California business owner’s have a lot of confusion surrounding getting a seller’s permit and paying California sales tax. Here some of the most important things to understand about obtaining a seller's permit, and how to properly remit sales tax.
Important note: This article is intended to compile information but is not intended as tax or legal advice. Please be sure to contact your CPA and attorney for all tax guidelines for your unique business and location.
A California seller’s permit is obtained through registering your business with the CDTFA — The California Department of Tax and Fee Administration.
When you register for and obtain a California Seller’s permit, it authorizes you to not only sell tangible goods, but also to collect and remit sales tax in the state of California. You are required to collect and remit sales tax for all sales of tangible goods as well as the sale of labor that then results in a tangible product.
The CDTFA has industry specific sales tax guidelines, so if you’re uncertain of a specific product or service is subject to sales tax, click here to learn more, but it’s also best to confirm with a certified tax professional.
If you do not need a permanent seller’s permit but will be engaging in temporary sales, you are required to obtain a temporary seller’s permit. These are issued to individuals with no permanent place of business, and they cover a selling period of 90 days or less at one location.
The state of California needs to receive this sales tax paid to them one time. That means if you are someone that is selling tangible products directly to customers, you collect and remit the sales tax to the CDTFA.
If you are someone that is utilizing a third party marketplace facilitator — a marketplace that collects the sales tax instead of you — then you are not required to hold a California seller’s permit or to collect and remit the sales tax. The California Marketplace Facilitators Act states that if a marketplace is already collecting the sales tax and remitting it, then California is happy— they do not need to receive it twice.
However, it’s important to ensure the marketplace facilitator you’re utilizing is in fact collecting and remitting your sales tax. To ensure this, head over to that marketplace and search their handbook and online guides. Look for sections of where they discuss sales tax, and check to see if that marketplace is collecting and limiting the sales tax or if it is left up to you.
If you can’t locate documentation there, then look in your transaction history. Is the marketplace collecting and remitting the sales tax from the customer directly or are they not charging sales tax at all? If that sales tax is charged, does it get paid out to you or do they keep the sales tax themselves?
For those of you who are not utilizing a marketplace facilitator that is handling the sales tax for you, you will need to obtain a California seller’s permit. Obtaining a California seller’s permit is free and the application is fairly easy to complete. To watch a complete walkthrough of the process, watch the video here.
Once you have obtained your California seller’s permit, you must make sure you are charging the proper amount of sales tax. You can find the proper amount of sales tax for your city and county on the form linked here.
According to your county, business owners can either charge a separate line on the invoice for sales tax, or can incorporate it into the total price. The State of California is mainly concerned that you are paying the correct sales tax amount, rather than how you are collecting it.
Once you have collected sales tax, you are required to remit that sales tax over to the CDTFA. In most cases, the CDTFA will have you send them quarterly, but it can differ according to the amount of sales you have and the type of business you run. Check the specific information on your seller’s permit and account login info with the CDTFA.
When it comes time to pay your sales tax, log in to your online account on the CDTFA website, click on through to their online filing system, and you will then be asked a series of questions about your sales. For the quarter, the CDTFA will assign a filing frequency for you with specific due dates. They will either ask for you to prepay quarterly in advance, pay quarterly, to pay monthly, or to pay annually. Based on how many sales you report and your anticipated taxable sales at the time of registration, the CDTFA is will let you know exactly when you need to pay, and will send you reminders.
You can locate this information at the time of registration and through the documentation you receive in your online account at CDTFA’s website.
If you’re required to file quarterly, you would pay your sales tax as follows:
For those who are put on a yearly reporting basis, your sales tax will be due by January 31.
In addition to reporting and paying your sales tax, you are required to keep adequate sales records of any sales that you make, as well as any sales tax that is collected.
Additionally, you are required by the CDTFA to notify them if you change your business address, change the ownership of your business, add or drop a partner to your business, sell your business, buy another business, or if you discontinue your business, you are required to close out the account.
Want to learn more about a seller’s permit and a California Sales Tax? Watch the video here!