Register for a Sales and Use Tax Permit
Obtain State Tax IDs and Certificates

In the United States, sales tax collection requirements vary by state:

• Forty-five states and the District of Columbia levy general sales taxes, which apply to nearly all tangible products and some services
• Thirty-seven states also allow sales tax at the local level (this includes Alaska, which has no state tax)
• Many states have special sales tax rules for tobacco products, alcohol, and motor fuels

Typical exemptions from sales tax in many states include:

• Food purchased for use at home (as opposed to food bought for immediate consumption, like at a restaurant)
• Prescription and nonprescription drugs
• Textbooks
• Clothing
• Professional services, such as accounting, legal, medical, and marketing

When a business has nexus in a state, it must obtain a seller’s permit (if the state or local government levies a sales tax). Having a physical presence—such as an office, store, or warehouse—in the jurisdiction establishes nexus. However, economic activity without a physical presence might also constitute a nexus.

Nearly every state has enacted nexus laws that affect remote sellers, including online marketplaces. And remote seller nexus comes in various flavors.

A state may address one or more in its laws to require businesses that meet the criteria to register to collect and remit sales tax:

• Click Through Nexus – When an out-of-state business contracts with an in-state individual or entity that refers (either directly or indirectly) potential customers to the out-of-state business through a web link to receive a commission or other compensation when a sale is made.
• Affiliate Nexus – When an out-of-state business’s employee, agent, or person otherwise affiliated with the out-of-state company has a physical presence in the state.
• Marketplace Nexus – When an online marketplace has its e-commerce infrastructure, customer service center, marketing operations, and payment processing services in the state. In this scenario, the marketplace operator has to obtain a seller’s permit and collect and remit sales tax rather than the individual sellers that use the platform to sell products in that state.

Be aware that businesses that sell taxable products in states where it doesn’t have nexus must inform their customers. States have been becoming more sensitive to out-of-state businesses getting an unfair competitive advantage.

If you’d like to learn more about nexus, you can read educational articles we have on this subject:

• When Do You Have Nexus in a State?
• A State-by-State Guide to Economic Nexus
• Nexus and State Reciprocity

States usually have their seller’s permit applications available online. Visit your state or local tax authority’s website to find details about how to get a sales tax certificate and for rules about the collection and remittance of sales tax.

This process can be a bit confusing and this is why CorpNet offers a done for you service for sales and use tax permits.

When registering for sales tax, the following information is often required:

• Principals’ social security numbers
• Principals’ driver license numbers
• Email address
• Federal tax ID number (EIN)
• For Corporations: corporate name, corporate number, state, and date incorporated
• Name, address and phone number of partner(s), corporate officer(s), member(s) or manager(s)
• Name(s) and phone number(s) of personal references
• Name(s) and address(es) of supplier(s)
• North American Industry Classification System (NAICS) code
• Standard Industrial Classification (SIC)
• Bank Information (name and address)
• Name and account number of the merchant credit card processor
• Name, address, and phone number of the person(s) who maintains the books and records
• If you purchased the business, name and contact information for the previous business owner

Business owners can alleviate some of the sales tax headaches by using software that automates the process. Automated software services offered by companies such as Avalara^®, TaxJar^®, and Vertex will calculate the amount of sales tax to collect, create sales tax reports, and file the reports with tax authorities. Services like those can be especially beneficial to businesses with nexus in many states or those in a state that charges sales tax at the county and city level.

If you fail to obtain a sales tax license or collect and remit the sales tax you’re responsible for, you could face fines and penalties. These will quickly add up, so it’s best to start your business off right and obtain a license/permit in all states where you have nexus.