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Most businesses starting in California that are selling a product will need to register for a seller’s permit. This is commonly referred to as a sales tax permit, sales tax license, sales tax number or sales tax registration.
Check out the rest of this guide to find out 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 with “nexus” (significant presence in the state) such as a retail store, office or warehouse
- 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 on-line 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.
More information on when a seller’s permit is needed is available in the Seller’s Permit Guide.
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 to 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 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.
Information needed to register includes:
- Type of business entity (Sole Proprietorship, Partnership, Corporation, LLC)
- Business name
- Names and addresses 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
- Federal Employer Identification Number (FEIN), or SSN 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
How much does a seller’s permit cost in California?
There is no cost for a seller’s permit in 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.
Do you have to renew your California seller’s permit?
The seller’s permit is a
Sales tax reporting
How is sales tax collected?
When a business makes a sale of a taxable product or service, the business charges the appropriate sales tax rate to the customer. This tax is collected by the business who then sends it to the California Department of Tax and Fee Administration.
There are two ways to submit
How much sales tax is charged?
The sales tax rate that is charged varies depending on the address of the business if the purchase is made or shipped from a business located in the state. If the seller is based out of the state, the sales tax rate is based on the buyer’s address.
When are California sales tax returns due?
The filing frequency is based on the expected volume of annual sales, 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.
Filings are due the 24th day of the month following the reporting period, unless the 24th falls on a weekend or federal holiday, in which case 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 occurred.
Sales tax on purchases for resale
A business is able to 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 distributors will require a sales tax number and a completed California Resale 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.