When most U.S. taxpayers think “tax deadlines,” they think of the April 15th Income tax filing deadline. It’s a little-known fact that one of the busiest tax deadlines in the U.S. is actually January 20th.
What’s that all about? January is the “sales tax due date perfect storm.” Nearly every online seller – from the smallest sellers who are only required to file a sales tax return once per year, to the largest multinational corporations who are required to file sales tax monthly (or more) – will have a sales tax filing deadline in January.
As an online seller, January will probably bring your first tax filing of the year. Fortunately, there are ways to make this a painless experience. Let’s dig in.
1. Check your sales tax due dates
Your sales tax filing frequency and due dates will differ based on the state or states where you are required to file sales tax. Double check the instructions your state gave you when you applied for your sales tax permit. While many states require a sales tax filing and payment by the 20th of January, some states have different due dates. You may find that your sales tax filing is due on the 15th, the 31st, or some other date. Find your January sales tax filing due dates here.
2. File on time
It’s important to check your sales tax filing due dates because most states aren’t very forgiving if you don’t file on time. For example, most states charge a roughly $50 penalty plus interest on any sales tax you owed if you file late. It pays to pay sales tax on time!
3. Take your sales tax discounts
Speaking of paying to pay sales tax on time, about half the states with a sales tax are kind to online sellers and offer a small sales tax discount. This just means that the state will allow you to keep a small percentage of the sales tax you collected from your buyers as a bonus for filing and paying sales tax on time. You can see a list of states with sales tax discounts here.
4. File “zero” returns
You should also be sure to file a sales tax return by the due date even if you didn’t collect a single penny of sales tax from a customer. Maybe you put your business on hiatus, or are just getting started and haven’t made any sales yet. Either way, failing to file a sales tax return by the due date – even when you don’t owe anything – can result in a monetary penalty and interest due, or even result in you losing your sales tax license. So, remember to file your return even if you’ve been away from your business.
5. Double check states where you have nexus
Sales tax nexus is just a fancy way to saying a “significant connection” to a state. As your business grows or changes, you may find that you have nexus in more (or fewer) states. For example, an employee in a state creates nexus. So, if you’ve hired a remote employee you may have nexus in a new state and be required to collect sales tax in that state.
You can see a list of what creates nexus in every U.S. state here.
6. Register for (or discontinue) sales tax permits
If you have nexus in a new state, that state requires that you register for a sales tax permit and begin collecting sales tax. You can find links on how to register for a sales tax permit in each state here.
On the other hand, maybe your business changed and you no longer have nexus in a state. If that’s the case, you can generally discontinue your sales tax permit by contacting your state’s department of revenue or other taxing authority.
7. Automate your sales tax life
Sales tax is one of those non-profitable administrative tasks that gets in the way of the business of running your business. If you’re spending too much time hassling with sales tax returns, you can automate your business’ sales tax. Sales tax automation software will connect with the online shopping carts and marketplaces on which you sell and automatically file your sales tax returns for you so you never have to worry about sales tax. With sales tax automation, you can cross “file sales tax returns” off your to-do list for good!
I hope this post has helped you conquer your January sales tax filings. For more on sales tax, check out our Sales Tax 101 for Online Sellers Guide or start the conversation in the comments!
Guest post by Jennifer Dunn, Chief of Content at TaxJar
TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers.