In most cases, you need a sales tax permit before selling taxable goods in a state where you have nexus. You cannot legally collect sales tax without registering first, and failing to register can lead to penalties and back taxes.
Do You Need a Sales Tax Permit Before Selling?
Yes, if you are selling taxable goods or services in a state where you have nexus, you need a sales tax permit before you begin collecting sales tax.
This is a legal requirement in the US.
You must:
- Register first
- Then collect sales tax
You cannot legally charge customers sales tax without a valid permit.
You need a sales tax permit before collecting sales tax in any state where you have nexus, collecting tax without a permit is not allowed.
At the same time:
- You are not required to register everywhere
- Only in states where you have obligations
What Is a Sales Tax Permit?
A sales tax permit is a registration issued by a state that allows your business to collect and remit sales tax.
It may also be called:
- Seller’s permit
- Sales and use tax permit
- Reseller permit (in some contexts)
Once you have a permit:
- You can legally collect sales tax
- You are required to file returns
- You must remit tax to the state
When Is a Sales Tax Permit Required?
You need a sales tax permit when you have nexus in a state and are making taxable sales.
Key Triggers
1. Physical Nexus
You must register if you have:
- Inventory in a state
- Employees or contractors
- Offices or locations
Physical presence creates immediate sales tax obligations.
2. Economic Nexus
You must register if your sales exceed thresholds, typically:
- $100,000 in revenue
- $500,000 in some states
This applies even if your business is fully remote.
3. Selling Taxable Products or Services
If what you sell is taxable:
- You must collect sales tax once nexus exists
If the product is not taxable, requirements may differ.
When Might You Not Need a Permit?
You may not need a sales tax permit if you do not have nexus in a state.
For example:
- You sell into a state but do not meet thresholds
- You have no physical presence
- Your sales volume is low
In this case:
- You do not collect sales tax
- You do not need to register
Why Registering at the Right Time Matters
Timing is critical when it comes to sales tax permits.
Registering Too Late
If you delay:
- You may owe back taxes
- You may face penalties and interest
- Registering Too Early
If you register before nexus:
- You create filing obligations unnecessarily
- You must file returns even with no sales
The goal is to register at the right time, when nexus is created.
Step-by-Step: How to Get a Sales Tax Permit
Step 1: Identify Nexus States
- Review sales and operations
- Determine where obligations exist
Step 2: Apply with the State
- Register through the state tax authority
- Provide business details
Step 3: Receive Your Permit
Approval times vary by state
Step 4: Set Up Tax Collection
- Configure systems (e.g. Shopify)
- Apply correct tax rates
Step 5: Start Filing Returns
Follow assigned filing frequency, which will vary by state.
For a broader understanding, see our guide on US sales tax explained for businesses.
Worked Examples
Example 1: New Online Seller
- Based in California
- Selling only locally
Therefore you must:
- Register in California
- Obtain a sales tax permit
Example 2: Remote Seller Crossing Threshold
$120,000 in Florida sales
Florida threshold = $100,000
Therefore you must:
- Register in Florida
- Obtain permit before collecting tax
Example 3: Ecommerce Brand Scaling Nationwide
- Selling across multiple states
- Inventory in warehouses
Therefore you must:
- Register in multiple states
- Maintain multiple permits
Common Mistakes to Avoid
- Collecting sales tax without a permit
- Registering in states without nexus
- Not monitoring thresholds
- Delaying registration after crossing thresholds
- Forgetting to file after registering
These mistakes can create unnecessary risk or compliance burdens.
FAQs
Can I sell without a sales tax permit?
Yes, but only if you do not have nexus in a state.
Can I collect sales tax without registering?
No, this is not allowed.
Do I need a permit in every state?
Only in states where you have nexus.
How long does it take to get a permit?
It varies by state, often a few days to a few weeks.
What happens if I don’t register?
You may owe back taxes, penalties, and interest.
Final Thoughts
Understanding when you need a sales tax permit is essential for staying compliant in the US.
The key takeaway is you must register before collecting sales tax but only in states where you have nexus.
By getting this right, you can:
- Avoid penalties
- Stay compliant
- Scale your business confidently
If you’re unsure whether you need a sales tax permit or when to register, RJM Tax Exemption can help you identify your obligations and manage registration across all states.
