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Obtaining needed sales and use tax permits is a required step for all businesses and
nonprofits. The government penalizes companies that do not comply with the laws to collect and remit
tax.
This guide summarizes some of our nationwide expertise in helping clients obtain tax ids, get exemption
certificates, and maintain sales tax compliance. Depending on your organization's activities, the
following licenses may be needed:
Businesses are generally required to register for sales tax once their sales activity hits
the threshold for physical or economic nexus. If your business has determined it has
nexus and needs to register, keep reading to learn how to register your business for
sales tax in a state.
Forty-five states and the District of Columbia impose sales taxes (or similar taxes, which
we'll refer to as sales tax for simplicity). Alaska, Delaware, Montana, New Hampshire, and
Oregon do not collect sales and use taxes, but all other states mandate some form of sales
and use tax registration for qualifying businesses.
Not all sales and use taxes are levied or administered by the state. There are roughly 11,000
sales tax jurisdictions in the United States. Most of these are counties, municipalities,
and other localities. Some states simplify administration by collecting local sales tax, but
in states like Arizona even cities ("non-program cities") administer their own sales tax.
What Is Registration?
Once a business has determined its physical and economic nexus, it must register with the
state revenue authority. Registration is the process of opening the relevant tax account(s)
so that the business can file returns and pay taxes.
In each jurisdiction where registration is required, the seller applies for a sales tax id,
collects sales tax, and remits the tax to the governing agency. You get a Sales Tax ID Number
from the Department of Revenue (or a similar agency) by submitting the appropriate application
and supporting documentation. All states ask for the IRS-issued EIN as a part of tax
registration. Many states require business entities to register with the secretary of state
(usually through foreign qualification) before applying for a sales and use tax account.
Different states may refer to sales and use tax registration as a tax account, license,
or permit, so it is important to keep this terminology straight when registering in multiple
states. Most states do not require a fee for registration; however, a handful do.
Below are some state-specific examples of the variation in the registration process.
Colorado, Connecticut, Florida, Hawaii, Indiana, Rhode Island, South Carolina,
Wisconsin, and Wyoming have fees for registration.
Hawaii collects a General Excise Tax instead of a traditional sales tax.
Wisconsin charges $20 for the first tax permit, but there is no fee for additional permits.
Colorado’s registration fees depend on the time of year you register and range from $4-$16
Why Is Registration Required?
While customers are generally responsible for paying sales tax, businesses
are generally required to collect and remit it to state agencies. By registering,
a business creates the account necessary to file returns and remit the appropriate
amount of sales tax owed on activity in that state.
Without registration, a business is unable to comply with state sales tax requirements.
This may result in penalties and audits that far exceed the cost of compliance.
Businesses should view registration proactively and as a way to protect itself from risk.
What is Exemption?
Exemptions from sales and use tax are frequently available to resellers, nonprofits, and
others. While in some jurisdictions your organization must expressly apply for an exemption,
in others your organization must present an exemption certificate or other form of
confirmation to the seller at the time of sale.
Most often, but not always, the buyer is responsible for presenting evidence of
tax exempt status at the time of transaction. To do this, nonprofits, wholesalers, and
others who qualify from tax exempt certificates create an organized packet listing each
tax-exempt identification number and the appropriate certificate to present. Consider
using the Uniform Sales & Use Tax Exemption/Resale Certificate (Multijurisdiction) , which
is currently accepted in 36 states.
Nonprofits should not assume they are exempt from paying sales and use tax or from
collecting sales tax on sales. In most cases, nonprofits can obtain exemptions from
transactions relating to their charitable mission. The chart below outlines each state-level
process for obtaining exemption. In addition, there are limits to granted exemptions based on
whether the nonprofit is the purchaser, seller, the type of nonprofit, and the type of
transaction.
Most nonprofit organizations will not qualify for a sales tax exemption in Alabama. Alabama Statutes § 40-9-1 et seq describes organizations that may qualify for an exemption.
Business entities can register for transaction privilege tax (sales tax), use tax, and withholding/unemployment taxes through the joint tax application form.
Apply for Nonprofit Exemptions
Agency:Arizona Department of Revenue Notes:
Arizona does not offer an overall exemption for nonprofits, but they allow exemptions in some circumstances. For a list of the few available exemptions, contact the Arizona Department of Revenue.
Arkansas does not offer a general exemption application for nonprofits, but charitable sales are exempted under certain conditions. The certificate of exemption can be used to exempt an organization from sales tax in a specific purchase.
Sales and use tax registration is know as a seller's permit in California.
Apply for Nonprofit Exemptions
Agency:California Department of Tax and Fee Administration Notes:
Few nonprofits are eligible for sales tax exemption in California. Volunteer fire departments, veteran's organizations, qualifying youth organizations, religious organizations, and few others may be eligible for exemption. See the Sales and Use Taxes: Exemptions and Exclusions guide to see if your organization is eligible to apply for an exemption.
