Before you start your business in California, you need to know what a California seller’s permit is and if your business needs one.
Let’s say it does.
Now, you need to learn how to get a California seller’s permit and other helpful tips like the easiest way to apply, how often to remit your sales tax, what to do if you sell part-time, have multiple businesses, or from another state!
And you`ll find all these answers and more here in our How to Get a California Seller’s Permit as a small business guide.
Starting or managing a business in California
California is a hub of innovation and investment, known for its skilled workforce and entrepreneurship. However, starting a business in the Golden State comes with high costs, including an 8.84% corporate tax rate.
Despite this, California is often the first choice for entrepreneurs because of abundant government incentives, business-friendly regulations, and zero state income tax.
Sounds great, right?
And besides the high rent, wages, and corporation tax costs, it is. Hey, it`s not called the land of sunshine and opportunity for nothing!
But to start a business in California (or anywhere else), you must take specific steps, like choosing an engaging brand name, forming an appropriate business structure, registering for sales, and using tax.
What is a sales tax?
Sales tax (also known as a retailer’s use tax, vendor’s use tax, or sales and use tax) is an additional charge the state requires you to add to taxable products or services. California`s state sales tax rate is 7.25% and can rise to 10.25% when adding local sales tax, depending on your jurisdiction.
The system is simple, for example:
You sell a $100 product, add the State sales tax rate of 7.25% plus your local sales tax (say it`s 2.75%), charge customers $110, and pass the $10 tax onto the California Department of Tax and Fee Administration (CDTFA).
Some US states don’t charge sales tax; those include Oregon, Montana, Alaska, Delaware, and New Hampshire.
What is a California seller’s permit (or sales tax permit)?
A seller’s permit, also known by various names, including a sales tax permit, allows you to charge, collect, and remit state and local (if applicable) sales tax on your products and services.
Once you secure your California seller’s permit, you must charge your customers the relevant state and local sales tax on taxable items and services and remit it to the California Department of Tax and Fee Administration before set deadlines.
California’s sales tax deadlines:
- January to March (Q1): April 30
- April to June (Q2): July 31
- July to September (Q3): October 31
- October to December (Q4): January 31
Which types of businesses require a California seller’s permit?
Any business operating in California, regardless of its structure (individuals, LLCs, corporations, partnerships, or out-of-state businesses), intending to sell or lease tangible goods or personal property must get a California seller’s permit.
So, if your business sells taxable products or property to people living in California, you`ll need a seller`s license.
Taxable products and services include furniture, giftware, toys, antiques, and clothing. Meanwhile, nontaxable products include groceries, medications, utilities, and fuel.
For a comprehensive list of taxable and exempt products and services, refer to the California Tax Service Center.
What about seasonal sales, I hear you ask?
Great question.
Entrepreneurs who sell for less than 90 days per year (for example, Christmas tree stands or craft fairs) can apply for a temporary seller’s permit.
What information do you need to register for a sales tax permit in California?
California`s requirements for obtaining a seller’s permit are pretty extensive; let’s look at what you need next:
- Your social security number (corporate officers excluded)
- Your date of birth
- Your driver’s license number, state ID number, or other ID (e.g., passport, military ID)
- Names and locations of banks where you have an account
- Names and addresses of suppliers
- Name and address of bookkeeper or accountant
- Name and address of personal references
- Expected average monthly sales and the amount of those sales which are taxable
- Your email address
- If you have purchased an existing business, you must also provide the previous permit information.
- Partners, corporate officers, and limited liability company managers/members/officers must also provide information.
- And your business’s North American Industrial Classification System (NAICS) code.
What is a NAICS code?
Federal statistical agencies rely on the North American Industry Classification System (NAICS) to categorize businesses and gather and assess data vital to the US economy.
Your business’s NAICS code is on the US Census Bureau’s website.
How to get a Seller Permit in California
To register for your Seller’s Permit, use the California Department of Tax and Fee Administration online registration tool or apply at one of the CDTFA field offices.
What should you do after receiving your California seller’s permit?
With your California seller’s permit in hand, you must:
- Report and remit sales and use taxes
- Maintain proper records (a minimum of 4 years)
You must also notify the California Department of Tax and Fee Administration (CDTFA) if you:
- Change your business address
- Alter the ownership structure of your business
- Add or remove a partner
- Sell your business
- Buy another business
- Close you business
Where do you pay your sales and use tax in California?
The California Department of Tax and Fee Administration (CDTFA) provides several options for paying your sales tax, including:
- Automated clearing house debit
- Credit cards
- Electronic funds transfer (EFT)
- Check or money order
But the easiest way to pay your sales tax in California is by card through the California Tax and Fee Administration website.
Specific regulations for a California seller’s permit
Each US state has its own sales tax permit regulations; in California, those include:
- How does a sales tax permit work in California? In California, sellers of taxable products or services must get a sales permit for each location that sells 2 or more products within a calendar year.
- What sales tax rate do you use? The state sales and use tax rate in California is 7.25%, but local sales tax jurisdictions can raise it to as high as 10.25%.
- California Administrative Code: Anyone liable for sales tax must have a sales and use tax permit. Sole proprietors and individuals must be at least 18 years old, and sales permits aren’t transferable from one business to another.
Do you need a California seller`s permit if you sell online?
Yes, if you sell to customers within the state, including remote sellers on Amazon, Etsy, and eBay vendors or businesses outside California.
Occasional sellers and online businesses selling to customers in other states are exceptions to the Golden States` sales and use tax permit requirement.
Who counts as an occasional seller?
Any individual or business that sells less than 3 taxable items in a calendar year within the Golden State doesn`t require a California seller`s permit.
California also provides an exemption for occasional or isolated property sales not associated with an activity requiring a seller’s permit (in other words, if you sell your home or flip the odd Condo). Real estate agents, however, need a California seller`s permit.
Types of businesses that require a seller’s permit in California?
Anyone who forms a business, like an LLC, corporation, partnership, or sole proprietorship, to sell certain tangible goods and personal property must pay sales tax, including wholesalers and retailers.
Even part-time sellers, like Christmas tree growers, pumpkin farmers, or rummage sale entrepreneurs, must apply for a temporary seller’s permit.
Conclusion
That’s everything you need to know about How to get a California seller’s permit as a small business owner.
And when you start your business, it always pays to be prepared; as the saying goes, “By failing to prepare, you are preparing to fail.”
Ensure your success and get your seller`s permit before you need it, collect the correct percentage of sales tax, and pay the California Tax and Fee Administration office on time, every time.
FAQ
The quickest way to get a California seller’s permit is to apply online, where you often receive your permit immediately after submitting your application.
Yes, California requires you to register and have a seller’s permit to sell on Etsy before you make the first sale.
The Golden State doesn’t charge for a seller’s permit, but depending on your business, you might need to pay a security deposit.
No, but your permit is only valid for as long as you`re in business, and if you stop selling, you must contact the CDOR to cancel your permit.
Unless you sell cigarette and tobacco products, in this case, you’ll need to renew that permit yearly.
No, if you have more than one place of business, you`ll need a California seller`s permit for each location.
However, you can apply for a consolidated permit for multiple business outlets, which provides sub-permits (from the original) for numerous locations.
As permits aren’t transferable, if you sell your business, you must cancel your California seller’s permit.
No, a California seller’s permit allows a business to collect and remit sales tax on taxable products and services. A resale certificate will enable businesses to make tax-free purchases (like when you buy stock from a wholesale seller) on taxable goods they plan to resell.