When is Sales Tax Registration Required?
If your company sells goods or services in multiple states, you likely need to complete sales tax registration. Since the Supreme Court’s Wayfair decision in 2018, remote sellers must register to collect sales tax in any state where they meet economic nexus thresholds, often based on $100,000 in sales. You can’t just collect sales tax preemptively – sales tax registration must be completed before collecting taxes from customers in a given state. Timing of registration varies by state, so review requirements to avoid issues. Sales tax registration compliance has become crucial for multi-state remote sellers after Wayfair.
When Should You Register?
Different states have different rules on this. The Government Accountability Office points out that quite a few states require you to register as soon as you reach the threshold they’ve set. For states with a $100,000 threshold, the sale that puts you over that $100,000 for the year is the last one you can make without registering to collect sales tax. In other states you might need to register on the day you reach the threshold, the first day of the next month after you reach the threshold, or in a few cases the first day of January of the following year.
Most states take a couple of weeks to issue a sales tax license, so you will need to think ahead in order to avoid a gap between when you register and when you can begin collecting sales tax.
Some states allow voluntary registration. If your forecasting suggests that you will meet the economic threshold for a given state during the year, it can make sense to register early and be prepared. Each state has its own website with a page for registering for a sales tax license.
Complicating Factors
24 states have signed on to the Streamlined Sales Tax plan. You can register to collect sales tax in all these states at the SSTRS website. Once you register, you must collect and remit sales tax even if you do not have nexus. If you want to register with only some and not all of the SSTRS states, you must register with each one individually at the state’s website.
If you have a physical presence in any state, you have nexus there for sales tax and must register to collect sales tax if you sell taxable goods or services.
In some states, you will need to register for local taxes as well. In Alaska, which currently has no state sales tax, you can register for all local taxes through the Alaska Remote Sellers Sales Tax Commission Portal.
Make it easy
Fortunately, Sales Tax DataLINK can take care of sales tax registration for you. Call 479-715-4275 today to learn more.
