Which States Require Foreign Qualification BEFORE Sales Tax Registration?
Foreign Qualification is the process where your legal entity will need to register with the Secretary of State first, before applying for a sales tax permit.
There are three states we have discovered that require a state ID (from the Secretary of State) prior to applying for a sales tax permit in a state (or use tax permit).
Update 7-26-19: District of Columbia (D.C.) requires the responsible party to have an ITIN or SSN. If they do not, you are not able to register. One exception is if the applicant is an entity and foreign qualifies to do business within D.C., the office of tax and revenue said the responsible party can be the registered agent. Therefore, foreign qualification is mandator with this option. Sales Tax System does provide support for this service.
CAUTION: This is a moving target as states review this process. This is at the end of dozens of calls to each state and hundreds of hours over the last 6-8 weeks.
Required vs Recommended
These are the states that require foreign qualification BEFORE applying for a sales tax permit. There are several more states that first sounded like foreign qualification was required but after calling back and asking more questions, it becomes more clear, foreign qualification was simply “recommended” but not “required”. Below are the ones that were “required”.
Here are the three states that “require” foreign qualification first before applying for a sales tax permit.
Colorado is an FBA state, since September of 2017. Separately, they also have notice and reporting laws that were effective as of July 1st, 2017. This means if you sold more than $100K in the previous year in Colorado, you should be registered to collect and remit sales tax (vs reporting to your customers, which is costly). Perhaps you held off applying for a sales tax permit in Colorado because you had to foreign qualify first, and there were extra costs involved.
If you have FBA stock in the state, you may want to get registered to collect and remit.
The Colorado state filing fee to foreign qualify for a corporation or LLC is $100. See our fees and process below for the entire foreign qualification process. Sales tax permit registration service is separate.
Oklahoma: Updated April 2019
No longer is it required to foreign qualify into Oklahoma before registering for a sales tax permit.
Oklahoma is NOT an FBA state, but it is a notice and reporting state with a threshold of only $10K in sales during the previous 12 months. If you have surpassed that number in sales, you should register for a sales tax permit in that state. This went into effect on 4/4/2018.
In the past, it was required that you first foreign qualify in the state before applying for a sales tax permit. Oklahoma requires you to register with a Vendor Use Tax (equivalent of a Sales Tax permit) but before you obtain a Vendor Use Tax, you will need to first register with the Secretary of State. This applies to both LLCs and corporations. An LLC does not have a franchise tax but vendor use tax. Here are our services to foreign qualify your company first.
Corporations are required to foreign register first before getting a Sales Tax Permit in Oklahoma. Corporations are subject to Franchise tax. LLCs are statutorily exempt from the Franchise Tax. The Oklahoma Secretary of State will issue a State Filing number and will then be entered on Sales Tax Permit Application.
West Virginia: Updated December 2018
West Virginia said foreign registration it is not required anymore for them to foreign register with the secretary of state. They will just need to fill out the paper form and mail it to them. Their online application will require them to foreign register. However, since they are an out-of-state or remote seller, they should not need to register online. Updated in middle October 2018, they published a notice about the economic nexus rules.
Learn more about our foreign qualification process:
If you need to foreign qualify for either of these states, review the link above. As well as this, reach out to sales tax system for support.
As a member of Sales Tax System, we will provide you with the proper updates on this complex subject.