Congratulations! You’re opening a new gym, Crossfit box, HIIT, cycling, yoga, or other fitness studio in California and you need to register for a sales tax license. We’ve registered more than 100 businesses across the nation so we understand how confusing the process can be, especially if this is your first time. By the end of this article, you will know exactly what to do to register for a sales tax license in the State of California with our step by step guide for fitness business owners.
To register your sales tax license in California you have three options: do it yourself, hire an accountant like us, or use one of the bigger corporations online like Avalara, TaxJar, or Legal Zoom. At the time of writing this article, all of the online corporate websites require calling in to speak with them about the registration process and no one has a step by step guide. This article should give you all of the tools you need to complete the process yourself and help minimize your start up costs. As accountants, we know how important it is to save every dollar when starting a new business.
So let’s get started with an overview of the topics we’ll cover today:
Why Do I Need A California Sales Tax License?
When starting a new California business, it is important that you register your company with your state (and sometimes city) for a sales tax license to stay in compliance with the requirements and to prevent penalties and fines. Except of course in these five states where there are no sales taxes – Alaska, Deleware, Montana, New Hampshire, and Oregon. Also you may have already discovered that when you try to buy inventory to sell at your new business, your vendors will ask for your sales tax license number. Your business does not pay a sales tax when you purchase items for resale, instead, sales tax is collected when the end consumer makes the purchase from your fitness business.
The State of California requires that your business collects sales tax when you sell retail items such as clothing, other apparel, yoga mats, food and beverage. As a retailer, you will need to collect and remit that tax to the government. However, state sales tax is not collected on services such as studio/gym memberships, teacher trainings and workshops thus you do not collect and remit tax on that service based portion of a customer’s purchase. Then at the end of each month, quarter or year (depending on the amount of sales tax collected) you will report your total sales to the state. Both service and retail sales are reported, however in California, sales tax is only collected and remitted on retail sales. Conveniently, when you register for your sales tax license, you can also register for your state withholding account number at the same time if you plan to have employees.
What Do I Need To Register For A California Sales Tax License?
You will want to have these items handy before you start the online registration process.
- · Name and address of your business.
- · Type of business (Sole Proprietorship, Corporation, S-Crop, LLC, etc).
- · If you are an LLC, ask your tax accountant how your LLC is taxed.
- · Your FEIN (Federal Employer Identification Number).
- · This can be found on your IRS form SS-4.
- · All owner/partner/corporate officer information: name, address, social security number, and phone number
- · Business bank account information. Your bank name, address and phone number along with your bank account and routing number which are found on the bottom of your business checks or you can login to your online bank account to find this.
- · NAIC code for the type of products and services you will be offering. The NAICS is the North American Industry Classification System. Each business type is categorized under a different number. Go here The Census Webpage here to look up your business code. (Hint, hint….if you are a fitness center, your code is 713940)
Where Do I Register for a Sales Tax License?
The State of California website takes you through a series of questions that guides you through the process of registering for your license. In addition, the State website will help you determine what other state registrations you may need to complete for your business. To begin, go to the State of California website here.
Step by Step Guide for How to Register for California Sales Tax License
Click to expand each section:[expand title=”Part I: Business Info” tag=”h2″]
The first step is go to cdtfa.ca.gov.
This is the main screen.
You will need to click on Permits & Licenses on the ribbon.
On this next page, you will click on the blue link labeled register online.
Now click on Business Activity or Location.
There are several sections
B.) Taxpayer Information
C.) Business Information
D.) Account Information
This is the first screen in the Questionnaire and you will need to read each item to see if it is relevant.
There may be 3 items that could be relevant to your company if in the fitness industry.
1.) Selling items or goods in California (Seller’s Permit)
2.) Purchasing items from out of state for use in California without paying tax. This is Use Tax and has changed dramatically over the past few years. Amazon was a huge organization where people and businesses would buy items from Amazon and didn’t pay sales tax when the items were purchased. The buyers were then responsible for reporting the sales and submitting sales tax to the state on those items. Amazon and most companies are now collecting sales at the time of purchase unless they do not have a physical location in the state of purchase.
3.) Employing 10 or more people
In my example, the gym has less than 10 employees and does not buy any items out of state where sales tax is not collected so I will only check the first box on the list (Selling items or goods in California)
Click next at the bottom of the screen.
The next page will ask the type of goods that will be sold:
A fitness facility would not be selling any of the items so just click “no” on all for 4 items and then “Next”.
The next page also is not fitness related to you would click “no” on all 4 items and then next.
B.) Taxpayer Information
This page will ask What Business type are you registering this activity for. Your choices from the pull down menu are items such as Sole Proprietor, Partnership, LLC, Estate, Trust, etc.
For this specific situation, I am choosing Partnership though you may be an LLC or even a corporation. Then clicking “Next”.
The FEIN needs to be entered on this screen. Also, on this page, if the business entity changed, this would be the screen to update it.
After entering the FEIN, entering “No” for entity change, click next.
The following question is Do you have a current account with CDTFA? If you do, you will click on “Yes”, this will link your accounts together. In this example, I am clicking “No” and Next. If you have another business in CA, you could click “Yes” and you will have access to them all with one login.
