Sales tax registration in general can feel confusing for first-time business owners. This is to say nothing of the confusion that comes along with online sellers or businesses that have multiple revenue streams. However, just because it’s confusing doesn’t make it impossible to be considered compliant with the law. Generally, most businesses that sell taxable products or services within the state of Florida must register properly before collecting sales tax. So if you’re looking at how to start a business in Florida, this is an important step to take.
No need to worry though, as this article will serve as your practical guide to understanding this process. We will cover who needs a Florida sales tax permit, how to apply, what filing responsibilities come after registration and more. Remember, tax requirements will vary depending on the business activity and products or services sold, so this should be taken as a general guideline to get you started in the right direction as a Florida business owner. Read on for more on how to get a Florida sales tax permit and what all that entails.
What is a Florida sales tax permit?
In the simplest of terms, a Florida sales tax permit serves as official permission from the state (Florida) that allows you as a business to collect sales tax from your customers and send that tax to the Florida Department of Revenue. It is an agreement that you make as a business that in essence makes your business an unpaid tax collector for the state of Florida. Businesses generally must register before legally collecting sales tax in Florida. Therefore, a sales tax permit is necessary in order to collect and then remit sales tax to the state on behalf of customers.
What is a Florida sales tax permit commonly called?
In Florida, the official name or common name of a sales tax permit is the sales and use tax certificate of registration. You might also see it referred to as a seller’s permit, a sales tax permit, sales tax license, or a sales and use tax certificate. These terms are often used interchangeably by business owners and professionals throughout the state, even though the state might stick with more formal terminology.
Does Florida require a sales tax permit?
In most cases, yes, the state of Florida does require a sales tax permit for businesses that are engaged in taxable business activities. They are required to register for sales tax collection. Common taxable activities can include the following:
- Selling retail products.
- Leasing or renting property.
- Selling certain taxable services.
- Operating ecommerce businesses.
- Repairing or altering tangible goods.
It’s important to note that even if you don’t have a physical storefront, this does not free you from sales tax obligations within the state of Florida.
Sales tax permit Florida requirements
Businesses may need to register with the Florida Department of Revenue if they establish a sales tax nexus in Florida. A tax nexus is basically a legal connection between a business and a state. It means the state views a business as having enough of a local footprint that they should collect and pay taxes after registering. As a business owner, you establish this connection in one of two ways:
- Physical Nexus: This means you have a physical tangible footprint in the state, which can include:
- Having a warehouse, storefront, or office.
- Storing inventory in the state.
- Having employees or remote workers working within the state lines.
- Having ecommerce or remote sales activity.
- Economic Nexus: This does not require a physical presence or storefront. However, if your business exceeded more than $100,000 in retail sales in the terms of taxable property or services in Florida throughout a year, then you have established an economic nexus.
If you feel your business qualifies under these definitions, then you should ready yourself for tax permit registration by gathering the following documents and information:
- Business name and address.
- EIN or SSN.
- Business Structure.
- Ownership Details.
- Description of Business Activity.
Obviously, different business models will require different registration obligations, but gathering this information will at least give you an idea of what you are going to need to begin this process.
How to apply for a Florida sales tax permit
Thankfully, although overall tax can be confusing, the act of applying for a Florida sales tax permit isn’t that difficult. Begin by applying online through Florida’s Registration and Account Maintenance Portal.
Paper registration options might also be available using Form DR-1. Keep in mind, you will likely need the following to get through this process whether you go the paper route or the online option:
- EIN or SSN
- Banking information
- Ownership details
- Estimated business start date
It’s also worth noting that the online registration process is typically faster than paper filling.
How much does it cost to get a sales tax permit in Florida?
The state of Florida generally does not charge for online registration for sales tax permits. However, there might be a small fee associated with the mail in applications. Of course, you might have other Florida business license and registration costs to pay, depending on your location and/or industry.
Do online businesses need a Florida sales tax permit?
