Sales Tax Registrations - Like Solving a Rubik's Cube

Registering for a state sales tax ID used to be a fairly routine process and still is in some states.  However, over the past decade with the ever evolving electronic administration of sales and use tax, just registering for a state sales tax ID has become a technical and interpretational challenge.  In some cases, the states have attempted to include every tax type in a single registration form – creating a labyrinth of questions and information requirements.  Oftentimes, a business will try to register themselves, only to get partially through the process before realizing that they really need someone with experience to assist in the registration process.

In some instances, just finding the registration form is a challenge.  New York recently changed its online registration process and application.  Just finding the starting point for the state sales tax registration can be like solving a puzzle.  And once you actually start to complete the form, be prepared to be fingerprinted (not literally) as you answer each question seemingly in an effort to clear your name from a list of potential “sales tax suspects”. 

New York is a rather extreme example of how the idea of using an online process instead of paper can create more complexity and room for error rather than less.  But something that is true in just about any state is that if you register incorrectly, you can subject yourself to incorrect tax types and unintended return filing requirements.  In states like Kansas there are different returns and registration IDs for different taxpayers.  For example, if you are only responsible for consumers use tax, you would be registered to file Form CT-10 – Kansas Consumer’s Compensating Use Tax.  If you are a retailer located in Kansas, you would be registered to file Form ST-36 Kansas Retailer’s Sales Tax.  And if you are an out of state retailer, you would be registered to file Form CT-9U – Retailer’s Compensating Use Tax.  Which Kansas return type you are assigned depends on how you answer the questions on the registration application.  Retailers aren’t in the business of determining how to register and which form to use when acting as a collection agent for the state.  Maybe if the states understood this fact, they would find more retailers encouraged to register and comply with the sales and use tax laws.

Whether or not you have the registration process figured out, you will still have to convince your corporate officers to list themselves as responsible persons on the registration application and in doing so, provide their social security number.  This requirement usually garners some resistance and questions from owners and officers of businesses.  “Why do they want/need my social security number?”  The best explanation I can provide is that the states don’t trust the company will charge, collect AND REMIT all of the required sales tax due.  If the taxes aren’t remitted appropriately, the owner/officer can become personally liable for the sales tax due to the state.  In fact, if the taxes are collected and intentionally withheld from the state, the owner/officer could become criminally liable. 

Takeaway – understand the registration process before you start an application for a sales tax permit and seek out experienced professionals for assistance in this endeavor.