Step-by-step instructions on how to get a license to sell in 2024, including when you need a license (or licenses), what it costs, and what the business needs.
If you’re starting a new business, you may want to know if you need a resale license. The answer is, it depends.
If you’re selling privately (subject to sales tax), most states in the U.S. require a resale license. However, there are some states that do not require sellers to be licensed.
Now you’ll learn if you need a resale license and how to apply for one.
What is a seller’s permit?
Reseller license is a unique identification number issued by the government to your business. It allows you to collect sales tax on products sold in stores or online, and you must submit it to the federal government on a regular basis with your state tax return. A
Reseller license acts as an intermediary between the government and your customers. Reseller licenses are state-specific and have different names from state to state, for example:
- Sales tax license
- Vendor’s license
- Use tax permit
- Retail license
- Certificate of authority
- Business tax account
- Sales permit
- Wholesale license
When do I need a resale license?
A resale license is generally required in the following situations:
- Doing business in a state that charges a state sales tax.
- Sale of goods or services subject to sales tax.
- A significant structure (nexus) exists in the state.
Which states require a seller’s permit?
Five states don’t require a sales tax permit at all:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
While Alaska and Montana do not have state sales taxes, some municipalities do have local sales taxes and may require a local license. Check with your local authorities to see if you need a sales tax permit.
Some states require you to go to tax services, such as consulting and legal advice. Be sure to contact your state tax office. Remember: You must file local taxes in addition to state taxes.
How to get a sales license
Wondering how to get a sales license in your state? Here’s a step-by-step guide:
1. Determine if you need a sales license
Do you have to pay sales tax on the goods or services you sell? If so, then you need a sales license. This applies regardless of whether your business is a limited liability company (LLC), a corporation, or a sole proprietorship.
If you have an online business, you must pay taxes in every state where you do business, not just where your business is located. So make sure you understand the laws of each state.
2. Register your business
Register your business under a state-approved law. Start by choosing a specific business name that is available in your area. Next, consider a business structure such as a sole proprietorship, LLC, or corporation.
Next, get an Identification Number (EIN) from the IRS website. Find out if you need any other licenses, permits, or taxes from federal, state, or local agencies.
Once you have done all of this, you are on your way to starting a legitimate business. Remember, registering your business creates a legal environment, and obtaining a business license ensures that you have the necessary authority to operate legally.
3. Complete the Resale License Application
Once your business is registered, you can apply for a resale license. You can usually find this form on your state’s Department of Revenue website or with the agency that administers the tax.
4. Provide the required information
When you fill out the application, you must provide details about your business, including:
- Your Social Security Number (SSN) or Identification Number (EIN)
- Legal document (such as a driver’s license)
- Your company name and contact information
- Business type
- Your North American Industry Classification System (NAICS) code
- Estimated monthly sales and sales tax
- Bank records
- The name and address of your accountant
- The names and addresses of all importers
5. Submit the application
After you complete your application, you can do so online, by mail, or in person. Online delivery is usually the fastest way.
6. Paying the applicable fees
Some states charge a licensing fee, while others do not. Some states, such as Nevada, may require a security deposit, especially if you have a history of tax noncompliance or if your business is considered high risk.
7. Wait for application approval
After you submit your application, you must wait for the state to approve it. This can take anywhere from a day to a few weeks, depending on your situation and how you file.
8. Get your reseller license or reseller certificate
Once approved, you will receive your reseller license. Keep it safe; you’ll need it to file your taxes or buy back your products. Some states provide licenses that last the entire life of the business, while others only last for a year or two. If they expire, you’ll need to reapply or renew them.
If you’re a Seller, some states may require proof of sale. This certificate allows you to purchase the products you want to sell tax-free.
NOTE: A resale license is required, but proof of resale is optional. A resale certificate allows you to purchase goods without paying sales tax because you will resell the goods and pay the tax to your customers.
9. Current business license
If you have a physical store, some states require you to display your sales tax license where customers and inspectors can see it.
10. File regular sales tax returns
When you have a sales license, you must collect sales tax from your customers and send the information to your state tax office. Keep proper records and pay your taxes on time to avoid penalties.
Remember, even if you don’t file state taxes when you file, you still need to file. If you don’t, you’ll be fined. Dealing with sales tax may seem simple at first. But as your business grows and you sell to different states, things can get complicated. Imagine spending hours in each state, it’s not a good use of your time.
Section Solution? Use tax software to track, file, report and file your taxes across the United States.
Types of businesses that need a seller’s permit
Most businesses in the United States require a sales license to sell goods or tax services, depending on the type of business and state regulations. Some of the businesses that typically require a retail license include:
Catering establishments
If you work in a restaurant or diner that serves food, you must be licensed to administer sales tax on these items.
Retail Company
If you are purchasing goods wholesale or manufacturing goods to sell to consumers online, in stores, or elsewhere and your state taxes the goods, you must obtain a permit.
Service-oriented businesses
Some states require service businesses such as hardware stores, barber shops, and rental companies to be licensed and pay sales tax. Please check with your state and local tax authorities to determine whether your business is a taxable service.
eCommerce business
If you sell products online, you’ll need a license. Regulations vary from state to state; some treat you like a brick-and-mortar store, while others require a special license for online business. You’ll have to pay taxes not just in your own state, but in every state your sales reach. This is called an “economic nexus.”
In most states, affiliate marketing starts at 200 transactions per year, or $100,000 in annual sales. If you plug in those numbers, you’ll need to collect and remit sales tax there, even if you don’t have a brick-and-mortar store in the state. Follow the baseline conditions and obtain permits as needed. A small business may not require a license in all states if it does not meet the requirements.
If you are a Shopify Plus business, you can use Avalara to identify financial relationships and easily file your taxes.
Do you need more than one resale license?
In some cases, you may need more than one resale license. You’ll need more than one resale license if:
- Operate your business in different states or jurisdictions with different sales tax laws
- Sell goods online to buyers in different locations (right of location)
- Engage in business or sell goods temporarily in different states. You’ll need an additional resale license for these sites
- Multiple legal entities, such as separate legal entities for your online store and your retail store
- Manage wholesale and retail businesses (you may need different licenses due to different tax laws)
- In states with special regional taxes (these states require a separate license in addition to the state license)
That may seem like a lot. That’s why Shopify Tax is here to help you pay your taxes. Watch the video below to see how Shopify Tax can make your life easier:
How much does it cost to get a sales license?
Fees can range from $0 to $100 depending on your state.
Out Of the 45 states that impose a sales tax, only 15 charge a sales tax. These fees range from $5 to $100. Florida charges a minimum fee of $5 and does not require a deposit if you apply by mail (it is free for online applications). Connecticut has the highest fee, with a one-time fee of $100. In Ohio, in-state sellers pay an application fee, while out-of-state sellers receive a free license.
Apply for a retail license for your retail business
Now that you know how to get a sales license, you are on your way to starting your business. You can handle the application yourself or hire a professional to help you.
Once you get your license and start growing your business, tax software is the best way to pay all your state and local taxes efficiently and on time. You can focus on more important things like growing your business.
