Sales tax registration is a critical step for any business that sells taxable goods or services in the United States. Because sales tax is governed at the state level, each U.S. state has its own rules, thresholds, and registration processes. This guide provides a comprehensive overview of how to register for sales tax in each state and what businesses need to keep in mind while doing so.
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Understanding Nexus
Nexus is the connection between your business and a state that triggers the obligation to collect and remit sales tax. Nexus can be physical (e.g., office, employees, warehouse) or economic (e.g., reaching a certain sales threshold in a state).
After the 2018 Supreme Court decision in South Dakota v. Wayfair, Inc., states can impose sales tax collection responsibilities on remote sellers once they cross specific economic nexus thresholds.
Step-by-Step Process to Register for Sales Tax
1. Determine Nexus in Each State
Before registering, you must determine in which states your business has sales tax nexus. This can result from:
- Physical presence (office, inventory, employees)
- Exceeding economic thresholds (usually $100,000 in sales or 200 transactions annually)
- Affiliate or click-through relationships
2. Visit the State’s Department of Revenue Website
Each state manages sales tax through its Department of Revenue (or equivalent). The websites provide access to sales tax registration forms and portals. Registration is usually free but requires business details like FEIN, business address, NAICS code, and ownership structure.
3. Complete the Online Application
You’ll typically need the following information:
- Legal business name and DBA (if applicable)
- Federal EIN (Employer Identification Number)
- Business type and structure
- Business addresses and locations
- Estimated sales volume in the state
- Responsible parties (owners/officers)
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4. Receive Sales Tax Permit or Certificate
Once registered, the state will issue a Sales Tax Permit or Certificate of Authority. This document authorizes your business to collect sales tax. In most states, you are not allowed to collect tax until this permit is granted.
5. Set Up Tax Collection on Your Platforms
After registration, ensure your e-commerce platforms (e.g., Shopify, Amazon, Etsy) and accounting systems are updated to collect the correct sales tax rates for each state and locality. Each state has specific rate combinations depending on jurisdiction.
6. File Sales Tax Returns Timely
After registration, states will assign your business a filing frequency—monthly, quarterly, or annually—based on your anticipated sales volume. Failing to file even “zero” returns can lead to penalties.
Common State-by-State Registration Nuances
California
Registration is done through the California Department of Tax and Fee Administration (CDTFA). California has one of the most complex rate systems due to local and district taxes.
Texas
Register via the Texas Comptroller’s website. Texas requires remote sellers to collect a simplified single local use tax rate unless they choose to collect actual local rates.
New York
Businesses must register with the New York State Department of Taxation and Finance. Nexus can be triggered through affiliate and marketplace relationships.
Florida
Registration is done through the Florida Department of Revenue. Florida applies a uniform 6% state rate with additional local surtaxes.
Illinois
Registration is through the MyTax Illinois portal. Illinois uses both origin and destination sourcing depending on seller location.
Colorado
Known for having a home rule system, where local jurisdictions manage their own tax collection. Sellers must register separately with the state and, in some cases, with home-rule cities.
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Marketplace Facilitator Rules
Many states require marketplaces like Amazon, Walmart, or Etsy to collect and remit sales tax on behalf of third-party sellers. If all your sales are through these platforms, registration may not be required—but it’s essential to verify with each state’s rules.
Keeping Registration Details Updated
Once registered, businesses must keep their information current. Changes in business name, address, responsible parties, or nexus status should be reported to the state immediately.
Consequences of Not Registering
If you fail to register in a state where you have nexus, you may be liable for unpaid sales tax, interest, and penalties. States may also revoke your sales tax permit for non-compliance.
Conclusion
Sales tax registration is a nuanced and ongoing compliance obligation for businesses operating across state lines. As tax laws evolve, particularly for e-commerce sellers, ensuring accurate and timely registration is critical.
PEAK Business Consultancy Services is trusted by U.S. CPA firms for comprehensive sales tax support—from initial registration to monthly compliance. Our experienced India-based team is available to act as an extension of your firm’s backend operations. Partner with PEAK BCS today.
