Guide

2023 Sales Tax

Preparedness
Guide

6 essential steps to setting your business up

for sales tax compliance now and in the future
Table of Contents

03 Introduction

06 Sales tax trends and changes in 2023

09 Step 1
Determine where you have sales tax nexus

14 Step 2
Verify if your products are taxable

16 Step 3
Register for a sales tax permit

19 Step 4
Set up sales tax collection on your online shopping carts and marketplaces

24 Step 5
Report how much sales tax you collected

25 Step 6
File your sales tax returns

Guide 2021 Sales Tax Preparedness Guide | 2

 Introduction

Introduction
In this Sales Tax
Managing your sales tax responsibilities can be a daunting task. Preparedness Guide
With over 46 different sales tax nexus laws, 11,000 taxing jurisdictions, you’ll learn:
and the constantly changing regulations, there’s a lot to track.
1. W hat is sales tax
2. S  ales tax trends and
To help with this, we’ve created a step-by-step guide that outlines six changes for 2023
steps to sales tax compliance in 2023. We’ll walk you through the different 3. 6 steps to sales tax
components of sales tax compliance, beginning with an overview of compliance
4. H ow to automate sales tax
nexus and product taxability, and share some new state sales tax laws and
with TaxJar
trends to be aware of as we head into 2023. Whether you are new to sales
tax or have just passed a nexus threshold in a new state, this guide can
help you stay compliant as your business grows.

Since sales tax management can be a challenging process, we’ll show you
how to make it more efficient and accurate with new automation tools.
Automation can help you spend 2023 focusing on more important things,
like growing your business.

Let’s get started.

 Introduction

What is sales tax?

States and local governments use sales tax to pay for budget items like
schools, roads and public safety. Sales tax is a “consumption tax” because
it’s only charged when a buyer buys goods or services.

And it’s a “pass-through tax,” because even though a business charges

sales tax to customers, they don’t get to keep it. It “passes through,”
because a business takes the money they collected from the customer
and remits it to the state taxing authority.

Sales tax is governed at the state level, which means each state gets
to make its own rules and laws — within the framework of the U.S.
Video: The Basics of Sales Tax in the U.S.
Constitution — when it comes to administering sales tax. This is part of
the reason sales tax compliance can be so complex. For a business selling
in multiple states, they have to be aware of all the different sales tax laws
and keep up with when sales tax is due in each state.

Click the map for detailed sales

tax information about every
Forty-six U.S. states and Washington D.C. all have a sales tax. U.S. state.

Guide 2022 Sales Tax Preparedness Guide | 4

 Introduction

Some aspects of sales tax that can vary from state to state include:
Sales tax fact:
• Which products and services are taxable
• How much sales tax is charged You can easily remember the
four states with no state sales
• When and how often businesses are required to file sales tax returns tax by remembering their
initials, NOMD: New Hampshire,
• Sales tax returns due dates
Oregon, Montana, and
• If the state allows local areas to collect sales tax, too Delaware.

Key points to remember:

• Sales tax is governed at the state and local level.

• 46 states and Washington D.C. have a sales tax.
• Every state’s sales tax laws and rules are different.

States with Local Sales Tax Rates

States with local sales tax rates States with no local sales tax rates States with no sales tax

Guide 2022 Sales Tax Preparedness Guide | 5

 Sales tax trends and
changes for 2023
Sales tax laws and regulations change often. This is one of the many
reasons why maintaining tax compliance can be so challenging for
sellers. While you are busy preparing your online store for the new
year, don’t forget to check in on these important sales tax changes and
trends that are coming in 2023.

Trends and Changes

Modernization of the sales tax base
State legislators are often left playing catch up when new business types or

services are introduced into the economy. The tax code is written with what is

currently offered to consumers at the time. As new products and services are

introduced, sales tax proposals are introduced to include these offerings — but

tax changes take time.

ME

However, states are not exempt from the hardships that

WI have come as a result of

rising inflation and pandemic-related issues. While sales tax is not the only way for

states to bring in revenue, it is an important one. One way for states to ensure they
KS
are optimizing their sales tax revenue potential is to modernize their tax code. Like

we’ve begun to see in services and SaaS products, states are starting to evolve

to the modern economy, and we believe we’ll see big changes in the taxability of

these industries as states look to maximize sales tax revenue.

