A Step-by-Step Guide to Getting Your Sales Tax Permit

Updated - Originally published February 26, 2025

Understanding Sales Tax Permits and Obligations

Forty-five out of 50 states (and the District of Columbia) have a state-level sales tax. If your business is located in any of them, or if you do significant business in any of them, then you need a sales tax permit for each.

Most business leaders want to think about sales tax as little as possible. Sorting out sales tax permits might feel like an annoying task that pulls you away from the real work of growing your business. I get that, but it is essential.

This is a quick guide that will walk through what steps to take so you can take care of this obligation and get back to focusing on running your business.

What Is a Sales Tax Permit?

A sales tax permit authorizes a business to collect and remit sales tax. It’s also called a retail license, sales tax license, seller’s permit, or vendor’s license. Once your company has triggered nexus in a state—other than in the five “nomad” states without sales tax—you are obligated to collect sales tax, and a sales tax permit is required to do so. 

What Is Nexus?

Think of nexus like an official link between your business and state or jurisdiction. It is what authorizes states to require your business to collect and remit sales tax on sales and services to anyone within their borders. Each state has its own criteria for what establishes nexus, but those requirements fall into one of the following two categories:

• Physical nexus: when a business has a physical presence in a state, such as an office, employees, inventory, or even something as simple as attending a tradeshow.
• Economic nexus: when a business reaches economic thresholds outlined by a state, usually based on sales volume or number of transactions.

Why Do You Need a Sales Tax Permit?

As soon as your business has physical or economic nexus in a sales-tax state, you must collect and remit sales tax. Operating without a required permit can lead to serious consequences, including:

• Liability for all unpaid sales tax, including any accrued interest.
• Fines ranging from $1,000 to $5,000 or more, depending on the severity of the violation.
• Additional penalties, which can total around 30 percent of the amount of sales tax due.
• State-based penalties, such as California’s 50 percent penalty for knowingly failing to obtain a valid sales tax permit.
• Criminal penalties in cases of intentional evasion or fraud, which may include the following:
  • Misdemeanor charges resulting in fines and imprisonment for up to one year.
  • Felony charges with fines up to $20,000 and imprisonment for up to three years for more severe cases.

Sales Tax Permits for Multiple States

As your business grows, you are responsible for tracking sales and nexus status. Since thresholds vary by state, and your sales likely do too, you can’t register for sales tax permits across all 45 sales-tax states at the same time. It’s best to establish a process for tracking nexus and registering as soon as you qualify in a new state.

Sales Tax Permit Registration Process

Now that you know the basics of what a sales tax permit is, as well as the when, where, and why you need one, let’s walk through the registration process step by step.

Step 1: Determine Your Sales Tax Obligation

Before you get started, have a clear understanding of what state or states you already have nexus in. Remember that nexus can be physical or economic—and what qualifies as nexus in one state may not qualify in another.

Step 2: Gather Required Documentation

While each state’s requirements may vary, it’s best to have the following documents readily available for any sales tax permit application:

• Federal Employer Identification Number (EIN): You use this to share standardized details about your business—like tax status, legitimacy, structure, and ownership—to confirm registration at the federal and state levels.
• Business Name and Address: Used to help tax authorities establish whether your business has a physical nexus in the state, as well as send important tax-related communications, verify compliance, and determine local tax rates and overall tax liability.
• Business Entity Type: Used to properly categorize your business based on varying tax obligations and reporting requirements—as well as the legal structure of your business—and, in some cases, determine how often your business must file sales tax returns.
• Business Owner Information: Used to verify the legitimacy of the application and link the business owner to the tax account, making them personally responsible for collecting and remitting sales tax. Some states may also use personal information to conduct background checks to prevent fraudulent applications or verify the applicant’s tax history.
• North American Industry Classification System (NAICS) Code: Used to accurately classify and regulate industry-specific sales tax rules and regulations, potential exemptions or special considerations based on your industry, and categorization for statistical analysis and reporting of economic data.
• Estimated Annual Sales in the State: Used to determine if your business meets the economic nexus thresholds, assess potential tax revenue, determine the frequency of filings and payments, allocate resources based on the expected volume of sales, and verify accurate reporting and remitting of sales tax over time.
• Bank Account Information: Used to facilitate and streamline the process of automatic tax payments and refunds between the business and the state tax authority. While many states require this information, specific requirements can vary, so it’s always best to check with a particular state’s tax authority for exact requirements.

