If you are a business owner going to sell your products or services, sales tax is something hard to miss. It is a mandatory consumer tax that buyers pay during the time of purchasing a taxable good or service.
Every state has its own and different sales tax rates and norms. However, without opting for a sales tax permit, you can not start your business in your native or foreign land. Don’t worry; this guide will let you go through the ways to register for a sales tax permit with a step-by-step approach.
What is a Sales Tax Permit?
A sales tax permit is typically a paper that enables you to make your retail sales while collecting taxes from your customers. This is also popularly known by several other names including; seller permit, retail license, sales tax license, etc.
Businesses need to register their names for sales tax collection as here they collect this tax on behalf of the state. Sales tax can vary across different states and according to different products. You need to licentiate your business first to collect sales taxes.
Who Needs a Sales Tax Permit?
Wherever you are expanding your business, opt for a seller permit at the very first point. Businesses that are building a nexus are all obliged to make a sales tax permit under their jurisdiction. If you are trying to expand your business nexus in a foreign land such as the US, you will have to have the following;
- Some sort of physical presence in that state. You can do this by opening up an inventory, shop, office, or real property and having employees there.
- Getting referrals from in-state entities
- Having economic activities in that particular region
- Tying up with affiliate marketers in that state
As soon as you develop your nexus at a place following the above norms, you will need to register for sales tax collection eligibility. You can opt for a temporary or permanent sales tax permit, depending on the period of your business operation.
Steps to Register For Your Sales Tax Permit
After building your nexus at your desired city or state, make a swift move to register it for a sales tax. Here are the steps you need to follow one by one to register for a sales tax abroad.
Step 1. Check Your Eligibility
The first step of registering for a sales tax permit in a foreign land is to check whether your business is eligible for that yet or not. The nexus that you build can be physical as it is mentioned above. But it can be economical too.
According to the state law of Michigan, you will be eligible to opt for a seller tax permit there if you either have;
- More than 200 transactions in the state
- Or, sell more than the worth of $100,000
Step 2. Find The State Registration Form
Once you meet the physical or economic nexus criteria, is it time to register your name. depending on the country or state you are expanding your business into, your registration process will differ a bit.
In states like Texas registering for sales tax is very simple with an online procedure. However, other states of the US still follow the paper modes to certify businesses for levying sales tax.
Step 3. Stay in Compliance
After registering your business, you are good to operate in that area for a particular time. But from time to time, you will have to renew your license. States like Colorado let their business dwellers renew their tax permit license every 2 years. There will be a transaction fee for getting your business license each time.
Also, you will have to report and submit all your sales tax collections either annually, or monthly, or quarterly. Hence, meeting all your sales tax obligations on time is extremely important to avoid penalties and fines.
Operating in one state or city is simple. However, the complexities increase when you expand your business to different states. Therefore, consulting with a taxation expert is always beneficial for businesses operating in multiple locations.
Documents you Need to Register for Sales Tax Permits
The registration process for sales tax permits will require some essential documents. These are;
- Business owner information
- Federal tax ID or the EIN issued by the IRS
- Starting date of your business operations
- The name, address, and social security number of your business
- Your gross sales or estimated monthly, quarterly, or yearly tax obligations
- The names of the partners and principal officers
- Your banking information
- The codes of products that you sell
Conclusion
Failing to register your business for a timely tax permit can lead you directly to a taxation penalty and legal complications. Therefore, opt for a timely tax permit registration and renewal of it to run your business smoothly.
Also, Read – How to Figure Out the Rate of Sales Tax on Your Car?
FAQs
-
Do online businesses need sales tax permits?
Online businesses too need sales tax permits just like physical businesses. You can build your presence at a place through affiliate nexus, economic nexus and click-through nexus and be liable to sales taxes.
-
Do Marketplace sellers need a sales tax permit?
Yes, marketplace sellers, too, need to register for a sales tax permit. The marketplace facilitators who have nexus can collect and remit taxes on the part of the third-party sellers.
-
Do I need to renew my sales tax permit?
This entirely depends on which state you are operating in. In some US states like Texas and California, you don’t need to renew your sales tax permits. But in states like Pennsylvania or Connecticut, businesses need to sincerely renew their sales tax permits at intervals.
-
What is the prime difference between a sales tax permit and a resale certificate?
The sales tax permit allows businesses to gather and submit sales taxes from the end consumer on behalf of the government. This certificate authorises businesses to collect taxes on the products they sell. A resale certificate allows businesses to make tax-free reselling on their taxable goods. This certificate prevents products from getting doubly taxed.
