A seller’s permit is the portal a business must go through to start a business. The permit allows you to sell products or services or even lease, enabling you to collect a sales tax. Governmental units require a seller’s permit from New York City to a Los Angeles seller’s permit or license. With the permit, a state or governmental unit controls the sales tax collecting and reporting procedure. The sales tax is collected at the time the sale is made.
Application for Seller’s Permit
As an example, an application for a Los Angeles seller’s permit is made through the California Department of Tax and Fee Administration (CDTFA). The CDTFA administers tax and fee programs where a business must register for a permit. The application may be made online, or you can hire a document preparation service to file for the permit. California also requires a seller’s permit for sales made through Internet auction houses.
A seller’s permit has been referred to, depending on your state, as a:
* Reseller number
* ID number
* State tax ID number
* Resale ID
* Reseller license permit
* Certificate of authority
* permit license
Sellers Permits and Sales Tax and Resale or Wholesale Certificates
After obtaining the permit, the business collects the sales tax that varies from state to state from its customers and pays the aggregate amount collected to the state. In this regard, the collected sales tax has the nature of a trust fund tax because the tax is collected for the benefit of the state. A seller’s permit must be obtained even if you do not know whether the state requires a license for products, services even on shipping charges, including gift wrapping. Alaska, Oregon, Montana, Delaware, and New Hampshire do not have sales taxes, while the states, Montana and Alaska, permit the collection of local sales taxes requiring local seller’s permits but not state permits. While Oregon, New Hampshire, Delaware, and Alaska do not require either state or local sales tax or permits. A business can sell only to resale a product. Selling or reselling is treated differently as a matter of law. A business can buy a product to wholesale the product creating a resale or wholesale certificate. Many states do not tax the purchase of a product for resale only. The business must obtain from the state a resale certificate to avoid taxation of a resale of a product. Each state’s taxing authority must be consulted to distinguish between a seller’s permit and a resale or wholesale certificate.
If a state requires a Seller’s Permit and you fail to do so, you must take out of your pocket the amount of sales tax owed because no tax can be collected directly from the consumer without the permit. The damage to you and your business can also include penalties, fines, and possible criminal prosecution.