July 8, 2015
This blog post is by Mark Faggiano, Founder and CEO at TaxJar.
Follow Mark on Twitter at: @taxjarmark
Small business owners are not all the same. We work differently, have different business models, and have different peak seasons. However, there are a few times of the year where we’re all focused on the same thing. Tax day on April 15th comes to mind for U.S. sellers. Another one of these times, at least for eCommerce sellers, is the July “sales tax perfect storm.”
In the U.S., July is not only the month of celebrating independence. It’s also a month where almost every product seller will have a sales tax due date. But never fear: July does not have to be a headache for your business. Follow these four tips to help with your sales tax preparation:
Check Your Sales Tax Due Dates
The thing about sales tax is that every state is different. In addition to the rules and laws being different, the sales tax due dates are different as well. So while you may be on the hook to file a sales tax return on July 20th in one state, your due date might be July 31st in another state.
Check your sales tax due dates here to determine when you actually need to file and pay sales tax in your state (or states).
File Any “Zero Returns”
If you were on hiatus this quarter or just didn’t collect any sales tax in a particular state for some reason, you should probably still file a sales tax return. Why? Most states consider sales tax returns a “check in” even if you don’t have any sales tax to remit. The penalty for failure to file one of these “zero returns” can be anything from revocation of your sales tax permit to a monetary fine.
Take Advantage of Discounts
Sales tax is a whole lot of work, and let’s face it: you’re basically serving as a tax collector on behalf of the state. Sales tax is known as a “pass-through tax” precisely because it just passes through your hands and you don’t get to keep it. Or do you? While it’s quite illegal to collect sales tax without remitting it back to the state, some states do understand your pain and give you sales tax discounts. This is just a small percentage of the tax you collected as a reward for your pain.
Click here for a list of states that offer sales tax discounts for paying early or on time.
Reevaluate Your Sales Tax Situation
Nobody wants to spend more time on sales tax. (That’s why we created TaxJar!) But while you have sales tax on the brain in July anyway, it’s a good time to reevaluate your sales tax liability.
If something changed and you have nexus in fewer states, you may be able to say goodbye to your sales tax permit in a state. (Just make sure you aren’t on the hook with trailing nexus before you stop filing those zero returns.)
Did you start selling on a new online channel alongside your Magento store? Double-check and make sure you’re collecting sales tax correctly there, too.
Giving your sales tax situation a double-check while it’s on your mind will save you headaches and penalties down the road. TaxJar’s new “expected sales tax” report will help you determine whether you over- or under-collected sales tax. Check it out if you have any sales tax concerns for the July deadline and beyond.
Speaking of concerns, do you have sales tax questions or just something to say? Let us know on Twitter at @taxjar.
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Mark Faggiano is the Founder and CEO of TaxJar, a Magento Silver partner service, built to make sales tax compliance simple for eCommerce sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life.
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The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Magento. They are intended for informational purposes only and not intended as legal advice. Please contact your tax advisor or tax attorney if you have specific tax questions.