Do I need to register before I start collecting sales tax?

Yes, registration comes before collection. In most states, collecting sales tax without a valid sales tax permit is illegal, even if you plan to remit every dollar. The correct sequence is: establish nexus → register → begin collecting.

The required sequence

Step 1: Establish nexus. You have nexus when you meet a state’s threshold for economic presence (typically $100,000 in sales or 200 transactions) or when physical presence begins (inventory, employees, office).

Step 2: Register for a permit. Apply for a sales tax permit with the state’s Department of Revenue before collecting any tax. In most states this is free and takes a few days to a few weeks depending on the state.

Step 3: Begin collecting. Once your permit is issued (or in some states, from your effective registration date), begin charging and collecting sales tax on taxable transactions sourced to that state.

Skipping to step 3 without completing step 2 creates exposure, you’re holding tax collected under an account the state has no record of, and there’s no mechanism to remit it.

Home state vs. other states

Home state: Register before your first sale. There’s no nexus threshold for your home state, you have physical nexus from day one. This registration should be in place before you open for business.

States where you cross an economic nexus threshold: Timing varies by state:

• Some states: Register immediately when the threshold is crossed; collection obligations begin on the same date
• Others: Nexus is established when the threshold is crossed, but collection doesn’t begin until the first day of the following calendar month or following calendar quarter

This distinction matters. Check the state’s specific rule, there’s often a short window between when nexus begins and when the collection obligation starts. Most states publish this in their economic nexus guidance.

What if you’ve already started collecting without a permit?

Stop collecting immediately. Then:

1. Register as quickly as possible. Most state DOR websites allow online registration with same-day or next-day confirmation.
2. Hold the amounts collected separately. Don’t spend collected-but-unremitted tax, you owe it to the state.
3. Contact the state after registering. Most states can accept remittance of prior-period amounts and will assign the payments to your new account.
4. Consult a tax advisor. The treatment of collected-but-unremitted amounts varies by state and the amounts involved. Some situations benefit from a voluntary disclosure approach.

SST states: registration before collection still applies

For SST member states, registration through a Certified Service Provider (CSP) covers all 24 SST member states in a single application. But the same rule applies: get registered before you start collecting. The SST registration process is typically faster than individual state registrations.