Beginners Guide to Sales Tax Filing
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It may seem intimidating to file sales tax. But, it is really quite simple! Filing sales taxes does not need to be a stressful process. TaxConnex provides easy-to-understand information about which forms you need to file and when to file them.
This guide will teach you how to navigate the often complex world of sales tax filing.
After reading this guide, you will learn what sales tax filing is, how to file online, the definition of nexus and why it matters, what are some common penalties associated with late or non-filed returns, who should register for a Sales Tax ID Number (STID) and lots more!
What is sales tax filing?
Before we jump into filing, let’s take a moment to define sales tax filing. Businesses who sell taxable items within state lines are required by law to collect and remit sales tax. This means that businesses must file a sales tax return or use a Sales Tax Automated Clearing House (STACH) agreement with the State to remit sales tax.
The definition of a taxable item in most states is nearly all products and services that the general public can purchase with United States currency, including medical supplies, food items, pet care equipment and much more.
Sales tax filing for online sellers
Online sellers, while not required to collect sales tax on all of their sales, are still required by law to pay sales taxes in states where they have a physical presence. Physical presence can be established in several ways:
- Employees working from your location
- Equipment located at your office for use in your business
- A lease or contract with a person or business located in your state
- Payments made to vendors for deliveries performed to your location
- Charges covered by a PO Box address instead of physical street address
Online sellers can also be required to collect sales tax on out-of-state sales. This requirement depends on how much the company does business in the state where they are making the sale.
Sales tax filing for businesses with multiple locations
Businesses with warehouses and/or retail outlets in more than one state must file sales tax returns in each of those states. This is referred to as nexus or substantial nexus. You can read more about the definition of nexus here .
How to avoid penalties and interest charges on late or non-filed sales tax returns
The penalties for late or no sales tax returns are steep. But it is possible to avoid paying any interest or late payment fees if you file your return on time. It is recommended that you call the State Department of Revenue as soon as possible to explain why your return was late, even if you have filed on time in previous years.
In most cases, the State will understand if you have a valid reason for not filing on time and allow you extra time to file without penalty. If it is determined that your late or missing return was due to carelessness or neglect then penalties and fines may apply. There are some states where the Department of Revenue will refuse to allow penalties and interest charges on late returns, no matter the reason.
Frequently asked questions about sales tax filing
What is a Sales Tax ID Number (STID)?
A Sales Tax Identification Number is a number that helps businesses collect sales tax from purchasers and file their sales tax return with the State. The STID is issued by the state, county or city where you have a physical presence.
There is no charge for obtaining an STID and it will be used when you sign up for a Sales Tax account with TaxConnex .
How often do I have to file a sales tax return?
Most states require businesses to file a monthly return.
Some states require quarterly returns and others only require annual filing, but the majority of states with sales tax require monthly returns.
What is a Sales Tax Return?
A sales tax return is an accounting document showing all taxable transactions made by your business during a specific time period. The information entered into the return helps create a report that is used by your state to determine how much sales tax you owe on your purchases and sales.
What if I do not have enough transactions during the reporting period to complete a full return?
Some companies have seasonal businesses where there are periods of very little activity. In this case, it’s best to file a partial return or no return at all. It is better to provide the state authorities with the information you do have than nothing at all.
What if I cannot figure out how much to charge for my goods and services due to multiple taxing jurisdictions?
You will need to file your sales tax returns based on this method of collecting taxes:
o If you are making sales for delivery in a state where you have nexus, then charge tax on the entire amount of the sale
o If you are making sales for delivery in a different state (i.e., out-of-state), then do not collect any taxes no matter what your business location
Conclusion
Sales Tax filing can be overwhelming and time-consuming for businesses with multiple locations, warehouses or retail outlets. The best thing to do is keep good records of all transactions in every state where you have a physical presence.
When you file your return on time with accurate data, the State will work with you to avoid penalties and interest charges. You will also avoid the potential negative ramifications of not filing on time.