Is ein and sellers permit the same

The collection of state sales tax is at the root of two terms known to many business owners: the seller's permit and the resale certificate. Some states choose to use one term over the other, and some roll the two documents together as a single document. However, there is a distinction to be made between the two phrases that should be understood before applying for business permits through your state's department of licensing and regulations.

Seller's Permit or "Sales Tax" License

A seller's permit allows a state to identify a business as a collector of sales tax. Some states may call this permit a “sales tax” permit or license. Seller permits are required for sole proprietors, partnerships, limited liability companies and corporations that sell tangible property to the public as a wholesaler or a retailer. Tangible property is a physical item such as a toy, jewelry or a vehicle, and may also include construction materials for homes and repair.

Some states may require service-oriented businesses – like accountants, lawyers and therapists – to collect a tax, which would require the business owner to obtain a seller's permit. Some states require temporary sellers – like seasonal, holiday, rummage sale operators– to obtain a temporary seller's permit. Although most businesses with a resale certificate have a seller's permit, some manufacturers never sell a product for resale and only provide components for other products. These businesses may not be required to hold a seller's permit because they do not collect a sales tax.

Resale or Wholesale Certificate

Resale certificates identify a business as having the right to make certain nontaxable purchases. These include wholesale items for resale and items that are purchased for use in the manufacture of products for resale. Resale certificates prevent the double collection of sales tax on products. Sales tax is collected further down the road when the item is purchased by the final customer.

The seller of the original items will require the purchaser to provide a copy of a resale certificate to keep on file for tax purposes.

Paying Sales Tax

Any business that sells tangible property for direct resale needs a seller's permit to operate legally in any state. The seller's permit is usually free to obtain and provides the business with a permit number. Sellers typically collect the sales tax at the time the buyer makes a purchase from the business. The sales tax is then paid to the state by the business owner on a quarterly basis by placing the sales tax permit number on the state's tax payment form.

Buyers Using Resale Certificates

Businesses buying for resale purposes must provide a resale certificate to the seller to avoid paying the sales tax. A copy of the certificate is the proof the seller needs if the state ever questions why he did not collect tax for the purchase. Resale certificates usually require the business owner to identify the items they need to purchase tax-free to prevent them from purchasing other items. Some states may require a business to complete an application to obtain a resale certificate and others may provide a list of information the purchaser must provide in the form of a letter, memorandum or note to the seller.

Resale certificates are not usually transferable across state lines. Resale certificates also are known as nontaxable transaction certificates, sales tax exemption certificates, and sales and use tax resale certificates.

Before you can collect and remit sales tax in a state, you’ll need to obtain a sales tax permit, sometimes known as a sales tax license or seller’s permit. Not every business is required to collect and remit sales tax, so how do you know if you need a sales tax permit? And how do you go about getting one if you do?

The answers to these and other related questions vary depending on the state and the business itself. Read on to learn more.

Who needs a sales tax permit?

You need to get a sales tax permit and comply with sales tax laws in states where you have nexus, which is another word for connection.

Nexus used to be based solely on physical presence, such as employees, inventory, or an office in a state. Having a physical presence in a state still establishes nexus, but thanks to the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. (June 21, 2018), businesses with no physical presence in a state can establish nexus through economic activity, or economic nexus. Physical presence in a state is no longer requisite.

Every state with a general sales tax enacted economic nexus in the wake of the Wayfair ruling, as did Puerto Rico, Washington, D.C., and some local governments in Alaska. Yet it’s still possible to sell into a state and not establish nexus because all economic nexus laws provide an exception for remote businesses selling beneath the state’s economic nexus threshold. These thresholds vary from $100,000 in sales to $500,000 in sales and 100 transactions; details are available in this state-by-state guide to economic nexus laws.

An out-of-state business that meets a state’s economic nexus threshold must obtain a sales tax permit and start collecting and remitting sales tax according to state and local laws, just like an in-state business.

How do you get a sales tax permit?

Registering for a sales tax permit usually occurs in several stages, from the initial “Welcome, we want to make doing business in [state] as easy and friendly as possible,” to the more sobering “List of Required Forms.” In some states, additional permits or licenses may also be required.

Obtaining this all-important slip of paper is more challenging and expensive in certain states, and for certain businesses. It all depends on the state(s) in which you do business and whether you’re a temporary or permanent business, a brick-and-mortar business with one location or multiple locations in the state, a marketplace seller, or a direct online seller (with or without a physical presence in the state).

