A seller’s permit is a state-issued registration that authorizes your business to collect sales tax from customers on taxable sales. If you sell physical products at retail — in a store, online, or at events — in any of the 45 states (plus Washington, D.C.) that impose a sales tax, you almost certainly need one before you make your first sale. Only Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, so businesses operating exclusively in those states don’t register for one.
What a Seller’s Permit Does
The permit registers your business with the state as an authorized collector of sales tax. When you charge a customer tax at the register or checkout page, you’re acting as an agent of the state: the money you collect belongs to the government, not to you. The permit comes with a unique identification number you’ll use when filing sales tax returns, corresponding with the state tax agency, and making tax-exempt purchases for resale.
States use different names for the same document — sales tax permit, sales tax license, sales and use tax permit, retail license, certificate of authority, vendor’s license. They all do the same job. Most states require you to display the permit at your place of business. If you sell online without a physical storefront, you generally just keep it on file and available for inspection.
Buying Inventory Tax-Free
Holding a permit lets you buy inventory without paying sales tax to your supplier. You give the supplier a resale certificate — a separate form that includes your permit number and a statement that the goods are for resale — and the supplier skips the tax on that transaction. The tax gets collected later, when you sell the product to the end consumer.
The certificate is not the permit itself. The permit registers you with the state; the certificate is a document you hand to suppliers. If you buy something on a resale certificate and then use it in your business instead of reselling it, you owe use tax on that item and report it on your next return. Auditors specifically look for patterns of resale purchases that don’t match reported sales.
Who Needs One
The short answer: any business selling taxable goods or services to end consumers. That covers brick-and-mortar stores, online shops, farmers’ market and craft fair vendors, food trucks, and anyone else making retail sales of tangible products. Many states also require permits for certain taxable services — landscaping, repair work, digital products — and the list varies by state.
You generally don’t need a permit if your business sells only nontaxable services, deals exclusively in wholesale where every buyer provides a valid resale certificate, or falls under an occasional-sale exemption (a handful of garage sales a year, for example). Nonprofits with valid tax-exempt status may be exempt from registration in some states, though many still need to register and then claim exemptions on qualifying sales.
The harder question is which states you need to register in. That depends on where you have what tax authorities call nexus — a connection strong enough to give the state legal authority to require you to collect its sales tax.
Physical Nexus
Physical nexus is the traditional standard. You have it in any state where your business maintains a tangible presence: a store, office, or warehouse; employees working in the state; inventory stored there, including at a third-party fulfillment center; or equipment you own or lease. Even sending a sales representative into a state for regular client visits can create it. If any of these apply, that state can require you to hold a permit and collect its sales tax.
Economic Nexus
Since 2018, physical presence is no longer the only trigger. The U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. held that states can require remote sellers to collect sales tax based purely on the volume of sales into the state, even without any physical footprint there.1Supreme Court of the United States. South Dakota v. Wayfair, Inc., No. 17-494 Every state that imposes a sales tax now has an economic nexus law. The most common threshold is $100,000 in annual sales into the state, though some states also use a transaction-count test (often 200 separate transactions). Once you cross a state’s threshold, you need to register there and start collecting.
This is where things get complicated for online sellers. A small Etsy shop shipping nationwide can unknowingly cross the threshold in several states during a strong holiday season. If you sell remotely into multiple states, monitor your sales by destination, not just your total revenue, and register in each state where you exceed the limit.
If You Sell Through a Marketplace
If you sell through a large online marketplace like Amazon, Etsy, eBay, or Walmart Marketplace, the platform itself may already be collecting and remitting sales tax on your behalf. Nearly all states with a sales tax have enacted marketplace facilitator laws that shift collection responsibility from individual sellers to the platform.
That doesn’t necessarily eliminate your obligation to hold a permit. Many states still require you to maintain an active registration and file periodic returns — sometimes just informational ones showing zero tax due — even when the marketplace handles the actual collection. And if you also sell through your own website or at in-person events, you’re fully responsible for collecting tax on those sales. The marketplace only covers what goes through its platform.
How to Apply
You apply through the tax agency of each state where you need to register. In most states, registration is free. Roughly a dozen states charge a fee, ranging from about $5 to about $100. Applications are typically available online, though some states also accept paper forms or in-person visits.
Expect to provide:
- Legal business name, any trade names or DBAs, and business address
- Your federal EIN, or Social Security number if you’re a sole proprietor
- Business structure — sole proprietorship, LLC, corporation, or partnership
- Names, addresses, and SSNs of owners and officers
- Anticipated monthly taxable sales and your planned start date
- A general description of what you’ll sell
Processing times vary. Some states issue a permit number the same day you apply online; others take several weeks if additional review or a security deposit is required. A few states require a deposit from new businesses with high estimated sales volumes, refundable after you establish a track record of timely filings. Plan ahead: you need the permit in hand before your first taxable sale.
Collecting, Filing, and Keeping the Permit Active
Once you have a permit, you charge the correct sales tax rate on every taxable sale and send that money to the state on a schedule the state assigns you — monthly, quarterly, or annually, usually based on your sales volume. Each return reports total sales, taxable sales, exempt sales, and tax collected. A handful of states offer a small discount (often 1–2% of the tax collected) as compensation for the administrative burden, but only if you file and pay on time.
The money you collect is not your revenue. States treat collected sales tax as trust funds held on the government’s behalf. If you collect it but spend it instead of remitting it, most states can hold business owners personally liable for the missing funds even if the business is an LLC or corporation. The corporate veil won’t protect you here.
In most states, a permit stays valid indefinitely as long as your account remains in good standing. Around a dozen states require periodic renewal — some annually, others every two to five years. Any time your business name, address, ownership, or locations change, update your registration. A change in ownership may require closing the old permit and applying for a new one, depending on the state.
If you stop doing business in a state, close the permit. An open registration keeps generating filing obligations, and the state will assume you owe tax for missing periods and start assessing penalties. Some states also impose a trailing nexus period of six months or longer after you stop activities, during which you’re still required to file returns before they’ll accept a cancellation.
What Happens If You Skip It
Operating without a permit and hoping nobody notices is a losing bet. States discover unregistered businesses through audits, tips, and cross-referencing data from marketplace platforms and payment processors. When they do, the consequences stack up:
- Back taxes for the entire period you operated without a permit, which can stretch back several years
- Late filing and late payment penalties commonly ranging from 5% to 25% of the unpaid tax, with interest accruing daily on top
- Criminal exposure in some states, where selling without a permit is a misdemeanor with escalating fines and potential jail time for repeat violations
If you realize you’ve been operating without a permit, coming forward is better than waiting to get caught. Most states participate in voluntary disclosure programs, and the Multistate Tax Commission runs one that covers multiple states through a single application.2Multistate Tax Commission. Multistate Voluntary Disclosure Program Under a voluntary disclosure agreement, you typically file returns and pay back taxes for a limited lookback period (often three to four years instead of the full period of noncompliance), and the state waives penalties. Interest is still owed unless the state specifically agrees to waive it. The catch: you must come forward before the state contacts you. Once it reaches out about an audit or assessment, the voluntary disclosure window closes.