When Should You Register for Sales Tax?
If you've started researching sales tax, you've probably wondered:
"When should I register?"
It's a great question—and one that many business owners get wrong.
Some businesses register the moment they make a sale in a new state. Others wait until they receive a notice from the state.
Neither approach is ideal.
The best time to register is after you've determined that registration is required, but before you begin collecting sales tax in that state.
Step 1: Determine Whether You Have Nexus
Before you fill out a registration application, you first need to determine whether you've created nexus in that state.
Nexus is the connection between your business and a state that allows the state to require you to collect and remit sales tax.
That connection can be created in different ways, including:
- Exceeding an economic nexus threshold (such as a certain amount of sales or number of transactions)
- Having inventory stored in the state
- Having employees or contractors working there
- Other forms of physical presence
Every state has its own rules, so it's important to evaluate each state individually.
Step 2: Register
Once you've determined that registration is required, you can apply for a sales tax permit with that state's tax agency.
After you're approved, you'll generally receive:
- A sales tax permit or license
- Your filing frequency (monthly, quarterly, or annually)
- Instructions for filing and paying sales tax
From that point forward, you'll be responsible for filing sales tax returns according to the schedule assigned by the state.
Why You Shouldn't Register Too Early
It might seem harmless to register "just in case," but registering starts the compliance clock.
In most states, once you're registered, you're expected to file returns—even during periods when you didn't collect any sales tax. Those are often called zero returns.
Registering too early can create unnecessary filing obligations and increase the amount of compliance work you have to do.
Why You Shouldn't Wait Too Long
On the other hand, waiting too long can create its own problems.
If you continue making taxable sales after you're required to register, you may have to address missed filings, unpaid tax, penalties, or interest, depending on the state's rules and your specific situation.
The goal isn't to register as early as possible or as late as possible—it's to register at the right time.
The Bottom Line
Registration isn't the first step in sales tax compliance.
Understanding where you have nexus is.
Once you know which states require registration, you can move forward with confidence and avoid both unnecessary registrations and costly delays.
If you're just getting started, my Sales Tax Starter Guide walks through the basics of economic nexus, marketplace facilitators, registration, and common mistakes in plain English. It's a great place to start if you're trying to make sense of ecommerce sales tax without getting overwhelmed.