Sales Tax Registration in the US: State-by-State Basics for New Businesses
The United States has no national sales tax. Instead, most states, and many cities and counties within them, impose their own, each with its own registration process, rates, rules and filing calendar. For a new business, the first question is not “what is the rate?” but “where do I need to register, and when?”
This guide covers sales tax registration for new businesses: when registration is required, the difference between physical and economic nexus, what information states ask for, how to register step by step, and what happens after you receive a permit.
When Does a New Business Need to Register for Sales Tax?
A business generally needs to register for a sales tax permit in a state before it starts making taxable sales there if it has nexus in that state, either through a physical presence (an office, employees, inventory or other activity) or by exceeding the state’s economic nexus threshold for remote sales. Registration is done with each state’s tax agency, usually online, and most states expect you to register before you collect any tax.
The Basics: How US Sales Tax Works
- State by state: 45 states and the District of Columbia have a statewide sales tax. Alaska, Delaware, Montana, New Hampshire and Oregon do not, although Alaska allows local sales taxes.
- Local taxes: many states let cities, counties and districts add their own rates, often administered by the state.
- Taxability varies: a product taxable in one state may be exempt in another, especially for services, software, digital goods, food and clothing.
- The seller collects: once registered, the seller collects tax from customers and remits it to the state, so uncollected tax can become the seller’s own cost.
Nexus: The Trigger for Registration
| Type of nexus | What creates it | Example |
|---|---|---|
| Physical nexus | Offices, stores, warehouses, employees, inventory (including in third-party fulfilment centers), and in some states contractors or trade show activity | A company stores inventory in a fulfilment warehouse in another state |
| Economic nexus | Sales into a state above a threshold set by that state, following the 2018 South Dakota v. Wayfair decision | An online seller exceeds a state’s annual sales threshold |
| Marketplace sales | Sales through marketplace facilitators, which generally collect tax for sellers; some states still count these sales toward the seller’s own threshold | A seller uses Amazon in addition to its own website |
Swipe the table sideways to see all columns.
Economic nexus thresholds are not uniform. California and Texas use $500,000; New York uses more than $500,000 in sales and more than 100 sales; Florida and Washington use $100,000. Some states count only taxable sales, some count all gross sales, and some include marketplace sales. Our guide to sales tax nexus covers these differences in detail.
Where a New Business Usually Registers First
- Your home state, if you are based in a state with sales tax and sell taxable goods or services there.
- States where you have physical presence, such as employees, offices or stored inventory.
- States where you cross economic nexus thresholds, which you should monitor as sales grow.
Having customers in a state is not, by itself, a reason to register. Registering where you have no obligation creates filing duties you then have to maintain or formally close.
What You Need Before Registering
- Legal business name, any trade name (DBA) and entity type
- Federal Employer Identification Number (EIN)
- Business address, mailing address and locations in the state
- Formation details and, for out-of-state entities, any state business registration
- Names and identification details of owners, officers or responsible persons
- NAICS code and a description of products or services
- Date you started, or will start, making sales in the state
- Estimated monthly or annual sales in the state
- Bank account details, in some states
Responsible-person questions can be a hurdle for foreign-owned businesses whose owners do not have US identification numbers; check each state’s requirements in advance. If you do not yet have an EIN, see our guide on getting an EIN for a foreign-owned US LLC.
How to Register: Step by Step
- Confirm nexus in the state, physical or economic.
- Confirm taxability of your products or services in that state.
- Go to the state tax agency’s official website, such as the California CDTFA, Texas Comptroller or New York Department of Taxation and Finance. Some states can also be registered through the Streamlined Sales Tax registration system.
- Complete the application with your business details and expected start date.
- Pay any registration fee or security deposit if the state requires one; many states charge nothing.
- Receive your permit and account number, and note the filing frequency the state assigns.
- Display or store the permit as the state requires.
- Set up collection in your checkout, POS or invoicing system, starting on the correct date.
Avoid using third-party websites that charge to “file” what the state accepts directly. Generally, do not collect a state’s sales tax before you are registered there; follow each state’s instructions on timing.
After Registration: Ongoing Obligations
| Obligation | What it involves |
|---|---|
| Collecting tax | Charging the right state and local rate on taxable sales, often based on the delivery address |
| Exemption and resale certificates | Collecting and keeping valid certificates for exempt and wholesale customers |
| Filing returns | Monthly, quarterly or annually, as assigned by the state, often even when no tax is due |
| Remitting tax | Paying collected tax by the due date |
| Recordkeeping | Keeping sales records, returns and certificates for the period the state requires |
| Updates and closure | Notifying the state of changes, and closing the account properly if you stop selling there |
Swipe the table sideways to see all columns.
Missing a “zero” return can trigger penalties in many states. Once you register in several states, a filing calendar or sales tax software becomes essential; see our multi-state sales tax compliance guide.
Common Registration Mistakes
| Mistake | Better approach |
|---|---|
| Assuming one national threshold | Check each state’s threshold and what counts toward it |
| Forgetting inventory in fulfilment centers | Track where your inventory is stored |
| Registering everywhere “to be safe” | Register where you have an obligation |
| Collecting tax before registering | Register first, then collect from the effective date |
| Not filing returns with no sales | File every assigned return, including zero returns |
| Ignoring local rates | Use rate tools based on the delivery address |
| Delaying after crossing a threshold | Register promptly; some states set a start date for collection |
Swipe the table sideways to see all columns.
What If You Should Have Registered Earlier?
If you discover that you have had nexus without registering, you may be liable for tax you should have collected, plus interest and penalties. Many states offer voluntary disclosure agreements, which may limit the look-back period or reduce penalties. Get advice before contacting the state, so you understand your exposure and options.
Frequently Asked Questions
Do I need a sales tax permit for my new business?
If you sell taxable goods or services in a state where you have nexus, you generally need a permit from that state before you begin collecting tax.
Which states do not have a statewide sales tax?
Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska permits local sales taxes, so some sellers may still have obligations there.
Is sales tax registration free?
In many states, yes. Some states charge a fee or require a security deposit. Check the official state website.
Can I register for multiple states at once?
For states that are members of the Streamlined Sales and Use Tax Agreement, you can register through the Streamlined Sales Tax registration system. Other states require separate registrations.
Do I need to register if I only sell on Amazon?
Marketplace facilitators generally collect tax on their sales, but some states still expect sellers to register or report. Check each state’s marketplace seller rules.
Do I need an EIN to register for sales tax?
Most states ask for an EIN for business entities. Sole proprietors without employees may be able to use an SSN in some states.
How often will I file sales tax returns?
The state assigns a frequency, usually monthly, quarterly or annually, based on your expected or actual sales volume.
What happens if I sell without a permit?
You may be liable for uncollected tax, interest and penalties. Voluntary disclosure programmes may help limit exposure.
Register Where You Must, When You Must
Sales tax registration is a state-by-state decision. Start with your home state and physical presence, track sales against each state’s economic threshold, register before you collect, and keep up with every return the state assigns.
This article provides general information and is not individualized tax advice. State thresholds and rules change; verify with each state’s tax agency.
Not Sure Where to Register?
AAPT & Associates provides sales tax nexus reviews and state registration and ongoing sales tax compliance for US businesses.
Sources: South Dakota v. Wayfair (U.S. Supreme Court, 2018) · California CDTFA · Texas Comptroller · New York Department of Taxation and Finance · Streamlined Sales Tax Governing Board
