A seller’s permit is required for most businesses that plan to sell products to the public. Issuing these permits helps states and local municipalities know who to collect sales tax from. Permits are issued at the state and (in some cases) local levels, which also means that the types of businesses required to obtain a seller’s permit can vary, depending on the governing authority. Here’s the gist of it:
What is a seller’s permit?
A seller permit is a state or local license that allows businesses to sell tangible items to the public. This can include retail items like toys, cars, or cowboy boots—but can also include supplies, like lumber and paint. A seller’s permit is also known as a “sales tax permit” or a “sales tax license.”
Seller’s permits can get a little tricky when it comes to certain businesses. For example, some states require businesses that provide a service (i.e. law, accounting, therapy) to obtain a seller’s permit, even if they don’t provide any tangible items. And in some states, temporary businesses—like seasonal shops—are required to obtain a temporary seller’s license. To make sure your business has the appropriate license(s), it’s best to visit your secretary of state’s website.
How do I get a seller’s permit?
Seller’s permits can be issued at the state and/or local level. (In some cases, sellers need both state and local licenses.) When you’re ready to get a seller’s permit, a good place to start is your secretary of state’s office—or the equivalent business authority in your state. They will typically also be able to provide you with information about seller’s permits on the municipal level.
Seller’s Permit vs Resale Certificate
Seller’s permits and resale certificates can often be confused for the same thing. However, though they both pertain to collecting sales tax, they serve very different functions. The main difference between the two documents concerns when sales tax gets collected.
For example, a seller’s permit allows a business (let’s call it Business A) to sell items to the public, which triggers sales tax that gets collected by the government. However, if Business A purchased items for resale from Business B, Business A would have to pay sales taxes on the items upon purchase and collect sales taxes when those items got sold—this is double taxation. To avoid double taxation, resale certificates allow businesses like Business A to purchase resale items from a company like Business B (usually wholesale) without paying sales tax.
In many cases, a business will need both a seller’s permit and a resale certificate. To find out whether you need a seller’s permit or a resale certificate (or both), it’s a good idea to seek the advice of a business attorney or CPA.