Once you get to sales tax filing, the hard part of sales tax should be over. (“Should be” is the operative phrase here.)
By the time a sales tax due date has rolled around, you have already:
- Determined where your business activities gives you sales tax nexus
- Determined if the items you are selling are taxable in your nexus states(s)
- Registered for a sales tax permit
- Began collecting sales tax at the right rate from all buyers in your nexus state(s)
Once a sales tax filing due date rolls around, most of the hard work is over. However, sales tax filing comes with its own challenges. This post will walk you through what you need to know to keep your sales tax filings rolling smoothly along.
Sales Tax Filing Frequencies
When you registered for your sales tax permit, the state assigned you a filing frequency. The general rule of thumb is, the higher volume of sales you make to buyers in a state, the more often you’ll be required to file sales tax.
If you are a small, hobby, or seasonal business, you may only be required to file sales tax returns annually.
If you are a high-volume business doing hundreds of thousands or millions in sales in a state per year then you’ll likely be required to file monthly. (Some states these days are even asking very high volume sellers like the Amazons of the world to file and remit sales tax more than once per month.)
And if you fall somewhere in between small and seasonal or very high-volume, the state will likely ask you to file quarterly.
Sales Tax Pro Tip: Some states like Georgia start every seller out on a monthly basis and then reassign you to a new filing frequency once you have filed for a few months. If you find that you’re only filing a few dollars or cents in sales tax every month, it’s worth it to reach out to the state and see if you can be assigned to file less frequently.
Not only does filing miniscule tax returns take time out of you running your business, it costs the state admin time, as well.
Once you know how often to file sales tax, you’ll need to make sure you are filing by the state’s due date.
Sales Tax Due Dates
In the US, states make their own rules and laws when it comes to sales tax. And this comes right down to the days of the month that they want you to remit sales tax.
Sales tax is always due on a certain day of the month after the taxable period has closed.
So for example, if New Jersey requires sales tax by the 20th day of the month and you are a monthly filer, then your April sales tax return would be due by May 20th at the latest. (The same logic applies to quarterly and annual filers.)
Most states are like New Jersey and require that you file and pay sales tax by the 20th of the month after the close of the taxable period. But others set that due date on the last day of the month, or the 15th, or even sometimes the 23rd.
The important thing to remember is to treat each state separately, because they are. When a state gives you your filing due dates, be sure to follow that state’s due date. Don’t get them confused! If you accidentally treat Florida as if your sales tax filing is due on the last day of the month just like it is in California, then you’ll be late filing your Florida sales tax return and earn a penalty (with interest.)
Sales Tax Filing Methods
Most states now want, and even require, retailers to file sales tax online. You can also often file with paper forms (downloaded from the internet or picked up at your local branch of your state’s taxing authority) or through an automated telefile system, though some states now penalize businesses over a certain size for filing paper forms.
Many retailers are now, of course, also turning to software to file sales tax returns. This is a good option in most cases, but bear in mind that if you have any special circumstances then software generally doesn’t handle those. For example, some states require that you file separate returns not just for the entire state but for individual cities, and software generally doesn’t have the granularity to handle this.
How Sales Tax Returns Work
Just like sales tax due dates and filing frequencies vary by state, so do sales tax returns.
Some states, like Kentucky or Connecticut, have just a single sales tax rate. This means that when you collect sales tax from buyers in that state you are collecting one rate from every buyer.
But most states also allow counties, cities, and special taxing districts to levy a sales tax. And those localities want to ensure they get their money. That’s why, as an e-commerce seller, you’re often required to provide information on your sales tax return about where each of your sales took place. (Learn more about collecting sales tax here.)
Of course, taking the $500 in sales tax you collected and figuring out how much you collected in each of a state’s counties, cities, and other special taxing districts can be a challenge. When you make a sale to a buyer, you just need the shipping address–not what county they live in or if they pay a special public transit tax. This is why it’s important to give yourself plenty of time to understand what each state requires when it comes to filing sales tax.
Sales tax can be a time-consuming hassle. If you want this hassle off your plate, contact HOST. You can handle the sales, and we’ll handle the tax.
Paying Sales Tax
You’ll be asked to pay the sales tax you owe at the time of filing. In most cases, states now require that you remit funds electronically. They may even assess a penalty for sending in a paper check.
Are you an international seller? Many states require a US bank account to remit online, though more are now equipped to accept international transfers. Contact us for assistance if you run into this issue.
Common Sales Tax Filing Questions
What is the penalty for late or missed sales tax filings?
States generally charge a uniform penalty (generally around $50) for every failure to file, plus interest on the amount of sales tax due that goes unremitted. Many states even levy a fine on taxpayers who fail to file on their due date even if they don’t have any sales tax to remit! Further, a pattern of failure to file or late filing can also be an automatic trigger for a sales tax audit.
Aside from sales, what do I need to include on a sales tax return?
You’ll need to report your total taxable sales, sales tax collected, allowed exemptions, tax due, and any other information required for that period and jurisdiction. Keep detailed records of sales and collection.
I’m not ready. Can I get a sales tax extension?
That depends on the state, but often the answer is yes. However, just like with an income tax extension, sales tax extensions give you more time to file, not more time to pay. So even if you successfully receive an extension, if you do not pay the sales tax due you may still be subject to penalties and interest. One strategy to mitigate the damage is to go ahead and remit an estimate of what you owe by the sales tax filing due date.
I don’t have time to handle sales tax filings. Help!
We’ve got your back. Contact HOST today and we’ll take over your sales tax filing while keeping you sales tax compliant.