Most businesses starting in California selling a product will need to register for a seller’s permit. This is commonly referred to as a sales and use tax permit, sales tax license, sales tax number, or sales tax registration.
Check out the rest of this guide to determine who needs a seller’s permit, what products are taxable, how to register for a permit, and reporting requirements.
Who needs a seller’s permit in California?
A business must register for a seller’s permit in California if they:
- Are engaged in business and
- Intend to sell or lease taxable tangible personal property.
Being engaged in business is defined as:
- A business has sales tax nexus. Nexus means having a physical presence in the state, such as having a physical location like a retail store or office or using a warehouse or fulfillment center to store inventory, or having another place of business.
- Having a sales representative or agent working in the state
- Receiving rent or lease payments of property in the state
- Selling retail items
- A California business selling taxable products to California residents
- An out-of-state business selling over $500,000 in taxable products to California residents.
Businesses that operate temporarily (typically lasting no longer than 30 days at one location), such as Christmas tree sales and rummage sales, must apply for a temporary seller’s permit.
What products and services are taxable in California?
There are a few exceptions, but almost all physical products are taxable when sold at retail in California. Common examples include:
- General merchandise like furniture, appliances, and clothing
- Titled or registered items like vehicles
Groceries and prescriptions are tax-exempt.
Labor, in most cases, isn’t taxable in California. For instance, let’s say you broke the screen of your cell phone and take it to a cell phone repair shop to have it fixed. Sales tax would be added to the selling price of the new screen and any additional parts to fix the phone. The labor to replace the screen isn’t taxable. However, a business that makes furniture will indirectly have a sales tax on labor. In this instance, let’s say this business is building a dining room table for a customer. Through labor, the pieces of wood are shaped, sanded, and painted to build this piece of furniture. While the labor isn’t directly taxable, sales tax is charged to the final selling price of the table.
Digital products are generally not taxable, with the exception of canned software (pre-made software).
Most services aren’t taxable in California, however, if the service is inseparable from the sale of a physical product, it is taxable.
How to register for a seller’s permit in California
A seller’s permit can be obtained by registering through the California Department of Tax and Fee Administration (CDTFA).
Information needed to register includes:
- Type of business entity: Sole Proprietorship, Partnership, Corporation, Limited Liability Company (LLC)
- Corporate number (only corporations and LLCs)
- Business name
- Name, address, Social Security Number, and driver’s license number of owners/officers/members
- Description of what products or services are being sold
- Driver’s license
- Business address
- Phone number
- North American Industry Classification System (NAICS code or Standard Industrial Classification (SIC code)
- Federal Employer Identification Number (FEIN) from the IRS, or owner’s Social Security Number or Taxpayer ID (ITIN) if a sole proprietorship with no employees
- Date business activities began or will begin
- Projected monthly sales
- Projected monthly taxable sales
- Types of products to be sold
- Employee information
Sales tax reporting
How is sales tax collected?
When a business sells a taxable product or service, the business charges the appropriate sales tax rate to the customer. The company collects this tax and then sends it to the California Department of Tax and Fee Administration.
There are two ways to submit sales tax to the California Department of Tax and Fee Administration. One is by filing online, and the other is to file by mail. Filing by mail is only available if the business has under $10,000 in sales tax liability.
How much is sales tax in California?
The sales tax rate that is charged varies depending on the address of the business if the purchase is made or shipped from a company located in the state. If the seller is based out of the state, the sales tax rate is based on the buyer’s address.
In addition to the statewide tax, additional sales taxes may be added from various cities, counties, and special districts. The Department of Tax and Fee Administration has a Sales Tax Rate Finder to determine how much sales tax to charge.
When are California sales tax returns due?
The filing frequency is based on the expected annual sales volume, which will be monthly, quarterly, or annually. Generally, a business with an average monthly sales tax liability of over $100 will file monthly. The frequency is re-evaluated annually.
The due date for filings is the 24th day of the month following the reporting period unless the 24th falls on a weekend or federal holiday, which would move to the next business day.
Even if the business had no sales during the reporting period, a filing is still required indicating no sales.
How much does a seller’s permit cost in California?
There is no cost for a seller’s permit in the state of California.
How long does it take to get a California seller’s permit?
It can take up to 24 hours to receive a seller’s permit and CDTFA account number.
Do you have to renew the California seller’s permit?
The seller’s permit is a one-time registration, and no renewals are needed. Be mindful that if any information about the business changes, such as the mailing address, additional locations, or change in ownership, those changes need to be updated.
Is a business license the same thing as a seller’s permit?
In addition to registering for a sales tax permit, there may be other business licenses needed before starting a business in California.
How do I get a wholesale license in California?
A business can purchase items to resell without paying state sales tax. The tax liability is passed from the distributor to the retailer, who will then charge sales tax to the end-user of the item.
Wholesalers and suppliers will require a sales tax number and a completed California Resale Certificate (also referred to as a wholesale license, reseller’s permit, or sales tax exemption certificate) before selling to them as proof they purchase the items for resale.
If you have questions about the seller’s permit, the California Department of Tax and Fee Administration can be contacted by calling 800-400-7115.