Sales Tax Permits: Their Current State, by State
- Sales Tax
- December 9, 2015 | Mark Berens
A sales tax permit, sometimes known as a sales tax license, is a permit that some states and jurisdictions require a business or entity to obtain before they’re allowed to begin collecting (and therefore remitting) sales tax.
A fairly simple step in the business registration process, registering for a sales tax permit usually occurs in stages, from "Welcome! We want to make doing business in [state] as easy and friendly as possible” to “List of Required Forms.”
It All Depends on the State
The path to getting this all-important slip of paper can be more challenging for some than for others, depending on the state(s) where you do business and if you’re a single-state brick-and-mortar business, a multiple-state brick-and-mortar business, or an online seller. First, go to your home state’s website and that of any state where you do business to read the rules regarding the collection and remittance of sales tax there, including if you need just one or multiple permits. Most sales tax statutes will describe when you have enough of a connection (nexus) with the state to perform this function (remember: sales tax is due from the buyer; the seller’s responsibility is to collect that tax and remit it to the state).
Along with your licensing requirements, you may be charged a fee. Some states charge comparatively a lot (like Connecticut's $100 for a five-year permit), some charge so little you wonder why they bother (Florida, $5), some charge nothing (as in the majority of states), and some states don’t even require these licenses.
As for renewing, some permits are good for as long as you own your business, while others must be renewed from time to time for a fee or at no charge. Again, it all depends on the state. As if these variations weren’t enough, there’s not always agreement on what these permits are even called, so let’s start there.
What’s in a Name?
You’d think that finding information on “a permit authorizing a business to collect sales tax” would be simple. It’s not. Search for “sales tax permit” and you’ll net 22,700,000 results -- a good sign, right? But depending on the state, it might be called a “sales and use tax permit," a "sellers permit" or a "seller’s permit.”
The good news is you don’t need to guess which you need. States' sales & use tax pages are generally clear about what permit is required in order for you to lawfully collect and remit sales tax, whether it’s called a sales tax permit, a seller’s permit, or some variation. (If you can't figure it out, just do an image search for "[state] sales tax permit" to see what yours looks like).
Once you apply, you’ll receive your permit in the mail suitable for framing and displaying “in a conspicuous place” (according to the law, is mandatory). Then you’re open for business in your state.
What They Cost: Permit Fees by State (2015)
As if the naming convention wasn’t puzzling enough, the range of fees charged for these permits is confounding. Purely out of morbid curiosity, I made a few calls to some state departments of revenue for clarity on the fee variations, ending with a final call to the Federation of Tax Administrators in Washington, DC. In the interest of time, I’ll just say that any responses, if given, I filed under “it’s the cost of doing business, sir.”
Funny that the "cost of doing business" varies so widely among states, but there you have it. Here are the current (of course, subject to change) costs for a permit to collect and remit sales tax, by state:
|Alabama||$0||Free to apply for an Alabama sales tax permit, but other business registration fees may apply.|
|Alaska||$0||No state sales tax, no fee.|
|Arizona||$12||The cost to register for an Arizona transaction privilege tax license.|
|Arkansas||$50||Nonrefundable application fee for an Arkansas sales tax permit.|
|California||$0||No fee for a California seller’s permit but a security deposit may be required to cover any unpaid taxes that may be owed if, at a later date, the business closes. The amount of the security will be determined at the time you apply.|
|Colorado||$16||The fee for a two-year Colorado license is $16, plus a one-time-only $50 deposit. The deposit is automatically refunded to the business after $50 in state sales tax has been remitted to the department. However, if a retail business fails to remit sales tax to the department, the deposit will not be refunded.|
|Connecticut||$100||This is a one-time fee for a Connecticut sales and use tax permit. The permit is valid for five years and is automatically renewed and mailed to you at no cost by the Connecticut Department of Revenue Services.|
|Delaware||$0||No state sales tax, no fee.|
|Florida||$5||The Florida Department of Revenue charges a sales and use tax registration fee if the business location or rental property is located in Florida.|
|Georgia||$0||Georgia sales and use tax registration does not require renewal and remains in effect as long as the business entity exists with no change in ownership or structure.|
|Hawaii||$20||The Hawaii Department of Taxation charges a one-time license fee.|
|Indiana||$25||The Indiana Registered Retail Merchant Certificate (RRMC) is valid for two years, and updates automatically with no additional charge for renewal. If a business does not pay its tax liability, the RRMC will expire.|
|Mississippi||$0||Before engaging in any business in Mississippi subject to sales tax, a permit or registration license is required from the Mississippi Department of Revenue. A separate permit is required for each location. The permit does not expire and does not require renewal as long as the holder continues in the same business at the same location.|
|Missouri||Variable||Although there is no fee to get a Missouri sales tax ID number, Missouri statute does contain a bonding requirement for businesses making retail sales.|
|Montana||$0||No state sales tax, no fee.|
|Nevada||$15 + variable security deposit||Fee charged per business location.|
|New Hampshire||$0||No state sales tax, no fee.|
|Oklahoma||$20||Oklahoma sales tax permits require a $20 fee with additional locations costing $10. The license is renewable every three years from the date the permit was issued, if the business is in good standing.|
|Oregon||$0||No state sales tax, no fee.|
|Rhode Island||$10||The Rhode Island Division of Taxation charges a renewal fee each year.|
|South Carolina||$50||Fee charged when you initially register for a South Carolina sales tax permit.|
|Vermont||$0||In Vermont persons required to collect the tax and persons purchasing tangible personal property for resale must register with the Vermont Commissioner of Taxes. No permit fee is required.|
|Wisconsin||$20||This applies to the first Wisconsin tax permit only. There is no charge for additional tax permits for this business.|
Some form of a sales tax permit is generally required by most states as proof that you’re authorized to collect tax there. Despite many states having naming, pricing, and renewal variations, all states demonstrate a united front -- penalties, fines, audits, and other forms of unpleasantness -- for people wishing to avoid the permit process. So get the proper sales tax permit (if required) right from the start.