When Do You Need One?

So how do you get a seller’s permit? It varies state to state. Most states have a fairly simple online form to fill out to apply, and all you should need is your business info and EIN. Be wary of applying for seller’s permits in every state up front though - since obtaining a seller’s permit puts you on the hook for collecting, filing, and paying sales tax for that state. 

In general, you will likely need to get a seller’s permit for the state your business is located in if you want to do any wholesale buying and reselling. However, you might not need to get a seller’s permit in other states quite yet. In the US, you only need to collect and pay sales tax (get a seller’s permit) in a state where you have an “established nexus”. The general conditions for establishing a nexus in a state are as follows:

• “Maintaining, occupying, or using permanently or temporarily, directly or indirectly or through a subsidiary, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business.”

This refers to your business having a physical presence in a given state. If you have an in person storefront in a state, you need a seller’s permit for that state, and have to collect and pay sales tax. 

• “Having a representative, agent, salesman, canvasser, or solicitor operating in this state under the authority of the retailer or its subsidiary on a temporary or permanent basis.”

This more refers to people physically located in a state selling your product. For example, having a salesman going door to door to sell your product in multiple states would constitute a nexus in those states, thus requiring a seller’s permit and the accompanying responsibilities. Note: this is specific to employees selling your product. If you have remote employees doing other administrative jobs unrelated to selling the product this does not necessarily apply. 

• “Any seller which does not have a physical presence in this state shall remit sales or use tax, if the seller meets either: 1. Gross sales from the sale of taxable items delivered in this state exceed $100,000; or 2. The seller sold taxable items for delivery in this state in 200 or more separate transactions”

This is the most common nexus-establishing threshold, particularly for ecommerce related businesses. It’s fairly self explanatory - if you’re selling products online (yes, even dropshipping), and you get more than 200 orders or $100,000 in revenue from any one state, you need to get a seller’s permit and collect and pay sales tax for that state. 

If you’re using Shopify, they will actually let you know once you’ve hit the established nexus threshold in a given state, and prompt you to start collecting sales tax. If you’re using another provider, it’s important to keep an eye on your state-by-state revenues and the laws of that given state. Most states have adopted the 200 transactions/$100k revenue benchmark, but a few states have adjusted those values slightly. 

One somewhat exemption to requirements to collect and pay sales tax CAN be digital products. I say “can” because every state is totally different in this matter, with some states saying digital products are completely exempt, some taxing only software and games, and others taxing everything as if it were a physical product. When it comes to collecting sales tax for digital products, do your own research, and it is likely worth a call to your local sales tax attorney for advice given the nature of your specific product.