Perhaps. In short, ecommerce businesses are not automatically exempt from Florida sales tax rules. Online sellers might need to register if they establish a nexus in Florida (outlined above). Marketplace facilitators might also collect tax on behalf of sellers and some businesses might still need their own registration even when marketplaces handle the collection process. Online sales tax compliance becomes more complex as businesses grow into additional states.
What happens after you get a Florida sales tax permit?
After you get a Florida sales tax permit, it’s now time to put it to use. You do this by performing the following actions:
- Collect sales tax from customers.
- File sales tax returns.
- Remit collected taxes to the Florida Department of Revenue.
Filling frequency requirements may vary based on several factors. You can expect to file either monthly, quarterly, or annually. It’s important to note that missing fillings or payments can result in penalties and interest charges, so it’s to your benefit to understand the ins and outs of proper filing for your particular business.
Common mistakes businesses make with Florida sales tax registration
Again, taxes are confusing. We get it and there are several common mistakes that many businesses make when it comes to Florida sales tax registration. Read the following and avoid these common errors:
- Collecting tax before registering.
- Assuming online businesses are exempt.
- Missing filing deadlines.
- Poor sales recordkeeping.
- Confusing sales tax permits with resale certificates. Sales tax permits give you the authority to collect tax, while resale certificates are a tool you can use to avoid paying taxes on items you plan to resale. They are not the same.
It’s worth noting that your sales tax obligations can expand as your business grows into new markets and opens more sales channels. So, it’s a good idea to keep up with evolving requirements as your business grows.
Preparing your business before applying for Florida sales tax registration
Now that you are moving towards applying for a Florida sales tax permit, you need to gather and organize all applicable information to make the process of registering much easier. The following should be some steps you take before you begin tax registration as a way to ensure your business is prepared for this process and can maintain ongoing compliance:
- Business Structure: Your business structure is the way your personal liability is dealt with along with how you are taxed. This can be a sole proprietorship, limited liability company (LLC), or a corporation (C-Corp or S-Corp).
- EIN: An EIN stands for Employer Identification Number. It is a federal tax ID used to identify your business entity. You use this to hire employees and to open bank accounts.
- Business Address: You need a designated address for mail, official documents, and state licensing. You can rent a private mailbox at a UPS store or use a virtual business address.
- Product or Service Categories: Next up in this process is setting up your product or service categories. This is how the government will classify your economic sector for industry data, regulations, and, of course, taxes. NAICS Codes are the North American Industry Classification System, which is a 6-digit code to define an industry (like professional services or specific retail). Product Services Codes or PCS are required if you plan to sell to the government.
- Basic Bookkeeping Setup: Last, but certainly not least, you should have your business set up from a basic bookkeeping point of view before attempting to register or get a sales tax permit. Also, it is a headache to try to split up business and personal transitions after the fact. Keeping your business’s bookkeeping separate from your personal finances is a must. Doing so should include setting up a basic business bank account dedicated to your business and having accounting software to use to track finances. Also, it’s good to chart your accounts to create categories of income and expenses so you can keep a handle on where exactly your money is going.
Overall, organizing business information helps simplify the registration process and makes ongoing compliance much easier. At Tailor Brands, we understand the necessity of having a well-organized business for a variety of reasons. We are here to help you with the following:
- Forming your business.
- Obtaining your EIN.
- Organizing your business setup and compliance information.
- Helping you manage your bookkeeping and operational records, keeping everything in one place.
Conclusion
Many businesses selling taxable goods and services in Florida need sales tax registration, including online businesses. In addition, there are many further responsibilities that come after registration that we can help you with. Staying organized early helps simplify Florida sales tax compliance and helps you as your business grows. While we cannot guarantee approval for your business, we can help make the process of registration much easier. Contact us today to learn more about our many business services. From tax permits to helping form an LLC or get your EIN, we can help you with it all. Call us today!