Checklist of Licenses, Registrations, Permits, and Tax Numbers to Operate Your Business in California
As we wrote recently here, nearly every business needs some kind of business license or permit to operate in California. Here is a checklist of licenses, registrations, permits, and tax numbers that you might need.
FEIN — Federal Employer Identification Number
All new businesses should obtain a nine-digit federal employer identification number. A FEIN is sort of like a corporate social security number. It will be used for a large assortment of papers and filings, such as your corporate tax returns, opening bank account for the company, filing other required governmental forms, etc. Your FEIN is given to businesses when they will be issuing an IRS 1099 form for payments made. It is important to have a FEIN because otherwise you will be expected to give out your personal individual social security number. In the past, FEINs were used only for businesses with employees. But now, the IRS SS-5 form specifically envisions corporate entities that do not expect to have employees. FEINs are obtained for trusts, probate estates, and a myriad of other entities.
California Employer Payroll Tax Number
If you have even one employee or pay more than $100 in wages in a calendar quarter, you must register with the California Employee Development Department (“EDD”) and obtain a California employer payroll tax number. This number is used for payment of state payroll taxes.
Local Licenses, Permits, or Registrations
Almost every large city in California and many small ones require business licenses or permits and/or registrations. These are primarily for city tax reasons, zoning compliance, business use/location regulations, or to protect public health or safety. Some types of business are specifically and heavily regulated (like restaurants and establishments that serve and/or sell alcohol).
Certain types of businesses require industry-specific licenses or certifications. Lawyers and accountants are examples, but specialists include other professionals like hairdressers, pest control experts, funeral homes, etc.
California Seller’s Permit
You must obtain a California seller’s permit from the California State Board of Equalization if:
- You are engaged in business in California; and
- Intend to sell or lease tangible personal property that would ordinarily be subject to sales tax if sold at retail; or
- You will make sales for a temporary period, normally lasting no longer than 90 days at one or more locations (for example, fireworks booth, Christmas tree lots, garage sale).
You must collect sales tax. The Board of Equalization will issue you a Permit Number for paying the sales tax and for use on other forms and filings.
California Use Tax Account
California assesses a use tax on purchases from retailers outside California if two conditions apply:
- The out-of-state seller does not collect California sales or use tax and
- Your business uses the goods or products in California
Generally, use tax is paid via a business income tax return or via filings required if the business has a California Seller’s Permit. There are also forms and payment options for one-time purchases. Since 2009, a business or person that receives at least $100,000 in gross receipts from business operations per year, and is not otherwise required to be registered with the Board of Equalization, must register with the Board of Examiners and report and pay use tax on purchases made from out-of-state retailers.
Special Taxes and Fee Registrations
Depending on your business, you may need to register for special taxes and fees with the Board of Examiners. There are 29 listed special types of businesses that must register and pay special fees/taxes including:
- Sellers of cigarettes;
- Sellers of alcohol;
- Sellers of tires;
- Fire prevention businesses;
- Businesses dealing with fuel, motor oil, and hazardous substances; and
- Businesses using or selling aircraft and watercraft.
For the full list, see BOE page here.
Contact San Diego Corporate Law
If you need more information or need legal advice about business licenses and permits, contact an experienced business attorney like Michael J. Leonard, Esq., of San Diego Corporate Law. Contact Mr. Leonard by email or by calling (858) 483-9200.
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