The final steps is the summary section
The first question is if you want to register for the Seller’s Permit. It will automatically have the “Yes” clicked. You will need to click “Next”.
The next part is asking if you want a temporary permit. You will need to change the answer to “No” if you are applying for a seller’s permit for your location and then click “Next”. *The 90 day permit is for vendors such as Christmas tree vendors that are seasonal.*
[/expand] [expand title=”Part II: Shareholder/Partner Info” tag=”h2″]
The next part will ask if you have a company agreement. Since I chose Partnership as the entity, the state wants to know if there is a partnership agreement. There is in my scenario so I will click “Yes” and then “Next”.
Since I clicked “Yes”, the state wants the partnership agreement uploaded or mailed.
The next screen asked the partnership address and if it is the business location.
If you want any sales tax notices mailed to your home address, enter in the home address here and click Here to Verify Address to confirm, then click “No”, and “Next”. If you would like any notices mailed to your place of business, you would enter the address of the business here and then click “Yes”.
Information about the company is next. The name of the business, start date, phone number, and email address need to be entered. The FEIN will auto-populate.
After entering in the information, click “Next”.
Now the detail needed is moving into the partner specific questions. A general partner information will need to be entered so click “Yes” and then “Next”.
Enter in the partner information here.
After entering the partner info, click “Next”.
This screen will ask for Social Security Number since the partner is an individual.
After entering the SSN, there has to be a 2nd type of identification so a driver’s license number needs to be entered.
After entering the license number, click “Next”.
Contact information for the owner will be entered here. Phone number and email needs to be entered and then “Next”.
Now the address of the owner will need to be entered.
After entering the address, click “Next”.
Entering the other Partner is the next step.
It is the same steps as before.
[/expand] [expand title=”Part III: Business Info Continued” tag=”h2″]
C.) Business Information
The state wants to know if you will accept credit card payments and internet sales. This is where you will answer that.
Enter in the information and then click “Next”.
Now you will need to enter the NAICS code. Fitness facilities code is 713940
You will need to click on “Add NAICS Code”.
You will need to type in a keyword to pull up the choices.
You will click on the best option.
There will be a description of the choice. Make sure it is the correction choice and click “OK”.
Your choice will be entered when you get to the next screen. Click “Next”.
In this example, the studio is not intending to ship goods to out of state and the other questions are also not relevant so we will click “No” for this example and then “Next”.
The next question is for a temporary event. The answer is “No” in our example. Now click “Next”.
The Business Location will be asked again. It will auto-populate to what was entered earlier. Click “Yes” and then “Next”
This next page is where the DBA is entered along with the phone number.
Enter in the information and then click “Next”.
Enter in the date of the Permit Start Date and then “Next”.
Are you buying or transferring an existing business?
If the answer is “Yes”, the following will need to be entered.
If the answer is “No”, then click “Next”
If you have an additional business location, this is where it can be added. This would be if you have a trunk sale or a temporary location. In our example, the studio is a single location.
A summary of the location will be listed. Verify that the information is correct.
D.) Account Information
This next page need to know how much you believe you will sell. You will need to enter all probable future sales and then only taxable sales.
In the example, I entered $30,000 in monthly sales and $300 in taxable sales along with the description of what is anticipated to be sold. The state is really interested in how much the taxable retail sales you will have. This is where they will decide your filing status. If you exceed your sales, the state will update your filing and tax remittance dates.
After clicking “Next”, the state wants to know where you will hold the books and records for the Sales and Use Tax Account. They also want to know the Mailing Address. You will need to click on each section. If you prefer to change the address to get notices to your home address, click on the “Add a different address” and then type in the address.
A supplier has to be added to continue the sales permit. The state needs to make sure that there is a vendor that you will be purchasing from.
Once you click on “Add a Record”, these section needs to be filled out.
Click on “Add” and then “Next”.
This is the registration summary. It will let you know how often you will need to file a return. Click “Yes” and then “Next”.
The person entering the information for the Sales Tax permit will be entered here. If you are applying for the permit, you would enter your information. If you hired a paid preparer, they would enter their information.
Since I filled out the application, I filled in my information.
Finally, we are at the Declaration of Intent. Click the box.
After clicking the box and “Next”, the following page gives you the opportunity to register to vote in the State of California.
Click the option that best suites you and then “Next”.
This page is the final summary.
At the bottom of the screen, click on “Submit”.
There will be a confirmation on the next screen. You will need to save a copy of the registration. Click on Printable View and save the PDF.
The confirmation will look like this.
You did it! You have completed a California Sales Tax Permit application![/expand]
Recap of The Sales Tax Registration Process:
Gather all of the necessary documents (as listed above) and head to the State of California’s website to start applying for your sales permit. Follow the instructions step-by-step and save a copy of the completed license application. That’s it!
If you run into road blocks along the way, feel free to shoot us your question and we will respond to your enquiry within 48 hours.
You may want to check out a few of our other guides for opening up a fitness business in the meantime as well:
Until next time!