Sales tax is administered state by state, with local add-ons layered on top. There is no federal sales tax and no single national registration. Five states have no general statewide sales tax at all — Alaska, Delaware, Montana, New Hampshire and Oregon — though local sales taxes exist in parts of Alaska.
What the permit is
Called a seller's permit, sales tax permit, sales and use tax licence or resale certificate depending on the state, it does two things: it authorises you to collect sales tax, and it registers you to remit it. It is usually free or low-cost, and issued by the state revenue department rather than the Secretary of State.
Register before the first taxable sale. Tax you should have collected but did not remains your liability — you generally cannot go back and charge past customers, so it comes out of your margin along with interest and penalties.
Two questions decide whether you need one
1. Is what you sell taxable in that state?
Tangible goods are taxable in most states by default, with carve-outs that differ sharply — groceries, prescription drugs and clothing are common exemptions in some states and fully taxable in others.
Services are where assumptions go wrong. The old rule of thumb that "services are not taxed" has eroded considerably. States variously tax repair and maintenance, landscaping, cleaning, pet grooming, personal care, data processing, and digital products such as downloaded software or streaming access. Some tax a specific enumerated list; a few tax services broadly. Check the enumerated list for your state rather than generalising.
2. Do you have nexus in that state?
Nexus is the connection that gives a state authority to make you collect. It comes in two forms.
| Type | What creates it |
|---|---|
| Physical nexus | An office, shop, warehouse or inventory in the state; employees or contractors working there; sometimes trade show attendance or deliveries in your own vehicles |
| Economic nexus | Exceeding a sales threshold in that state, regardless of physical presence. Thresholds are set per state and have been revised repeatedly since 2018 — check current figures rather than relying on a remembered number |
Economic nexus came out of the Supreme Court's 2018 decision in South Dakota v. Wayfair, which allowed states to require collection from sellers with no physical presence. Every state with a sales tax has since adopted some version.
Storing stock in a third-party fulfilment warehouse can create physical nexus in that state even if you have never been there. If you use a fulfilment network that moves inventory between facilities, find out which states hold your goods.
Marketplace facilitator rules
If you sell through a large marketplace, the marketplace is generally required to collect and remit sales tax on those transactions itself. That removes a substantial burden, but two things survive it:
- Sales through your own website or in person are still yours to handle.
- Some states still expect you to be registered and to file returns reporting marketplace sales, even at zero tax due.
Resale certificates
A resale certificate lets you buy inventory without paying sales tax, on the basis that tax will be charged when you sell it on. It is generally tied to your sales tax permit. Two rules matter: only use it for goods you genuinely intend to resell, and keep the certificates your own customers give you — in an audit, an unsupported exempt sale usually becomes a taxable one.
After registration
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Charge the right rate
Most states are destination-based: the rate follows where the customer takes delivery, combining state, county, city and special district rates. Rates change on fixed schedules, so a rate table needs maintaining.
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File on your assigned frequency
Monthly, quarterly or annually, assigned by the state and revised as your volume changes. Most states require a return even for a period with no sales — a missed zero return still attracts a penalty.
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Keep the money separate
Sales tax collected is not revenue. Treating it as working capital is one of the more common ways small businesses end up with a liability they cannot clear.
Questions owners ask
I only sell online. Do I still need a permit?
Yes, at minimum in your home state, and in any other state where you cross the economic nexus threshold or hold inventory.
What if I sell only to other businesses?
B2B sales are not automatically exempt. They are exempt when the buyer provides a valid exemption or resale certificate, which you must collect and retain. Without the certificate the sale is treated as taxable.
Do I need to register in all fifty states?
Almost certainly not. Register where you have nexus. For most small businesses that is one state, sometimes a handful.
Where to check
- Your state department of revenue — the authority for rates, taxability and thresholds
- Streamlined Sales Tax Governing Board — for member states
- SBA — pay taxes