A California seller's permit gives your business the authority to make sales and collect sales tax within the state. Most people and businesses that sell or lease tangible property while engaging in commerce in California need seller's permits, but there are many details to understand within those broad rules.
Who Needs a California Seller's Permit?
The website of the California Department of Tax and Fee Administration (CDTFA) outlines the basic rules concerning whether you need a California seller's permit and how to get one.
The two main criteria are whether you are “engaged in business" in the state, and whether the tangible property you are leasing or selling “would ordinarily be subject to sales tax if sold at retail."
Being “engaged in business" in California encompasses many situations including maintaining a physical place of business, such as a warehouse or satellite office, or a sales representative in the state. Even if you are only renting space in which to conduct your business in California, the state considers you to be “engaged in business" there. The rules concerning seller's permits apply to wholesalers, retailers, and all types of businesses, from limited liability companies (LLCs) to corporations as well as individuals.
Tangible property that is “ordinarily subject to sales tax if sold at retail" include such common items as clothing and furniture. California does not apply sales tax to services and labor, but because the rules are complicated concerning what is subject to sales tax, the CDTFA recommends you consult its office for guidance if you have questions.
If you are involved only in a seasonal business and/or make sales exclusively during distinct periods (e.g., craft fairs, Christmas-related sales), you need to apply for a temporary seller's permit to cover those intervals. The state considers your business temporary if you sell tangible property from one location for 90 days or less.
How to Obtain a California Seller's Permit
Information required on the application includes your Social Security number; another personal ID number (passport, driver's license, etc.); your business's date of incorporation, employer identification number (EIN), and bank account details; supplier information; estimated monthly sales; and more.
The Cost of a California Seller's Permit
There is no fee for obtaining a seller's permit in California. However, if you already owe back taxes, the state may request a security deposit to cover any taxes that could still be outstanding if the business closes. The state determines this amount when you apply.
Once your application is approved, you should display your seller's permit prominently in your place of business. You may also wish to keep a copy of your seller's permit in a safe location, should you need to refer to it. If you conduct business at more than one location, you may need separate seller's permits, although the CDTFA might give you one that covers several locations.
With your California seller's permit in hand, you may now collect sales taxes on transactions, which you are then required to report and pay to the state.