FL

Changes in the non-luxury necessities category

The non-luxury necessities category includes items like groceries, prescriptions,

diapers, and feminine hygiene products, and the majority of US states exempt

these purchases from sales tax or charge sales tax at a lower rate.

I 6
 Trends & Changes

However, despite these items being necessities, there are still states that charge

the full sales tax rate on items in this category, including groceries and feminine

hygiene products.

Maybe not for long though. Over the last year, a few states, like Louisiana and

Michigan, have decided to exempt feminine hygiene products from sales tax. And

the momentum will continue into 2023. Colorado and Iowa will also eliminate

sales tax on these goods as of January 1, 2023. In addition, states are beginning to

remove sales tax on grocery items. Alabama, Kansas, and Oklahoma have intro-

duced sales tax measures that would decrease or remove the sales tax on grocery

items in 2023. We expect to see more states follow these trends in the new year.

Streamlined sales tax filing requirements

Sales tax filing requirements are complex for sellers operating in multiple states. In

some states, like Alabama and Arizona, the home rule system makes it even more

difficult to stay compliant. These cities can define their own tax rules and sellers

may be required to complete additional registrations in these areas.

Sellers are getting increasingly frustrated by the complicated filing requirements

– and are taking action. In 2022, two states, Colorado and Louisiana, were sued

by sellers, noting the intricate sales tax obligations as an impediment to interstate

commerce. While these cases are still ongoing, we’re interested to see if any

changes come as a result of the lawsuits.

Diane Yetter, founder of the Sales Tax Institute, spoke about these hardships

during a senate hearing earlier this year. She explained how these elaborate
filing requirements are especially damaging for small businesses, who might not

have the resources to maintain compliance in certain states. We’re hoping these

lawsuits will force states to create a streamlined process, enabling more business-

es to meet their tax obligations with more ease.

Guide 2022 Sales Tax Preparedness Guide | 7

6 steps to sales tax
compliance
To get the full picture of sales tax compliance for
e-commerce companies, work through these six
steps:

1. Determine where you have sales tax nexus and are

required to collect sales tax.

2. Verify if your products are subject to sales tax.

3. Register for sales tax permits.

4. Set up sales tax collection on all your sales channels.

5. Report how much sales tax your business collected.

6. File sales tax returns.

 Nexus

Step 1

Determine where you have

sales tax nexus
Find out where you are required to collect sales tax

In the U.S., retailers are required to collect sales tax from buyers in states
where they have “sales tax nexus.” "Nexus" originates from a Latin word
meaning "to bind" or "to tie." If you have sales tax nexus, think of your
business as having a "tie" to the state.

There are two different types of sales tax nexus, or in other words, two
different ways you can meet the requirements to collect and remit sales
tax to a state. Physical nexus is just that, a physical connection to a state.
Examples of physical nexus (also sometimes referred to as “physical
presence”) include employees, offices, stores, warehouses, conference Video: What is economic nexus?
attendance, servers, etc.

Then there is economic nexus. Based on a 2018 Supreme Court ruling,

states are now allowed to require that businesses who exceed certain
economic thresholds in the state are required to collect sales tax from
buyers in that state. For example, you may have never set foot in a certain
state, but if your business transacts more than $100,000 in sales in that
state, then you are considered on the hook to collect sales tax. What
constitutes nexus varies from state to state.

Guide 2022 Sales Tax Preparedness Guide | 9

 Nexus

Physical Presence

The following business activities may create sales tax nexus through
physical presence:

• A location. This includes an office, warehouse, store or other physical

place of business.
• Personnel. An individual who is an employee, contractor,
salesperson, installer or other person doing work for your business
falls under personnel.
• Inventory. Most states consider storing inventory in the state to cause
nexus even if you have no other place of business or personnel.
• Affiliates. Someone who advertises your products in exchange for a
cut of the profits creates nexus in many states.
• Selling products at a tradeshow or other event. Some states consider
you to have nexus even if you only sell there temporarily.
 Nexus

Economic Nexus
Meeting State Sales
While physical nexus (or physical presence) is fairly self explanatory, Tax Requirements:
economic nexus is a bit more complicated. Essentially, economic nexus is
an economic tie to a state. So if a company has economic nexus in a state, 1. D
 etermine if your business
that means their sales or transactions into a state triggered the state’s has physical presence or
economic nexus in a state
economic nexus thresholds. This is a fairly new concept -- prior to June
2018, sales tax nexus just consisted of physical nexus. Then, a landmark 2. Register your business

South Dakota v. Wayfair Supreme Court decision overturned a decades- 3. C

 ollect sales tax on orders
shipped to that state
old case, Quill v. North Dakota, which initially defined sales tax nexus. This
gave states the green light to enact their own economic nexus laws. 4. Pay what’s been collected

Now, not only does physical presence or activity trigger nexus, but
economic activity in a state can create sales tax nexus as well. Even if
you don’t have a physical presence in a state, if you pass the economic
threshold for total revenue or transactions in a state, you’re legally
required to collect and remit sales tax to that state.

