When business owners think about sales tax compliance, filing returns is at the forefront. However, there’s another instrumental part of sales tax that must come before the filing begins: registrations.
Registering for sales tax typically involves completing and submitting an online applications with each state where a business meets the economic nexus threshold. These registrations provide a company with a state sales tax identification number and permit, both of which allow the company to legally collect and remit sales tax in that state. Without registering, businesses risk facing penalties, interest charges, and dreaded audits.
The sales tax registration process can be complex, especially for ecommerce sellers who ship to multiple states. Each state has its own registration procedure, forms, and requirements. For these reasons and more, many business owners choose to outsource their sales tax registrations to skilled, experienced accountants and sales tax-centred companies, like SalesTaxSolutions.US.
This content will provide an overview of the SalesTaxSolutions.US registration process for new and existing clients, and answer some common questions:
- How long do registrations take?
- At what point do I need to register for sales tax in a state?
- Can I register to collect sales tax in a state even if I don’t reach nexus?
- How soon can I begin collecting sales tax after registrations?
- And more!
Before registrations can begin, company information needs to be gathered to ensure that the applications are correct.
For new companies that are just starting with SalesTaxSolutions.US, we will get to know you with an intial consultation with our founder, Christopher Stout, where you can outline your sales tax needs and goals, as well as what you are wanting to outsource to us. If you choose to move forward with us, we will set up your company on our very own client portal.
Following this, we will send you an online business questionnaire. Along with the questionnaire, we request articles of incorporation, a copy of a valid ID, as well as owner/officer information. These are all essential components of registrations. After the questionnaire is completed, we will schedule a welcome meeting to finalize the details and answer any further questions you might have.
Existing SalesTaxSolutions.US Clients
The goal for any business is for sales to increase over time. But with more sales comes the potential to exceed nexus thresholds. Companies that sell across the United States, Canada, and Puerto Rico can hit nexus at any time which will establish sales tax responsibilities.
If you are an existing SalesTaxSolutions.US client that has hit nexus in a new state, or are wanting to preemptively register for sales tax in additional states, you can reach out to us anytime at [email protected]. If you have notices from a state, ensure that you attach them in the email.
Our cost per registration is $125, with a $25 deduction for each if you decide to have us file your returns as well. This does not include potential state fees.
Before registering for sales tax in a state, it’s important to understand nexus and what business activities trigger a sales tax collection obligation.
What is Nexus?
Nexus refers to a business having a presence in a state that requires it to register, collect and remit sales tax. Nexus can be established through physical presence, such as having an office location, employees, inventory or property in the state. It can also be established through economic nexus, which involves meeting certain revenue or transaction thresholds.
Nexus triggering activities include:
- Having an office, warehouse, distribution center or employees located in a state
- Storing inventory in a warehouse or fulfillment center
- Making a certain amount of sales into a state
- Running delivery vehicles within a state
- Having traveling sales solicitors
What if I only make sales online?
Businesses that are purely ecommerce based – or those that don’t have a physical location in a state – may still need to collect and remit sales tax if they surpass economic nexus laws. Economic nexus is based on set revenue or transaction thresholds which, when met, trigger sales tax obligations. All states that collect sales tax have economic nexus laws in place, but they can vary widely. Whereas Virginia expects businesses who exceed $100,000 or 200 transactions into the state within the past year to collect and remit sales tax, California doesn’t require it until sales reach or exceed $500,000.
It’s important for businesses to carefully evaluate any nexus triggering activities in the states they operate in. Exceeding nexus thresholds without promptly registering for sales tax collection and remittance can result in penalties. Consulting with a sales tax expert can also help determine nexus.
Do I have to meet nexus thresholds to register for sales tax?
Sometimes, a business might want to be proactive in sales tax collection and register before nexus thresholds are met. As long as a company is making sales in a state, it can choose to register at any time. However, it is important to realize that as sales increase over time, the frequency with which returns will need to be filed may change.
Information Needed to Register
When registering for sales tax with SalesTaxSolutions.US, we will need to have certain information about your business ready. This includes:
When registering, we will need to provide your business’s Employer Identification Number (EIN), legal name, and any DBAs (Doing Business As names) that your company uses. This establishes the official entity that will be registered.
