A storm is coming! We’re not talking a blizzard, tornado, or hurricane, but a sales tax storm that will hit all eCommerce sellers this January.
What on earth am I talking about? Nearly every online seller will have a sales tax return due in January, whether you’re on a monthly, quarterly, or annual filing schedule. For this reason, we call January the “Sales Tax Perfect Storm.”
No one likes to get caught unprepared when a storm hits, so we’ve created a list of our best tips to help you batten down your records and get ready for the storm. Here we go:
Find Your Sales Tax Due Dates
Every state is slightly different when it comes to your sales tax due date. Most states’ due date is the 20th of the month, but other states want you to file on the 15th, the 25th, or the first or last day of the month following the closing of your filing period. Check your state’s sales tax due dates here to make sure you’re filing on time.
Determine How Much Sales Tax You’ve Collected
You’ll need to go through each and every one of your sales channels (Amazon, eBay, Shopify, Square terminals, etc) and figure out how much sales tax you’ve collected from customers in each state.
From there, you’ll need to break those amounts not just by state, but my county, city and other special taxing districts. This is usually the biggest headache in the process and is exactly why we recommend a sales tax automation service to take care of all of this bookkeeping automatically.
File Your Sales Tax Returns
After you’ve tallied all of your collected sales tax for each state, you’ll be ready to start filing. There are a few different options:
File Online: You’ll need to find the sales tax portal site for each state, fill out their online forms, and then usually create an account for their separate payment processing system.
Mail in your sales tax return: This is actually getting harder to do as some states have discontinued the option. The sales tax portal should indicate if the state still allows mailed returns.
AutoFile: If you don’t want to deal with filling out forms or payment gateways, you can automatically file your sales tax returns in most states. AutoFile lives up to its name – it automatically files your tax return and remits payment to the state. It’s even smart enough to figure out if a state has a discount for filing sales tax on time and will apply the discount for you. That’s pretty smart!
Whether you file by mail, portal, or let your sales tax automation solution do the work for you, you’ll want to make sure that you file for every state where you’re registered for sales tax collection – even if you don’t owe any sales tax for the current filing period.
Wait, what? That’s right - file a sales tax return even if you didn’t collect any sales tax over the filing period. These returns are called “zero returns” and most states require them. Failing to file a return - even if you don’t owe a penny - can result in anything from a fine to having your sales tax permit revoked.
Get a Jump on Next Year’s Sales Tax Storm
If you’re finding the January sales tax perfect storm painful, not to worry. There are a few ways you can make your next sales tax filing simpler.
Check Your Sales Tax Nexus
As your business grows, your business activities may create sales tax nexus in more states. Most sources of nexus include states where you operate an office, store merchandise for sale in warehouses, have remote employees, or where you sell at craft shows. This indicates you have “significant presence” in that state and are required to file returns. Check this guide to see if you have nexus in a particular state.
Be Sure You’re Registered for Sales Tax Permits
You’ve filed your return for every state where you have nexus and at this point the last thing you want to do is continue thinking about sales tax compliance. I understand, believe me, but just keep in mind that as your business grows in the new year you may find yourself establishing nexus in a new states. If that happens, you’ll want to make sure that you register for permits in those states as soon as possible.
Discontinue Your Sales Tax Registration if You No Longer Have Nexus
Of course the flipside of that is that you may find that you no longer have nexus anymore in a state and can stop filing in that particular state. In that case you’d contact that state’s department of revenue and let them know you’re ending your business relationship with that state. Some states have a policy of “trailing nexus” where you must keep filing for a certain period after you no longer have nexus, so make sure you read the particulars for that state to see what their policy is.
And that’s it! We hope these tips have helped you weather the January “Sales Tax Perfect Storm” and organize your sales tax life for 2017. Want to know more about sales tax? Check out our Sales Tax Guide for Amazon FBA Sellers, join our Sales Tax for eCommerce Sellers Facebook Group, or start the conversation in the comments!
TaxJar is a service that makes sales tax reporting and filing simple for more than 5,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!