When starting a business in California, several registrations must be completed. The most common is the California seller’s permit, sometimes called a retailer certificate, sales tax license, sales and use tax number, or sales tax registration.
Keep reading to learn who needs a sales tax permit, what kinds of products and services are taxable, how to register, and what to do for reporting.
Related: California Startup Checklist
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 a physical location like a retail store or office, using a warehouse or fulfillment center to store inventory, or having another place of business.
- Hiring a California employee (including a remote employee, 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?
Physical Products
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.
Digital Products
Digital products are generally not taxable, except for canned software (pre-made software).
Services
Most services aren’t taxable in California; however, if the service is inseparable from the sale of a physical product, it is.
How to register for a California seller’s permit
Register with the California Department of Tax and Fee Administration (CDTFA) to obtain a seller’s permit.
Information needed to register includes:
- Type of business entity: sole proprietorship, general 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, it charges the customer the appropriate sales tax rate. 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: filing online or filing 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?
If the purchase is made at a store or in a mobile location, the sales tax rate varies depending on where the sale occurred in California. In addition to the statewide tax, additional sales taxes may be added from various cities, counties, and special districts. When shipping in-state, the sales tax is based on the purchaser’s address.
The Department of Tax and Fee Administration has a Sales Tax Rate Finder that can help you determine the amount of 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.
A filing indicating no sales is still required even if the business had no sales during the reporting period.
California Seller’s Permit FAQs
How much does a California seller’s permit cost?
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?
No – A sales tax license may be needed in addition to other California business licenses to set up a new business.
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 reached at 800-400-7115.