States can set their own thresholds based on sales and/or transactions,
so it’s important to follow each state’s laws to know when and where you
have nexus.

Nexus
Your business has a presence
in a state significant enough
that you’re required to comply
with state sales tax law

No Nexus
No nexus in a state means
you don’t have to collect

Economic nexus law active

DE, MT, NH and OR have no sales tax

No legislation yet

Guide 2022 Sales Tax Preparedness Guide | 11

 Nexus

To determine if you have nexus, ask yourself these questions:

TaxJar’s Economic Nexus
Insights Dashboard will alert
1. Do I have a location, warehouse or other physical presence in a state?
you when you’ve crossed
2. Do I have an employee, contractor, sales person, installer or other a state’s threshold and
triggered economic nexus
person working for me in a state?
based on your activity.
3. Do I have products stored in a state?
4. Do I have an affiliate program with affiliates in various states?
5. Do I cross state lines to sell my products at a tradeshow, craft fair or
other event?
6. Do I have qualifying sales or transactions that exceed the state’s
economic nexus threshold?

If you answered yes to any of these questions, explore where you have
sales tax responsibilities by learning about each state's sales tax nexus
laws.

Remember: Collect sales tax from ALL buyers in states where you
have sales tax nexus. (Unless a marketplace collects on your behalf.)
Nexus is slightly different in every state, so check with the state or a sales
tax expert if you are not sure whether you have nexus.
 Nexus

Marketplace Facilitator Laws

After you’ve determined you have sales tax nexus in a state, you’ll also
want to check to see if any of those states have passed marketplace
facilitator laws. States which have active marketplace facilitator laws
require the marketplace facilitator, such as Amazon or Walmart,
to collect sales tax on your behalf.

The caveat, however, is that you’re still liable for collecting on sales
when selling via other channels, such as a brick and mortar store
or through your business website. It’s a good idea to keep up with
evolving marketplace facilitator laws to know which platforms collect
when and where.

Marketplace Facilitator Laws in the US

This map shows the states that have active marketplace facilitator laws

Marketplace facilitator law active State has no sales tax

Guide 2022 Sales Tax Preparedness Guide | 13

 Product Taxability

Step 2

Verify if your products are taxable Here are a few

examples:

What products are taxable? • Grocery items are not

taxable in many states,
though prepared food
In the U.S., most “tangible personal property” is taxable. In other words,
bought at a restaurant
most items like furniture, jewelry, toothbrushes, coffee mugs, etc. will be generally is taxable.
subject to sales tax.
• C
 lothing is not taxable in
some states, though luxury
However, some items considered to be “necessities” may not be taxable
clothing is often taxable
in all states. even in states where most
clothing is considered
Product taxability is not always “all or nothing.” non-taxable.

For instance, in New York, only clothing priced under $110 is exempt from
state sales tax. However, clothing may not be exempt from local sales tax.
In Illinois, grocery items are taxable, but they are only taxable at a reduced
rate of 1%. You can read more about product taxability here.

Here’s a list of common item types that may not be taxable in

some states:

• Grocery food
• Clothing
• Certain books (textbooks, religious books, etc.)
• Prescription and nonprescription medicine
• Supplements
• Magazines and subscriptions
• Digital products (books, music, movies, etc.)

This is not a complete list, so keep in mind that some states may exempt
other types of items. If you sell any of these items, check with your state
to determine if you should collect sales tax on your products.

If the items you are selling are not taxable, then you are not required to
collect sales tax on those items.

Guide 2022 Sales Tax Preparedness Guide | 14

 Product Taxability

Key points to remember

• An identical product may be taxable in one state, and non-taxable in

another state.
• A product may not be taxable at the state level, but may still be taxable
at the local level.
• Be sure to set up your online shopping cart or marketplace to avoid
collecting sales tax on non-taxable items. How to do this varies by sales
channel, and you can find sales tax guides for the most common
sales channels here.

