We are breaking down the complicated steps to
start a small business as a sole proprietor
in the state of California into simplified, easy
to digest steps that you can actually accomplish.
Today we're talking about step number three,
which is to obtain a seller's permit
if you are required to do so.
Now, the CDTFA is the California Department of Tax
and Fee Administration, and they say that if you
sell or lease merchandise, vehicles or other tangible property
in California, even if it's temporary, then you're required
to register with the CDTFA and you must pay
sales tax on your taxable sales.
Now, when you register with the CDTFA, you
are registering and receiving a seller's permit.
This then allows you to make those sales, but also requires
that you collect and remit sales tax to the CDTFA.
Now, many of you might not be sure
if you specifically are required to get a
seller's permit for your own unique business.
So first ask yourself, are you selling tangible products and
are you making three or more sales per year?
If you are selling tangible products and you are
making three or more sales per year than the
CDTFA States that you in most cases would be
required to receive a seller's permit.
So what about those of you
that have a mixture of things?
Let's say you are selling a tangible product, but
you are also selling and charging for your labor.
If you are charging for Labor, labor is subject
to sales tax when it results in the creation
or future sale of a tangible product only.
For example, if you make a ring for a
specific customer, you are creating tangible personal property.
Therefore, the total amount you charge
would be subject to sales tax.
On the other hand, labor costs for making
repairs, such as resetting a diamond, for example,
are not taxable since they do not result
in the creation of tangible personal property.
Now, for those of you who are conducting
three or more sales per year and who
are selling tangible property, there is an exception.
If you are utilizing a marketplace facilitator to
conduct your sales and the marketplace is the
one collecting and remitting the sales tax, then
you do not need a seller's permit.
Now, a marketplace facilitator is a third party company
that hosts your shop and collects and limits the
sales tax every time you make a sale.
So how do you know if the company the platform
that you were selling on is a marketplace facilitator?
I want you to check and see if
they charge and keep the sales tax.
If they are keeping the sales tax themselves and
this is something that never passes through your hands,
then they are, in most cases a marketplace facilitator.
In order to make sure check the
sellers frequently asked questions on whatever marketplace
you are using to conduct your sales.
Most likely they will have a
section specifically devoted to taxes.
Now that you have decided whether or not
you're required to actually obtain a seller's permit.
The next step is going to be completing
the online application with the CDTFA in order
to apply for your seller's permit.
Now this is a detailed application and I do
have several very thorough videos showing you not only
a full walkthrough of the application but also answering
many frequently asked questions that individuals who are applying
for sellers permits in California often ask me.
I'm going to link those down below.
Make sure you click on this video next to watch them.