases the chair’s Tax paid on sale price. In short, most states charge sales tax on items you consume, not items you plan to resell and have sales tax laws so the same item isn’t taxed twice.
The same state tax agency that issued the seller’s license usually issues a resale certificate. The rules vary from state to state, and if it is different from the state in which you sold the item, you will need to check with the state tax agency in the state where you purchased the resale item. Some states allow you to use resale certificates issued by other states. Some require you to register by filling out an application form and providing your seller license number and your federal Employer Identification Number (EIN). Others require you to first obtain a seller’s license from the state where you are making your resale purchases before you can apply for a resale certificate.
