What Is a Sales Tax Number and How Do You Get One?

A sales tax number, often called a seller’s permit or resale license, is a government-issued identification number for businesses. This number authorizes a business to legally collect sales tax from customers on taxable goods or services and ensures the state can track sales tax compliance and revenue. It is a requirement for businesses operating in states that impose sales tax, allowing them to act as intermediaries in collecting and remitting these taxes to the proper authorities.

When a Sales Tax Number is Needed

A sales tax number becomes necessary when a business establishes “nexus” in a state, which signifies a commercial connection triggering a sales tax collection obligation. Traditionally, nexus was based on physical presence, such as having a physical store, an office, a warehouse, or employees in a particular state.

With the rise of e-commerce, states have expanded nexus definitions to include “economic nexus,” based on a business’s sales volume or transaction count within a state, regardless of physical presence. Most states have adopted economic nexus thresholds, set at a certain dollar amount of sales or a specific number of transactions within a calendar year. Businesses selling tangible personal property or certain services generally need a sales tax number in states where they meet these thresholds.

Applying for a Sales Tax Number

The application for a sales tax number is managed by a state’s department of revenue or equivalent tax agency, with online portals being the preferred method for submission. Before beginning the application, businesses should gather specific information. This includes the business’s legal name and address, its Federal Employer Identification Number (EIN) or the owner’s Social Security Number.

Applicants also need to provide details about their business entity type and a clear description of the goods or services they intend to sell. An estimated start date for sales activities and information about the business owners or officers are also required. While some states may charge a small application fee, many states offer free registration.

Responsibilities After Obtaining a Sales Tax Number

Once a business has its sales tax number, it assumes ongoing responsibilities related to collecting, reporting, and remitting sales tax. Businesses must accurately collect the applicable sales tax from customers at the point of sale. The sales tax rate combines a state rate with any local taxes.

Filing sales tax returns is a regular obligation, with frequencies set to monthly, quarterly, or annually, depending on the business’s sales volume. For example, monthly filers often submit returns by the 20th of the month. Even if no sales or tax were collected during a period, a “zero report” is required. Businesses must remit the collected sales taxes to the state tax authority by the designated due dates. Maintaining accurate and comprehensive sales and tax records for at least four years is also a standard requirement.

Understanding Resale Certificates

A resale certificate is a distinct document that serves a different purpose than a sales tax number. It allows businesses to purchase items they intend to resell without paying sales tax on that initial purchase. This prevents “double taxation.”

To use a resale certificate, a business provides it to its suppliers, certifying that the purchased goods are for resale. The certificate includes:

• The purchaser’s business name and address
• Their sales tax permit number
• A description of the items
• A statement confirming the intent to resell

This means the sales tax burden is shifted to the ultimate customer who consumes the product.