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Understanding sales tax registrations: A comprehensive guide for businesses

by Sarah Craig November 25, 2024

One of the most crucial steps to managing tax compliance is understanding how and when to register for a sales tax permit in the states where you have sales tax nexus. This blog post will walk you through the essentials of sales tax registration, including how TaxJar can manage sales tax registration for you.

What is sales tax nexus?

Before we get into registrations, it’s important to understand the concept of sales tax nexus. In the US, retailers are required to collect sales tax from buyers in states where they have sales tax nexus. Nexus originates from a Latin word meaning “to bind” or “to tie.” If you have sales tax nexus, think of your business as having a  tie to the state. There are two different types of

sales tax nexus, or in other words, two different ways you can meet the requirements to collect and remit sales tax to a state.

Physical nexus is just that, a physical connection to a state. Examples of physical nexus (also sometimes referred to as “physical presence”) include employees, offices, stores, warehouses, conference attendance, servers, etc. 

Then there is economic nexus. These are either revenue or transaction (or both) thresholds that require businesses who exceed these thresholds to collect sales tax from buyers in that state.  For example, in the state of Georgia, businesses only need to collect sales tax from customers if they have exceeded $100,000 in revenue or 200 transactions from customers in Georgia. These thresholds are determined by each state, and so they vary from state to state. We outline each state’s economic nexus thresholds here. 

Once you determine where you have sales tax nexus, your next step is sales tax registration. 

What is sales tax registration?

Sales tax registration is when a business registers with the appropriate state tax authority to collect and remit sales tax from customers in that state. Sales tax registrations are also commonly referred to as a sales tax permit or license. 

Businesses must register for a sales tax permit before collecting sales tax from customers. After registering, the state will give you a filing frequency, telling you when your sales tax will be due. These filing frequencies are generally monthly, quarterly or annually. Be aware that some states have other filing frequencies like semi-annually or twice-monthly for very large retailers. States reserve the right to change this, so always file and pay based on the due date the state assigns you. Due dates will fall on a different day of the month depending on the state. In most states, sales tax is due by the 20th day of the month following the taxable period.

You are not required to register for a sales tax permit in every state, only states where you have sales tax nexus.

Is a resale certificate the same as a sales tax permit?

In most states, your sales tax registration number also doubles as your sales tax permit number. But not always. In some states, you are required to request a separate resale certificate. Before you try to use a resale certificate, check either TaxJar’s State Resale Certificate blog posts or contact your state to determine what you need to present to buy items tax-free for resale.

How to register for sales tax

Each state’s taxing authority handles sales tax registration. Since each state has their own registration process, taking the time to ensure each form is filled out correctly is a challenge and time consuming. On top of that, as soon as you reach nexus in a state, you are expected to begin collecting sales tax right away, so it’s important to complete the registration process quickly and accurately. 

It’s helpful to have the following information on hand when preparing to register for a sales tax permit:

• Your personal contact information

• Your business contact information

• Social security number (SSN) or Federal Employer Identification Number (FEIN) also known as Employer Identification Number (EIN)

• Business entity (sole-proprietor, LLC, S-Corp, etc.)

• Your NAICS Code (Note: The NAICS code for online stores is 454110)

Individual states may ask for additional information. If you don’t want to manage these details for all the states where you have sales tax obligations, TaxJar can register on your behalf. Learn more here. We outline how to register for a sales tax permit yourself in this blog post.

In the majority of states, sales tax registration is free. There are a handful of states that charge a fee for sales tax registration:

• Arizona
• Colorado
• Connecticut
• Florida
• Hawaii 
• Indiana
• Rhode Island 
• South Carolina
• Washington 
• West Virginia 
• Wisconsin 
• Wyoming 

How TaxJar can streamline the registration process

Sales tax registration is a fundamental element of running a compliant business. While this process can be challenging, TaxJar is here to make it easier. We’ll handle all the paperwork, so you can focus on growing your business. Learn more about our sales tax registration and get started here. 

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