Colorado organizations can apply for state sales tax exemption if they have an IRS determination letter. If approved, you will receive a Certificate of Exemption.
Upon receiving an IRS determination letter, Connecticut nonprofits are automatically exempt from state sales tax. Organizations must follow the guidelines in Guide SN 95(10). This includes providing sellers with a copy of CERT-119: Purchases of Tangible Personal Property and Services by Qualifying Exempt Organizations.
Certain not-for-profit organizations are exempt from sales and use tax on purchases and rentals of tangible personal property if that property is used in carrying out the organization's not-for-profit activities. See the form for information on the available exemptions.
Georgia currently does not provide a general sales or use tax exemption. A few exemptions exist for nursing homes, hospices, hospitals, and other organizations, and you can contact the Georgia Department of Revenue for a full list.
Hawaii does not have a sales tax, but instead collects a general excise tax from businesses. Form BB-1 should be used to apply for general excise and use taxes.
Iowa nonprofits receive limited exemption from sales tax. Sales made to nonprofits are not exempt from sales and use tax. The exception is private nonprofit schools do not pay sales tax on the purchase of goods and taxable services used for educational purposes. Also, sales made by educational, religious, or charitable organizations are exempt on proceeds expended for qualifying educational, religious, or charitable purposes.
In general, Louisiana nonprofits are not exempt from sales and use tax. You can request an exemption for a fundraiser by filing an exemption application at least 2 weeks prior to the event.
There is no application form for sales tax exemption; simply send in your IRS determination letter with an explanation and the department will review the request.
Michigan nonprofits are automatically exempt from state sales and use tax. Simply complete and present Form 3372: Michigan Sales and Use Tax Certificate of Exemption to sellers and vendors.
Mississippi nonprofit organizations are not exempt from state sales tax, with a few exceptions. Review the full of list of exemptions on the Department of Revenue website.
If your IRS determination letter stipulates that your nonprofit is an educational or social organization, you are automatically exempt from New Mexico’s gross receipts tax. If you purchase taxable goods, you can apply for a Nontaxable Transaction Certificate (NTTC). You will file Form ACD-31050: Application for Nontaxable Transaction Certificates with the New Mexico Department of Taxation and Revenue.
North Carolina currently does not offer an exemption from sales tax. However, the state offers semiannual refunds for qualified organizations. You will file Form E585: Nonprofit and Governmental Entity Claim for Refund with the North Carolina Department of Revenue.
Most North Dakota nonprofits are not able to become exempt from sales tax. Certain organizations, such as hospitals and schools are automatically exempt.
Ohio nonprofits that have received their IRS determination letter are automatically exempt from paying state sales tax. They must present Form STEC-B: Sales and Use Tax Blanket Exemption Certificate to sellers.
Once every five years. Approximately 2 months before an organization's sales tax exemption expires, the Department of Revenue will send a renewal packet to the organization.
Certain nonprofit organizations in South Carolina are exempt from sales and use tax on items sold by the organizations for charitable purposes. The exemption applies only to items purchased for resale and does not apply to items purchased by an organization for its own use.
Exemption certificates are only issued to Tennessee nonprofits. Out-of-state nonprofits should instead present their IRS determination letter to vendors.
Vermont nonprofits that have received their IRS determination letter are automatically exempt from paying state sales tax. They must present Form S-3: Vermont Sales Tax Exemption Certificate for Resale and Exempt Organizations to sellers.
Currently, Washington does not grant nonprofits exemption from state sales tax. They must pay sales tax on all goods and retail services they purchase as consumers, such as supplies, lodging, equipment, and construction services. In addition, nonprofit organizations must collect and remit retail sales tax on their sales of goods and retail services. Limited B&O and sales tax exemptions are provided for nonprofit fundraising activities, donations, and for certain types of organizations.
$30 registration fee unless the applicant is a nonprofit, foreign retailer, government agency, or only applying for a withholding account or agricultural/farming account.
West Virginia uses a multi-state form that is not actually submitted with the West Virginia State Tax Department. West Virginia nonprofits should complete the form and display to sellers, but out-of-state nonprofits are generally allowed to use exemption certificates from another state. The form is rather complex, and not accepted in all states. Be sure to read the instructions carefully.
To become exempt from Wyoming sales tax, simply submit your IRS Determination Letter to the Wyoming Department of Revenue. Alternatively, submit articles of incorporation, constitution or bylaws, mission statement, budget, and income/expense statement for the past three years. When the Wyoming Department of Revenue approves your exemption, they will send you a Streamlined Sales/Use Tax Agreement (SSUTA) Certificate of Exemption.
Filing fees depend on your individual situation. We do our best to calculate your filing fees
upfront and collect those fees today so we can get started. Your specialist will determine your
exact filing fees and invoice additional fees if required.
