regstrationCollecting sales tax from your customers and remitting to the proper jurisdictions can be challenging. But, before you start collecting and remitting you need to register with the applicable jurisdictions. This may sound like an easy task, but like most things related to sales tax, the registration process can be complicated and varied from state to state.

Here are some tips that can make your life easier:

  • Make sure you are qualified to do business within the state. More so than in the past, when you prepare a sales tax registration, the application will ask for your Secretary of State registration information. Registering with the Secretary of State is a separate process and may be required in order to issue a sales tax id to your business.

  • Take advantage of registering online. Many states offer online registration and the turn-around time is very quick. In some states you can get your account number instantly.

  • Know what tax type you need to register for: You may think you need to register for sales tax but there are numerous different tax types to consider. There is sales tax, seller’s use tax, consumer’s use tax, retailer’s use tax, vendor’s use, gross receipts tax, transaction privilege, communications tax, utility users tax, business and occupations tax...just to name a few. If you are not located in the state where you are registering, you may need to register for seller’s use, vendor’s use or retailer’s use depending on the state. It’s important to know which tax type to register for because there are different forms/returns in some states for the different tax types. Additionally, in some states the tax rates will differ depending on the tax type and some states don’t require out-of-state taxpayers to collect certain local taxes.

  • What’s your start date? All sales tax registrations will have a question as to when you started conducting business in their state.  This is the date that the jurisdiction starts the clock so to speak. If you register with a start of March 15th, then a jurisdiction may require a March return if they have given you a monthly filing frequency. If you have registered with a particular start date, but there was a change of plans and you did not start collecting until a later time, it is important to file a zero due return or else you could be subject to a late filing penalty.

  • Estimated taxable sales or tax liability: Some states may ask for this because they are trying to set a filing frequency. It is ok to put unknown or come up with your best guess. The jurisdictions may have guidelines or requirements on filing frequency based on these measures or they will set you up with one and review periodically. For example, New York will start all taxpayers on a quarterly filing frequency and then review each quarter and make an adjustment.

  • Mandatory electronic filing and electronic payment requirements: Once your sales tax id has been issued, some states will require a mandatory online filing and/or mandatory electronic payment. There can be penalties if you send in a paper return when a jurisdiction requires e-File and e-Pay so be sure to understand the requirements before you register.

Carol McIlvaine

Written by Carol McIlvaine