Seller’s Permit and Collecting Sales Tax

If you sell taxable goods — and, in a growing number of states, certain services — you generally need to register for a seller's permit (also called a sales-tax license, sales-and-use-tax permit, or vendor's license, depending on the state) with your state tax agency before you make your first sale. Once you're registered, you collect sales tax from your customers at the time of sale and periodically remit it to the state. That money was never yours to spend — you're just holding it in trust for the state until you send it in.

This is one of the few areas of small-business compliance that is almost entirely a state (and sometimes local) matter, not a federal one. There is no such thing as a federal seller's permit or a national sales-tax rate. Every state sets its own rules for who must register, what's taxable, how often you file, and what the tax is called. Some states — Alaska, Delaware, Montana, New Hampshire, and Oregon — don't impose a statewide sales tax at all, though Alaska allows local governments to charge one. Because of this variation, the only reliable way to get the specifics right for your business is to go directly to your own state's department of revenue or taxation.

Do you need a seller's permit?

In most states, you need to register if you sell tangible goods at retail, and increasingly if you sell certain digital products or services, within that state. The classic trigger is having a physical presence there — a store, office, warehouse, employee, or inventory. But physical presence is no longer the only way a state can require you to collect its tax.

Economic nexus: selling into other states

In 2018, the U.S. Supreme Court decided South Dakota v. Wayfair, Inc., which upheld a state law requiring out-of-state sellers to collect that state's sales tax once they did enough business there — even with no physical presence in the state at all. This is called economic nexus. Following that decision, states across the country adopted their own economic-nexus laws, each with its own dollar-sales and transaction-count thresholds for when an out-of-state seller must register and start collecting.

In practice, this means that if you sell online and ship product into other states, you may owe a registration and collection duty in those states too, once your sales there cross that state's threshold — not just in the state where your business is located. The thresholds, the products and services that count toward them, and the registration deadlines all vary by state and do change over time, so don't rely on a number you saw somewhere else or a figure from a prior year. Check the threshold and the current rules directly with each state's tax agency (usually the department of revenue) before assuming you're in the clear — or out of it.

Marketplace facilitator rules

If you sell through a marketplace — Amazon, Etsy, eBay, Walmart Marketplace, and similar platforms — most states now require the marketplace itself to collect and remit sales tax on your behalf for sales made through that platform. This is often called a marketplace facilitator law. It can meaningfully simplify your compliance burden for those sales, because the platform is doing the collecting and filing for you on that portion of your business.

But marketplace facilitator collection doesn't necessarily erase every duty you have. Depending on the state, you may still need to register there, your marketplace sales may still count toward your economic-nexus threshold, and if you also sell directly through your own website, in person, or through a different channel, you're generally still responsible for registering and collecting on those sales yourself. Don't assume the platform has you fully covered — confirm with each state where you have sales what, if anything, you still need to do.

What to do

1. Figure out where you have a duty to collect. Start with your home state, then look at any state where you have a physical presence (employees, inventory, a warehouse) or where your sales volume might cross that state's economic-nexus threshold.
2. Register before you start collecting. Apply for a seller's permit through each relevant state's tax agency — usually the department of revenue, department of taxation, or comptroller's office. There is typically an online application. Some states charge a registration fee and some don't; because this varies and changes, confirm the current fee, if any, with the state agency rather than relying on a figure from elsewhere.
3. Know what's taxable in that state. Which goods and services are taxed, and which are exempt (like groceries or prescription drugs in some states), varies widely. If you sell to other businesses for resale, you'll typically need to collect and keep resale exemption certificates rather than charging tax on those sales.
4. Collect the tax at the point of sale. Your point-of-sale system, invoicing tool, or e-commerce platform should calculate and add the correct tax based on where the sale is sourced. Rates vary not just by state but often by city and county, so don't assume one flat rate applies everywhere you sell.
5. Keep the collected tax separate. Treat it as money you're holding for the state, not revenue. Many owners find it easiest to route collected sales tax into a separate account so it's never accidentally spent as if it were income.
6. File and remit on the state's schedule. States assign a filing frequency — monthly, quarterly, or annually — usually based on your sales volume, and that frequency can change as your business grows. Filing deadlines and any penalties for a late or missed return vary by state, so confirm your specific due dates and requirements with your state tax agency rather than assuming a general rule applies to you.
7. Renew or update your permit as required. Some states require periodic renewal or notification if your business information changes; others don't. Check your state's requirements.

Why "it's not income" matters

Sales tax you collect from customers is not your revenue — it belongs to the state from the moment you collect it. That distinction matters for how you should think about it day to day, and it can matter a great deal if things go wrong: states generally treat unremitted sales tax as trust-fund money, similar in concept to how the federal government treats withheld payroll taxes, and owners or other responsible people can potentially face personal liability for unpaid sales tax even when the business itself is an LLC or corporation. This isn't a case where limited liability protection reliably shields you — spending collected sales tax on business expenses instead of remitting it is one of the more serious mistakes an owner can make, even if unintentional.

Services, and the trend toward taxing more of them

Historically, most states taxed goods but not services. That is changing — a growing number of states now tax specific categories of services (things like digital products, certain professional or personal services, or software-as-a-service), and which services are covered varies a great deal from state to state and continues to shift. If your business is service-based, don't assume you're automatically exempt from sales tax; check directly with the tax agency in each state where you do business.

If you're just starting out

If you're setting up your business for the first time, your seller's permit registration is separate from — and usually comes after — your basic business setup: choosing a business structure, getting an EIN if you need one, and registering your business name with your state. If you're weighing how to structure the business itself, that's a separate question from sales tax registration, and the two shouldn't be confused. And if your business is already carrying more debt than it can handle, sorting out sales-tax compliance going forward doesn't erase past-due obligations — that's a conversation for a qualified attorney or CPA, and for business debt specifically, rather than something to work through alone.

Multi-state sales tax compliance — figuring out where you have nexus, what's taxable, and how to file correctly in each state — gets complicated quickly once you sell in more than a state or two. A CPA, a state Small Business Development Center, or SCORE (both free, SBA-affiliated resources) can help you sort out your specific situation before you get in over your head.

Key takeaways

• If you sell taxable goods, or in many states certain services, you generally must register for a seller's permit with each state where you have a duty to collect — not with the IRS.
• Collected sales tax is trust-fund money you hold for the state, not business income; spending it can create personal liability even behind an LLC or corporation.
• Economic nexus after South Dakota v. Wayfair means selling into other states, even with no physical presence there, can create a registration and collection duty in those states once your sales cross that state's threshold.
• Marketplace facilitator laws often shift collection duty to platforms like Amazon and Etsy for sales made through them — but confirm what that does and doesn't cover for your specific situation.
• Rates, thresholds, taxable categories, filing frequency, and deadlines all vary by state and change over time — always confirm current details with your state's tax agency.

This article is general information, not legal, tax, or financial advice, and reading it doesn't create an attorney-client or accountant-client relationship. For decisions about your specific business, talk with a qualified attorney or CPA, or contact your state tax agency directly.