Just about every business requires a license or permit to operate, regardless of whether the business is structured as a sole proprietorship or other type of business entity, such as a corporation. In general, a sole proprietor must obtain a permit to buy or sell product, whether retail or wholesale. The permit is obtained from a government office at either the state or local level where the sole proprietor is doing business.

Seller's Permit Basics

The term "seller's permit" does not have a uniform definition, but most often is used to refer to a permit that allows a business owner to sell products that are subject to retail sales tax. For example, in California a seller's permit must be obtained by all businesses that intend to sell or lease property subject to the state's retail sales tax. However, even in states without a statewide retail sales tax, a similar permit or license may be required. For example in Arizona, all businesses selling product or providing certain taxable services must obtain a license from the state Department of Revenue called a Transaction Privilege Tax license.

Application Procedure

A sole proprietor applying for a seller's permit will generally find that the government agency responsible for issuing the permit provides a system for online registration. For example, in California the Board of Equalization has a system called "eReg," and the New York Department of Taxation and Finance has system called "O.P.A.L." -- short for Online Permit Assistance and Licensing. The information required to apply for a permit is fairly extensive. Sole proprietors must provide their Social Security number; a second ID such as a driver license number or passport; banking information, including an estimate of anticipated average of monthly taxable sales; names and address of suppliers and personal references; contact information.

Miscellaneous Issues

If a sole proprietor is making sales from more than one location, additional permits may be required for each location. For example, the Texas Office of the Comptroller requires a separate permit for each place of business, although a California seller may consolidate multiple locations under one permit in some instances. As a general rule, a seller's permit is not transferable from one person to another or from one location to another. A change of ownership for a business will require a new permit, which includes a sole proprietor forming a corporation or limited liability company to operate his business.

Online Sales

If a sole proprietor is located in a state that imposes sales tax, sales made using the Internet are subject to the tax for any customers residing within the state and a seller's permit is required. For sales made to customers out of state -- called "remote sales" -- the seller does not have an obligation to collect sales tax. However, this rule may change in the future as state and federal taxing authorities continue to examine the amount of lost potential tax revenue from online sales.