Each state registration will require personal information for the business’s owner(s) and officer(s), including full legal names, titals, ownership percentages, social security numbers, and contact details like addresses and phone numbers. Understandbly, providing this information may be uncomfortable, but it is necessary to the registration process and is never shared with anyone outside of the team members who are registering your business.
Description of Business Activities
This is an overview of what your business does, including details like products/services offered and NAICS codes. Providing an accurate description helps ensure that the business tax profile is configured properly, and also determines if your company needs any special exemption or resale certificates.
To determine nexus and how often your business will need to file, (aka filing frequency), you will need to provide estimated sales or tax liability. Some states ask for a monthly estimate, others quarterly or annually. This estimate is just that, an estimate, and does not need to be exact. If your tax liability ends up being more or less than what was predicted, the state will update your filing frequency accordingly.
Once we have completed initial setup procedures, business information has been received and invoices have been paid, the actual process of completing and submitting registrations begins. The timeframe for completing registrations can vary widely. The main factors that impact registration time include:
- Number of States – more jurisdictions means we will need more time to submit every application.
- Business Structure – some business structures require more detailed registrations, such as if the company does wholesale, alcohol/tobacco sales, or other sales/services that require certifications.
- Responsiveness – the faster we receive your information, the quicker we can begin registrations. During the process, states may also request additional information that we do not have on hand. It is a team effort to ensure that accurate and necessary details are made available to the State Department of Revenue.
- Time of Year – end of quarters or busy seasons slow not only state processing but our availability to complete registrations.
- State Procedures – some sales tax registrations process immediately, whereas others take several weeks.
- Start Date – for each new registration, the start date will need to be the beginning of the current or an upcoming month. States that have sent notices or require immediate sales tax collection will receive priority.
As with anything in sales tax, each state has its own processes and procedures. Some are simple, whereas others are complex. These differences might include:
- Some states allow businesses to register for multiple local jurisdictions in one combined registration, while others require separate registrations.
- The type of sales tax permit issued can differ – some states use a standard sales and use tax permit, while others issue specialized permits for specific activities.
- The documentation and information required upfront. Some states request business licenses, articles of incorporation, and even additional details on inventory, assets, and transactions.
- Certain industries or products may need additional licensing.
- The time for registrations to process ranges from instant to several weeks.
To better understand how each state’s sales tax registration varies, here are some specific examples:
Obtaining a seller’s pemit from California doesn’t cost anything, but it can be very time consuming depending upon the nature of the business. For example, if you have multiple locations in California, each will need to be registered individually. Once the application has been submitted, processing takes 2-3 business days and a permit will be available on the electronic filing account that is created during registration.
Idaho also doesn’t charge for sales tax applications, but the registration can take 4-6 weeks to fully process. There are also specific licenses that apply to Contractors, Travel & Convention, and other business types. Additionally, certificates are mailed, which is why the processing time is longer than for many other states.
One of the more expensive sales tax licenses, Washington charges $90 for sales tax registrations. After the application has been filed and paid, expect to wait 10 business days for a certificate and a welcome letter to come in the mail. This letter is necessary in setting up an electronic filing account.
Managing Sales Tax Compliance
Once registered for sales tax, businesses must comply with ongoing filing and remittance requirements. This involves understanding each state’s policies around:
Sales Tax Filing Frequencies
Most states require monthly or quarterly sales tax filings, but some have annual or even semi-annual filing options. Typically, the type of filing frequency assigned to a business depends upon how much monthly or annual tax liability the business has in that state. Sales tax reports must be filed even if there have been no sales or tax to remit.
Sales tax collected must be remitted to state Departments of Revenue (DOR), and is typically done electronically through DOR portals. Some states, like California, may also require monthly prepayments before filings are due.
Detailed recordkeeping is essential for sales tax compliance. States require that detailed transaction records, receipts, invoices and other documents are retained for a certain time period in case of audit, typically 3-4 years.
How Can I Make Sales Tax Compliance Easier?
Utilizing a service like SalesTaxSolutions.US can simplify compliance. Our team has over 20 years of experience in all things sales tax, from registrations to filings, nexus reviews to audit assistance. Leveraging our technology and expertise has been key for hundreds of businesses collecting taxes in multiple states.
Proper compliance procedures not only ease your burden, but reduce audit risk and prevent penalties. Working closely with a sales tax provider like us can help your business establish best practices based on your operations and requirements. Managing compliance may seem complex, but taking the right steps can make the process seamless.