Every state has its rules, but business owners must take tax while selling any item or service. There is a proper way of collecting this tax.
Businesses must apply for a sales tax license for retail sales, but it is also essential to get multiple tax licenses to trade in different states.
This article will help you uncover the sales license and the details you need to have to get the sales license.
- What is a sales tax license?
- What is the rule for multi-state businesses or online sellers?
- How to Apply for a Sales Tax License
- What is the difference between a Sales Tax Certificate of Authority and a Resale Certificate?
What is a sales tax license?
A company must apply for a sales tax license if it is liable to collect taxes on taxable items or services. It is also known as the sales tax certificate of authority. This certificate of authority is from the department of revenue or a particular state. Without a tax license, no one can collect taxes. If someone is guilty of collecting taxes without a sales tax license, they have to pay a heavy fine.
The sales rates vary from state to state and business to business. Some states charge higher than others states. Moreover, the sales tax percentage differs from country to country as well.
What is the rule for multi-state businesses or online sellers?
Sales taxes are applied on interstate commerce if the owner has a physical outlet or an economic nexus. Each state has a different set of requirements for sales tax. Below are the activities which show the physical presence nexus:
- Having a physical location (temporary or permanent)
- Having even a single salesperson
- Having an inventory
- Renting of the personnel properly
There was a rule of paying sales tax for the physical outlets, but people have moved to online stores and marketing these days. Therefore, the laws of sales tax have changed. Even if a business owner doesn’t have a physical outlet but meets certain economic conditions, he must register for a sales tax license. There are separate rules for remote sellers in each state.
How to Apply for a Sales Tax License
To get a sales tax license, we can easily apply online. We need to visit the state’s website and fill out an online application. For each different business location, even if the new locations are within the ambit of the same state, we have to apply separately for a permit. Since some states issue temporary permits for people investing in flea markets and some, don’t, therefore, be very demanding in selecting the state and right permit.
The following are the requisites for completing the registration for sales tax permits:
- Name and addresses of your dealers
- Type of business
- Driving License
- Social security number
- Details of contacts, such as email/mailing addresses
- Driving license
- Business information, for example, address and telephone number
- Security deposit
The forms for tax returns vary from state to state. As permit holders in a state, we shall submit sales tax returns for our business entity. We will keep submitting the returns as long as the business works, even if we don’t make any sales throughout the year. However, exceptions exist, as few states ask for license renewal annually.
We must immediately pay taxes and apprise the concerned Revenue Department.
What is the difference between a Sales Tax Certificate of Authority and a Resale Certificate?
A certificate for sales tax enables us to sell taxable products and pool up sales tax. On the other hand, a resale certificate entitles us to exempt any business from sales tax for some items, especially when the business entity aims to resell the items. We require a sales tax ID number to secure a legitimate resale certificate.
Selling Taxable Goods and Services Compliantly
Counterchecking the formalities and rules of our state and the state we sell our products is important. Since the rules hugely vary from state to state, you may avoid penalties and externalities by complying with the requirements.
For more useful information, browse the resources guide today!
- How to Calculate Withholding Tax: A Simple Payroll Guide for Small Business
- Tax Deductions for Daycare Business
- Tax Deductions for Home Office
- What is the Difference Between Tax Inclusive vs. Tax Exclusive?
- List of Common Tax Deductions for Owner-Operator Truck Drivers
- 11 Tax Deductions for Self-Employed Workers