Sales Tax: How to Conquer the First Tax Day of the Year
When most Americans think of “taxes,” the month that comes to mind is April, the month when income tax returns are due each year. If you’re a product seller, however, your first “tax day” of the year falls in a different month altogether—January.
In January, small businesses that collect sales tax will most likely have a sales tax return due, whether you file annually, quarterly, or monthly.
Here are a few strategies to help you prepare for your first tax day of the new year!
Find the states where you need to file sales tax returns
You are required to file sales tax returns for every state where your business has nexus–usually defined as a significant presence like an office, a remote employee, a warehouse that stores your merchandise, or even a trade show in another state where you sell each year. Here’s a guide to determining if you have nexus in a given state.
Determine your sales tax filing due dates
Most states have a sales tax due date on January 20th. But a few states have a different due date for January, so check your sales tax due dates in each state to make sure.
Figure out how much sales tax you owe
You need to go through each of your sales platforms and channels to add up the taxes you’ve collected for each of your nexus states. This can be time consuming if you sell on multiple platforms, but automated sales tax solutions can save you a lot of time crunching numbers.
File your sales tax returns
At this point you should know the states where you need to file sales tax returns and also how much you need to pay to the state. You’ve finished the hard work and now you just need to file each individual state sales tax return. You have a few different options here:
1. File online: Find the state’s sales tax portal website, fill out their online form, and submit payment (usually through a separate system from the portal).
2. File by mail: Some states still let businesses file by mail, but many no longer allow mailed returns. If you really want to file by mail, check the state’s website to make sure you can.
3. Automate your filing: Use an automated sales tax filing service like AutoFile to automatically file your sales tax return and remit any sales taxes owed to the state on your behalf—you don’t need to complete any forms. AutoFile is smart enough to automatically apply any available discounts that some states have for filing on time.
However you decide to file, make sure that you file for every state where your business is registered, even if you owe no taxes for that filing period.
Get ready for the next year
After you’ve filed for each state where you have nexus and have moved on to growing your business in 2017, you should keep in mind that if you have new warehouses storing your products, a new remote employee, or you’re selling at a new craft fair, you might establish nexus in a new state. If that happens, register for permits in those states as soon as you discover you have nexus.
You might also find that you no longer have nexus in a particular state. If so, contact that state’s department of revenue to let them know you’re ready to end your business relationship. But keep in mind that some states have “trailing nexus,” so check that state’s regulations on how long you’ll have to continue filing after your nexus has ended.
We know, we know—no one likes dealing with sales tax compliance! But just like doctor’s appointments and oil changes, keeping on top of these administrative tasks will save you money and time in the long run. Having a way to automate away the headaches is key to this effort, and gives you more time to work on your New Year’s resolutions.
For much more about sales tax, check out TaxJar’s Sales Tax 101 for eCommerce Sellers Guide.
Latest posts by Mark Faggiano (see all)
- Sales Tax: How to Conquer the First Tax Day of the Year - December 7, 2016
- 10 Things You Might Not Know About Sales Tax - July 8, 2016
- The Ingredients of a Sales Tax Rate - August 28, 2015
If Trump Kills the Fiduciary Rule, What Does It Mean for Your Small Business?
Georgia McIntyre / Feb 8, 201791
The 5 Most Profitable Industries for Small Business Owners in 2017
Meredith Wood / Jan 26, 201718
Which Trump Plans Will Affect Your Small Business Most?
Georgia McIntyre / Jan 25, 201715
Want Free Money? Check Out This List of 108 Small Business Grants
Ben Rashkovich / Jan 26, 201713
Dreaming of Starting An Event Space? Here's the Secret to Success
Eric Goldschein / May 3, 20166