Though most businesses in California need a seller’s permit to get started with the company’s operations, there are entities who might not need a seller’s permit. If you are a corporation, an LLC, or any other business who plans to sell or lease taxable goods and services, you must obtain a California seller’s permit for each business location before you get involved in sales.
What is a Seller’s Permit?
A seller’s permit, also called as sales and use tax, is a business license which allows you to collect taxes on taxable goods and services. A seller’s permit helps the state government to identify existing businesses with taxable properties. Business owners often misunderstand a seller’s permit to a resale certificate which can often put them in trouble.
Benefits of a Seller’s Permit
- Allows you to collect sales tax.
- Easily access wholesale goods. There are cases when a wholesaler doesn’t work with a company who does not have a seller’s license.
- With a seller’s permit, you qualify for wholesale discounts.
- Having a legitimate seller’s permit protects you from legal ramifications.
- Save sales tax on supplies.
Does Your Business Need a California Seller’s Permit?
The California Department of Tax and Fee Administration describes two criteria clarifying which businesses need a seller’s permit.
The official website of the department states ‘If you are ‘engaged in business’ in the state and if the tangible property you are selling or leasing would be subject to sales tax, your business requires a California seller’s permit.
A copy of your seller’s permit must be displayed at each location where sales of taxable products are made. Make a note that for each location where sales of taxable items will be made, your business would require a separate California seller’s permit.
Well, there are states who don’t follow the system of sales tax. Here are the names:
- New Hampshire
How to Apply for a California Seller’s Permit?
To get a seller’s permit, the business is required to file a California Seller’s Permit Application with the California State Board of Equalization. You just have to fill in the basic information about your business and the department will then process the application.
The business owner is required to submit the following information at the time of registering:
- The federal taxpayer identification number or company’s EIN (if applicable)
- Social security number of each business owner
- A photocopy of the applicant’s driver license
- Bank details of the company’s bank accounts
- Basic details of each of the company’s suppliers
- Details of the members who will handle the company’s tax records
- Description about the types of products and services you wish to sell
- Expected average monthly sales of the business
- You need to provide the previous sales permit details if you have purchased an existing business.
Once you have successfully registered with the department, your seller’s permit will be issued within 14 days by mail.
Getting your seller’s permit directly from the state could be time-consuming and tiresome. There are some online websites which provide document filing services where you just have to pay some amount and they file all the paperwork with the state authorities on the behalf of your company.
If you are already caught up in the other important aspects of your business formation, you can register with a document filing company and get your business formation documents at your doorstep.
Once you get your seller’s permit from the state, your business should keep the following things in mind:
- Maintain proper records of sales and purchases.
- File a sales tax return, even if your business was engaged in no sales.
- Timely pay the sales tax due on the retail sales.
- Inform the State Board of Equalization about any changes made to the business.