If you are starting a business or plan to sell goods or services in the U.S., you’ll need to register with both the Secretary of State’s office and your state’s Department of Revenue for state tax purposes. A common misconception about state registrations is that once you register with the Secretary of State’s office, you have fulfilled all of your obligations for business registration. However, your business will likely have one or more tax types that need to be reported at the state Department of Revenue level.

Understanding the registration process, and how to eventually withdraw a registration if needed, is crucial to ensure your business is compliant with state and local tax laws. In this blog, we’ll break down the process of registration and withdrawal. 

Step 1: Understanding Sales Tax Registration 

The first step in this process is understanding exactly what you need to register for and why. Registration with the Secretary of State’s office is required by most states before your business can legally operate. At the very least, you should be registered with the Secretary of State in the state in which your business was formed. If you are doing business in other states, you’ll need to check that state’s laws to determine your registration requirements. If you are a remote seller doing business in other states with no physical presence there, you’ll probably only be required to register with that state’s Department of Revenue, not the Secretary of State’s office. 

After registering your business entity with the Secretary of State, you will also need to register with the Department of Revenue to report your sales, payroll, and other applicable taxes. Another common misconception at this stage is that companies who do not have any taxable sales do not need to register with the Department of Revenue. It is important to note that both taxable and nontaxable sales must be reported, and some states have reporting requirements even if your business makes only wholesale sales, sells through a marketplace facilitator, or otherwise makes nontaxable sales. 

Step 2: Registering Your Business with the Secretary of State

Registering your business with the Secretary of State is one of the first steps in starting a business. Before you start, you’ll need to make a decision regarding your business structure. There are several options to choose from, including a sole proprietorship, a partnership, and a limited liability company (LLC). Each option comes with pros and cons. For example, a sole proprietorship is the simplest form of business structure, but does not offer any legal separation or protection between you and your business. Picking the right business structure will depend on your specific situation and business needs. 

Registering your business with the Secretary of State’s office will also require you to provide information like your business name, the personal information of owners or officers for the business, and a description of your business activity. Be prepared to pay a filing fee when submitting your registration, which can range anywhere from $50 to a few hundred dollars, depending on the state. 

After you’ve completed the Secretary of State registration, remember that your compliance requirements do not end there. Some states require biannual or annual reporting to keep your business in good standing with the state. Failure to complete this reporting can result in penalties or a revocation of your business license, so it is essential to keep up with these regulations. 

Step 3: Registering Your Business with the Department of Revenue

Many business owners believe that completing the Secretary of State is a one-stop solution for all of their compliance and reporting requirements. However, the Secretary of State registration simply allows your business to operate. The state Department of Revenue is the agency that issues tax permits and collects various tax types. Some of the tax types that are reported at the Department of Revenue level include corporate income tax, transportation services tax, sales tax, and payroll or withholding tax, among others. Typically, you can register for multiple tax types using the same registration application. 

For sales tax purposes, you’ll need to register with the Department of Revenue to obtain a sales tax permit or license, sometimes also referred to as a seller’s permit. A sales tax permit authorizes you to collect sales tax from your customers in that state. It is crucial to understand that you cannot collect sales tax from your customers in a state without a sales tax permit from that state. Registration with the Department of Revenue will typically require you to enter information such as your EIN, your NAICS code, the information for responsible officers/owners of the company, the date you began operations in that state, and other similar questions. The state will then issue a sales tax permit and assign a filing frequency that tells you how often you need to file sales tax returns. 

Step 4: Withdrawing Your Registration with the Secretary of State or Department of Revenue (if needed)

At some point, there may come a time when you need to close your business permanently, or you no longer need to remit a certain tax type to the Department of Revenue. For example, if you no longer have employees in a certain state, you might close your withholding tax account. 

If you plan to close your business entirely, you will need to officially dissolve it by filing dissolution paperwork. The paperwork required varies by state, but can include a certificate of termination, articles of dissolution, or a notice of intent to dissolve. The purpose of this paperwork is to inform the state that your business will no longer be active.

At the Department of Revenue level, there are several reasons why you might need to close an existing account. If you think you no longer have a sales tax obligation in that state, make sure that you are permitted to close the sales tax account. Some states require you to keep the sales tax account open and file zero returns. If you are permitted to close the account, you will need to submit a final sales tax return and indicate to the state that it will be your final return. Make sure your account is in good standing and all returns have been filed and any outstanding tax or penalties have been paid. After filing your last return, some states will automatically close your account, while other states will require you to submit a form or formal request to close the account. 

Conclusion

Registering your business with the Secretary of State’s office and the Department of Revenue is a crucial, yet confusing, part of running your business. This guide provides an overview, but there are many more steps and considerations to business registrations that can make this process feel daunting. 

Remember that you do not need to navigate registrations on your own, and let State Tax Advisors be your guide.