Step 3: Submit Your Application

While some states still offer a physical submission option, most recommend submitting online for faster processing. To register online, follow these steps:

1. Visit the Department of Revenue website, which conveniently lists the relevant links for each state.
2. Navigate to the “Sales and Use Tax” section of the state you’re registering in.
3. Click on the link to register a business and follow the prompts to complete the application.
   • Many states offer free registration, but there may be a small application fee.
   • While online registrations may provide instant approval in some states, typical processing times range from two to four weeks. Physical applications generally take longer than that.
   • Once approved, you’ll receive a copy of your sales tax permit.

Prepare the necessary information and follow these steps to streamline the process of obtaining your sales tax permit.

Maintaining Your Sales Tax Permit

Now that you’ve obtained your sales tax permit, you’ve taken a pivotal step that sets the foundation for your business’s tax compliance. Let’s explore what’s next, best practices for ongoing compliance, and when and how to cancel your sales tax permit should you ever need to.

What to Do After Obtaining Your Sales Tax Permit

1. Understand Your Filing Frequency: Your filing frequency may be monthly, quarterly, or annually (typically determined by your sales volume) so make sure that you’re clear on individual state requirements.
2. Set Up a Record-Keeping System: Implement a system to track all sales, exemptions, and tax collected. This could be through accounting software or a dedicated sales tax management solution. Most businesses find a hybrid approach works best.
3. Display Your Permit Properly: Most states require businesses to display their sales tax permit, so ensure that yours is visible to customers and auditors alike.
4. Train Your Staff on Compliance: Educate your team on the importance of sales tax compliance, including all relevant collection and documentation procedures.

Ongoing Sales Tax Permit Maintenance

The real work of sales tax compliance is maintenance. Unfortunately, much of this can't be "set and forget." Here are the key principles to keep in mind to keep things from getting problematic.

Business Updates: Promptly report any changes in your business structure, location, or operations to the relevant tax authorities and register for any new physical or economic nexus.

Renewal Requirements: Some states require periodic renewal of sales tax permits. Mark these dates in your calendar to ensure timely renewal, as missing these deadlines can result in delays or penalties.

Compliance Changes: Monitor tax law and regulation changes in every jurisdiction where you're registered.

Regularly review your compliance practices to ensure that they’re up to date.

Canceling Your Sales Tax Permit

If your business situation changes, you may have cause to cancel your sales tax permit. This typically happens when any of the following occurs:

• Your business closes or is sold.
• You stop doing business in the state.
• You no longer have physical nexus in the state.
• Your sales no longer meet the state’s economic nexus threshold.

Be aware that some states have what’s called trailing nexus (or residual nexus) regulations. This could mean the state requires you to pay sales tax for additional weeks or months even after you lose economic nexus there.

If you're looking to cancel your sales tax permit, keep the following in mind:

Cancellation Process: Before canceling your sales tax permit, confirm if changes are permanent. If nexus is re-established, you must re-register.

State Variations in Cancellation: Just like the registration process, canceling your sales tax permit can vary state to state.

Filing Final Sales Tax Returns: Most states will require you to file a final sales tax return.

Additional Documentation Requirements: Some states may require additional documentation.

Cancellation Deadlines: Some states require cancellation within 15 days of selling or closing your business.

Ensuring Compliance: If unsure about a state’s requirements, contact its Department of Revenue. Some states require keeping your permit without nexus, so consulting an expert can help avoid penalties.

Staying Informed: Maintaining your sales tax permit requires attention to detail and staying informed about your obligations across different jurisdictions. Follow these guidelines to confidently navigate next steps, meet ongoing requirements, and adapt to any changes.

Work with the Sales Tax Permit Experts

A sales tax permit is essential for business success. Understanding your nexus, obligations, and permit process helps you stay compliant while expanding or optimizing operations. It can feel overwhelming. I hear that all the time. So if all the complexities are holding you back, know you’re not alone. We can help: schedule a free call with one of our experts to ask questions and get an idea of the best next steps.