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Business owners who develop a new business and begin selling products need a seller’s permit. The seller’s permit is a specific type of business license and allows you to sell products or services, as well as collect sales tax. In addition, a seller’s permit enables the state to control the process of collecting, reporting, and paying sales and use tax.
Also called a resale permit, permit license, sales tax permit, sales tax license, or certificate of authority, this permit is required by most states. The main reason that state governments require a seller’s permit is to enable them to collect sales tax on transactions. Failure to secure this permit can sometimes result in penalties and fines, in addition to back taxes on previous sales to the Internal Revenue Service (IRS).
While the process of obtaining a seller’s permit varies from state to state, most business owners can obtain one from the local government agency that regulates businesses in each state. Below are some frequently asked questions (FAQs) about a seller’s permit:
What is the Purpose of a Seller’s Permit?
This permit provides a business with the authorization to sell products and services within the jurisdiction granting the license.
How Do I Know if I Need a Seller’s Permit?
Needing a seller’s permit depends on the laws that govern and your type of business. Local and state regulations determine whether a business requires one. However, if you sell wholesale or retail goods to the public, you most likely need a seller’s permit. In fact, several states also require service providers, such as attorneys and architects, to obtain a seller’s permit. In addition, if you have a seasonal or holiday business, such as a Christmas tree lot, you may be required to obtain a temporary seller’s permit.
Do Online Businesses Require a Seller’s Permit?
Unless you are selling products or services in a regulated industry, such as health care, you typically do not need a seller’s permit to conduct business online. However, each state has different rules and income tax laws, so be sure to check with your state.
Should My Seller’s Permit be Publicly Posted?
The physical document should be posted in a visible location at your place of business, so the public can see it.
Are Seller’s Permits Referred to by Other Names?
A seller’s permit can also be referred to as any of the following names, depending on your state:
• Resale Permit
• Resale Certificate
• Resell or Reseller Permit
• Permit License
• Reseller Number
• Resale ID
• State Tax ID Number
• Reseller License Permit
• Certificate Of Authority
How Do I Obtain a Seller’s Permit?
While the process tends to differ in each state, most small business owners can complete a free application to obtain a permit. Applications typically can be found on the gov website of your local agency that regulates businesses.
The information that is generally required on permit applications includes the business name and address, Social Security number or employer identification number, estimated monthly sales, and supplier names. Most states allow you to mail in the completed form, deliver it in person, or submit it electronically.
Because every state has different requirements for obtaining a seller’s permit, the following list of information may differ depending on where you live. For example, Alaska, New Hampshire, Delaware, Montana, and Oregon do not charge sales tax, so you don’t need a seller’s permit if you do business in these states. However, for every state where you have physical presence, you must apply for a permit, example would be California.
The good news is that most states allow you to file your application online. To do this, visit your State Department of Revenue’s website to obtain the direct link. When you apply, you will need your Federal Employer Identification Number (FEIN). In addition, you may need the following information:
Your business name and DBA (doing business as) – Before applying, you should get a DBA and form an LLC or a corporation.
Revenue distribution – Is your business seasonal and is the revenue unevenly distributed throughout the year?
Tax collection start date – The beginning date for collecting sales tax in your state.
The type of products or services to be sold – You may be asked for your North American Industry Classification System (NAICS) information. NAICS is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.
The estimated amount of sales tax you will collect – Keep in mind that embellishing your potential earnings means you will need to file your State & Federal tax returns more often when you exceed a certain threshold.
Depending on the state, you may need to present the following documents: a photocopy of your driver license or passport, the name and location of your business bank account, the names of your suppliers, personal references, and your Social Security Number.
Learning and understanding documentation needed for your business can be tricky, especially with state and local levels of government. The experts at Inc Authority can assist you with compliance and provide you with business management tools to help you make the best decisions.
So, start your business with confidence, knowing that Inc Authority is here to answer all your questions. Form your free LLC today!