In California, for example, you need to apply for a temporary seller’s permit if you plan to make sales in one location for 90 days or less. Maryland’s temporary permits for temporary or seasonal sellers is good for up to 30 days. It’s important to confirm which type of permit a state requires for your type of business: While New York offers a temporary permit, short-term vendors that make sales at a show, entertainment event, flea market, or sporting event must obtain a regular permit; the temporary Certificate of Authority is only for vendors who “expect to make taxable sales in New York State for no more than two consecutive sales tax quarters in any 12-month period.”

It’s in every state’s interest to make the registration process as clear and straightforward as possible. Though consumers are required to self-report consumer use tax if a seller doesn’t collect applicable sales tax at checkout, it’s much harder for states to track down non-compliant consumers than non-compliant businesses.

That said, you may have to hunt for the information you seek, and the fact that different states call their permits by different names can make that a time-consuming process. For example, the California Department of Tax and Fee Administration (CDTFA) lists the California Seller’s Permit under “Permits & Licenses,” while on the New York State Department of Taxation and Finance website, you’ll find a link to “Register as a sales tax vendor” in the side menu under the “Businesses” heading. If you can’t find what you’re looking for, give the department of revenue a call.

After you apply, you’ll receive a permit in the mail that’s suitable for displaying in a conspicuous place, which is mandatory for businesses with a physical presence in the state. Different requirements may exist for remote sellers.

Pay attention to how long your sales tax permit lasts. Permits in some states (e.g., California and Texas) are good for as long as you own your business, while in other states (e.g., Connecticut and Pennsylvania), they must be renewed every one to five years. It all depends on the state. And, of course, these requirements are subject to change: Alabama requires annual license renewal as of January 1, 2021.

What’s the difference between a sales tax permit and a resale certificate?

As explained above, businesses typically need to acquire a sales tax permit before collecting sales tax on taxable sales. In obtaining a sales tax permit, a seller agrees to act as an agent for the state for the collection and remittance of sales tax, as prescribed by law.

A resale certificate allows a business to make tax-free purchases of taxable goods for resale. As the Nevada Department of Revenue explains, “The certificate represents the purchaser’s assurance that the property is for eventual resale and the tax will be charged then.” Resale certificates prevent goods from being taxed twice.

Although free to obtain, resale certificates do need to be updated periodically. Sellers that fail to obtain a resale certificate to validate tax-exempt sales could be held liable for the uncollected tax.

Do marketplace sellers need a sales tax permit?

If you sell through a marketplace, whether you need to register for a sales tax permit depends on a few factors, such as whether you have a physical presence in the state, if you make direct sales in addition to marketplace sales, and the volume of your sales.

Having a physical presence in a state creates nexus and a need for a sales tax permit, as noted above. Most states consider physical presence to include inventory held in a marketplace facilitator’s warehouse or fulfillment center, so it’s important for marketplace sellers to track the location of inventory. Not knowing you have marketplace inventory in a state won’t protect you from tax liability.

With the exception of Missouri, all states with a sales tax now require marketplace facilitators to collect and remit tax on behalf of their third-party sellers (Missouri’s marketplace facilitator law will take effect January 1, 2023). Some states, like Iowa, don’t require individual sellers to register for a sales tax permit or file returns if all their sales in the state are made through collecting marketplaces; yet a marketplace seller with a physical presence in Iowa would still need to register, as would a direct remote seller whose sales exceed Iowa’s economic nexus threshold.

Some states require marketplace sellers to obtain a sales tax permit and file a sales tax return even if they only sell through a registered marketplace and don’t have a physical presence or make direct sales in the state. That’s the case in Connecticut. See our state-by-state registration requirements for marketplace sellers for state-specific details.

In short, sellers that sell through multiple channels in a state, including their own ecommerce store, generally need to obtain a sales tax permit. Sellers that sell only through marketplace(s) that collect and remit on their behalf may or may not have to obtain a sales tax permit. It depends on the state. 

How much do sales tax permits cost (2022)?

Just as naming conventions for sales tax permits vary by state, so does the cost of doing business.

Below is a list of what permits cost in each state, as of January 2022. As with just about everything else related to sales tax, this information is subject to change. 

All states impose penalties, fees, and maybe even criminal charges on businesses that fail to register as required. So, before you start collecting sales tax, be sure to get any necessary sales tax permits right from the start. Avalara Sales Tax Registration can help with that process in all states.

Updated January 2022; originally posted March 2019.

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