Learn the process to register your business for sales tax in California

TL;DR

• A seller's permit is a document that proves that you have a registered business in a state. You need this to legally collect and pay taxes to the state.
• If you are a temporary seller in California (selling for less than 90 days), you'll need to register for a temporary seller's permit.
• Registration is free. However, if you owe taxes from before or have a history of non-payment, you'll be asked to submit a security deposit.
• You have to register with the CDTFA (the tax authority in California) either online or offline, with relevant ID proof and details such as FEIN, SSN, and more.
• To register online, visit the CDTFA website and click on 'Register a new business activity' to provide the required information and submit the form.
• After you get the permit, you will have to display it in your place of business. In case of any changes to the form, inform the CDTFA and get a new permit.

If you have a sales tax liability in California, registering for a seller's permit is the first step forward. The seller's permit is a document that will give you the certification to run your business in the state that's issued the permit, allowing you to collect and remit sales taxes. First, you'll need to submit the necessary information about your business to the state government. Once this is submitted and approved, your business will be considered to be registered with the state and you will receive a permit. 

This guide will explain the use of the permit in California, how to apply for it, the necessary documents required to get it, and the permit holder's obligations.

What is a seller's permit and how does it work in California?

A seller's permit is also called a sales tax permit or a sales tax license. Without it, you won't be allowed to collect taxes and, as a result, cannot continue business. This document should be possessed by every seller who has nexus in a state, and can be provided as proof of having a legitimate business registered in the state, if requested by the tax authorities. 

In California, if you make sales at a location for 90 days or less (such as festivals or trade shows), you are a temporary seller who only requires a temporary seller's permit. You can get this permit through the same registration process used for a regular permit, but you'll have to select the option for temporary sellers. This permit should be obtained 90 days before the start date of the business. The period of business (start date and end date) must be specified for each location where the sales will take place. Multiple locations can be registered with one permit, as long as business for all those locations occurs within those 90 days. If the period of your sales will exceed 90 days, you will need to get a separate permit.

For online or out-of-state sellers, this permit is necessary only if you have nexus in the state. Some sellers may have nexus in multiple states, and will need to have a separate sales tax permit and know the sales tax laws in each state.

Sellers who require a permit but don't have one will face consequences. In California, if you operate your business without a seller's permit, you will first be asked to obtain one immediately. If you still fail to do so, you'll face legal consequences that may include criminal citations, or you may have to appear in court. A fine of up to $5,000 may also be levied, with additional penalties based on the court's discretion.

What are the costs involved in the registration process?

There is no registration fee for a sales tax permit. However, if you have a history of non-payment of taxes and owe back taxes, you will have to submit a security deposit to the CDTFA (the amount will be determined by the state). This is done in case you still owe taxes when you decide to stop doing business. This security deposit will be returned to you if you terminate the business and don't have any remaining taxes to be paid.

Who do you register with?

To get a seller's permit in California, you need to register with the CDTFA (California Department of Tax and Fee Administration).

You can also register in person at any CDTFA office.

What information and documents do you need to register?

• Social Security Number (SSN), Federal Employer Identification Number (FEIN) and State Employer Identification Number (SEIN)
• Personal details of the owner(s) (such as name and address)
• Business entity type and contact information
• Date of effective nexus
• Expected monthly sales (average) and the taxable amount
• Driver's license copy 
• California secretary of state entity ID
• Names of websites that sell your product(s)
• In addition to the above, corporate businesses will have to provide: corporate name and corporate number, the state in which it is incorporated, and the date of incorporation
• Contact information of partner(s), corporate officer(s), member(s) or manager(s)
• Contact information of personal references and suppliers
• Contact information of the business's accountant
• Contact information of the previous business owner (if an existing business has been purchased)
• North American Industry Classification System (NAICS) code
• Standard Industrial classification (SIC) code
• Bank information (name and address)
• Name and account number of the credit card processor

Note:

If you're an out-of-state seller, your home state registration number is also required. You can contact the CDTFA when you are asked for the California secretary of state number during the registration process, or you can enter the 'non-California issued entity number' instead. For example, if your business type is LLC, you may provide the LLC registration number from the state you are located in.

How do you register?

In order to register online for a seller's permit in California, visit www.cdtfa.ca.gov and click Register to begin. Click on Register a New Business Activity to view a questionnaire, where you can fill in details about the following:

• Your business activity, business type, and what you sell.  
• Your taxpayer information, details of the jurisdiction and state, as well as the address and contact information of your business.  
• The details and roles of the people involved in the business, along with the ID number (SSN, FEIN, and SEIN) and a secondary ID number (for example, a driver's license).
• Your online and physical presence. If you make online sales, you should mention the appropriate details (about the site and any third party).
• The NAICS code for your business. Based on your business type, you can find the NAICS code online.
• Use tax and your sales volume (total sales and taxable sales). You will also have to mention the starting date from when sales was made, as you'll have to collect and remit sales tax based on this date.
• The supplier information, along with the details of the person filling in the form. Confirm the details and submit the form.

What are a permit holder's obligations?

Once this application is approved, the seller's permit should be displayed in the store or kept in your possession. With this permit, you are obligated to collect and remit CA sales taxes and keep records documenting these transactions. If there is any change in the information you submitted, you will need to notify the CDTFA and get a new permit. If your business has multiple branches, you may need to get separate permits for each branch, or the CDTFA may provide one sales tax permit that covers several locations.

Once you have registered your business, you will have to start managing your sales and keeping track of your many tax requirements, state-wise. Instead of handling them all yourself, you can use accounting software like Zoho Books, making the entire process easy for you and helping you focus on your work better. Zoho Books is a powerful financial platform that is tax compliant and helps you with your accounting needs, so you can ace your sales tax management with ease.