Explaining the essentials of sales tax registration in Texas

If you are engaged in business in a state and have nexus there, then you have a sales tax obligation to that state. This means that you can take the first step in keeping up with your sales tax compliance by registering your business with the state and obtaining a permit. Each state has a different process for registration, and Texas requires you to have certain documents ready with you while you register. This guide will explain what a permit is, how you can apply for a sales tax permit in Texas, the documents and information you would require in the registration process, and what your obligations will be as a Texas sales tax permit holder

What is a seller's permit and how does it work in Texas?

The sales tax permit is also commonly referred to as a seller's permit or a sales tax license. This document acts as a license to continue your business in the state and is what you will need to collect and pay taxes. Failure to do any of this would mean a failure to keep up with your sales tax compliance, and the state may impose penalties and interest charges on your business accordingly.

In Texas, any seller who has nexus there has to get a Texas seller's permit. This includes those who are making taxable sales in Texas through flea markets and trade days. Even if you are a seller located outside Texas, you will have to register for a permit if you sell taxable goods and services during these events, as sales made through such occasions also create nexus for you.

You need to get a separate permit for each active business location/place of business (office, outlet, etc.). So you'll have different permits with the same taxpayer ID number, and separate outlet numbers.

Note: A warehouse, storage yard, or manufacturing plant is not considered a place of business (for requiring a tax permit), unless you receive a minimum of 3 orders in a calendar year at these places.

What are the costs involved in the registration process?

Registering for a permit in Texas is free, and you don't have to renew your permit again. However, at the time of registration, you may be informed by the Texas Comptroller to post a security bond. This amount will be determined by the Comptroller, and has to be submitted in case of any default in tax payment in the future.

Who do you register with and how do you do it?

You need to register with the Texas Comptroller, and registration can be done online and offline. You can register online by visiting the Texas Comptroller website, and clicking on Taxes >> Sales Tax Permit Application. You can also register offline by downloading the form AP-201, Texas Application from their website. You can fill in the details after printing it, and mail it to the Comptroller.

What are the information and documents required?

• Sole owner's social security number (SSN)
• Partnership SSN or federal employer's identification number (FEIN) for each partner
• SSN for each officer/director of a corporation
• File number assigned by Texas secretary of state
• NAICS (North American Industrial classification system) code
• Business details, contact information, and business owner information
• Date of first taxable sale
• Details of business officers, partners, members, trustees
• Bank account information

Note: If you don't have a driver's license number and SSN, you will have to download the form and mail it in. Furthermore, if you don't have an FEIN, and apply for a permit before getting one, you will get a permit with a temporary number. Then, after the Comptroller gets the FEIN,  they will issue a new permit.

What is the process of registering?

If you are registering for the first time, you will first have to sign up on the website and create a profile by entering your personal information and contact details. After doing so, you can login and begin the registration process:

• Fill in the organization details, with the SSN and driver's license number. You will also have to mention the ownership and corporation type, with the management details.
• Enter personal contact details, as well as the business address, the FEIN, and the file number issued by the Texas secretary of state (this can be left blank if you have not registered with the Secretary of State) have to be entered. Apart from this, you will also have to include the name of the bank that your business has an account with.
• Enter your business activity and details, such as your anticipated taxable sales, whether you make internet sales, have representatives in Texas, etc.
• Enter the date of your first taxable sale, as well as information about your distribution and business location(s) have to be entered.
• Enter your NAICS code. Based on your business type, you can find an NAICS code online.
• If your business has been previously owned by someone else, you will also have to enter their contact details, FEIN, taxpayer number, purchase price and purchase date.

You will receive confirmation of registration after submission, and will receive it within 2-4 weeks. If you need any further help with the process of registration, you can always contact the Comptroller or even visit their site for video tutorials.

Note: if you haven't been issued a taxpayer number before, and if this is the first time registering with the comptroller, you can leave the Taxpayer number field blank.

What are your obligations as a permit holder?

You have to display your permit at your store or any other place of business, and use it to comply with sales tax obligations—collect taxes from your customers when you make taxable sales, file returns, and pay the amount to the state by the due dates assigned to you. It's also important that you keep records of all such transactions.

You should notify the Comptroller of any changes in business ownership, and get a new permit accordingly. If you need to change your business address, you can update the same by accessing the Sales Tax Permit page on the website. If you terminate your business and are no longer a seller, you have to return the permit.

After registration is completed, you need to start keeping track of the taxes you collect, and using great accounting software can help you. Zoho Books is an online accounting solution that eases your tax burden by helping you manage your business, focus on your revenue, and stay tax compliant with easy sales tax management. Sign up with us here!