In which states are groceries tax exempt?

Every state is
slightly different
3

Find your state to read their

exact rules and regulations
around grocery items.
1 1
2
1
1
1. G
 rocery items taxed at a
2
1 reduced rate
2
1 2 2. G rocery items exempt from state
2 tax, but still subject to local tax
2 3. Limited to “grocery staples”

States where groceries are tax exempt

States where groceries are taxable

States with no sales tax

Guide 2022 Sales Tax Preparedness Guide | 15

 Sales Tax Permits

Step 3

Register for a sales tax permit

How to register for a sales tax permit

Now that you have determined you have sales tax nexus in a state and
that the products you sell are taxable in that state, your next step is to
legally collect sales tax by registering for a state sales tax permit.

Each state’s taxing authority — usually called the [State] Department

of Revenue — handles sales tax registration. You can register for a sales
tax permit yourself, or hire a professional to register for your state
sales tax permits for you.

When filing online, you will sometimes receive your sales tax permit
number instantly, though with some states it will take up to 10 business
days. If you register on paper, it may take two to four weeks to receive
your sales tax permit.

This is a crucial step! It is unlawful to collect sales tax from buyers without
a valid sales tax permit. While collecting sales tax without a valid permit
may be an honest mistake on a business’s part, states generally view this
as tax fraud and take it very seriously.

When are sales tax due dates?

When they send your sales tax permit, the state will also assign you a
sales tax filing frequency and due date.

These filing frequencies are generally monthly, quarterly or annually. Be

aware that some states have other filing frequencies like semi-annually or
twice-monthly for very large retailers. You can see each state’s general
sales tax filing frequency here. (States reserve the right to change this,
so always file and pay based on the due date the state assigns you.)

Due dates will fall on a different day of the month depending on the state.
In most states, sales tax is due by the 20th day of the month following the
taxable period.

However, states reserve the right to set their own due dates. Sometimes
sales tax is due on the 15th of the month, the last day of the month, the
25th of the month or even on some other date. High-volume businesses
may also be assigned a different sales tax filing due date.

Guide 2022 Sales Tax Preparedness Guide | 16

 Sales Tax Permits

Here’s an example sales tax filing scenario for an

e-commerce business: Key points
to remember:
Danny’s Mattresses has sales tax nexus in three states:
Georgia, California and Maine. • A lways register for a sales
tax permit before you begin
collecting sales tax.
• His Georgia sales tax returns are due every month by the 20th. • States don't have the same
sales tax filing frequency
• His California sales tax returns are due every quarter on the final and due dates. In fact, some
day of the month. may have multiple filing
frequency and due dates
• His Maine sales tax returns are due annually on the 15th day of
based on sales volume.
the month. • Keep track of your sales tax
filing frequency and due
dates. These will be assigned
As you can see, it’s tough to get into a rhythm when filing sales tax when
to you by the state.
the due dates and filing frequencies vary. If it’s challenging to keep track
• Your sales tax permit often
of sales tax due dates, TaxJar AutoFile will automatically file for you on also serves as a resale
time, every time. certificate that you can use
to buy items tax-free if you
intend to resell them. Always
Have this information handy when registering for a sales tax permit: follow each state's individual
rules for using a resale
certificate.
• Your personal contact information
• Your business contact information
• Social security number (SSN) or Federal Employer Identification
Number (FEIN) also known as Employer Identification Number (EIN)
• Business entity (sole-proprietor, LLC, S-Corp, etc.)
• Your NAICS Code (Hint: The NAICS code for online stores is 454110)

Individual states may ask for additional information.

Pro Tip: Some businesses have had success asking the state to allow
them to file sales tax less often. You can try this yourself by calling the
state’s taxing authority. Find the best phone number to contact each
state’s sales tax department. To avoid long hold times, we recommend
calling in non-quarterly months.

Guide 2022 Sales Tax Preparedness Guide | 17

 Calculations & Collection

Resale certificates
Remember:
In most states, your sales tax permit also serves as a resale certificate.
If you hold a valid sales tax permit with the state, you can buy from In general, the more sales tax
a business collects in a state,
wholesalers, and also often buy items tax-free at retail as long as you
the more often the state wants
intend to resell the items. Each state is a little different when it comes to the business to file a sales
how you can use and accept a resale certificate as a retailer. tax return. The states use this
money to pay for budget items
like schools and roads. Thus,
• Read our Resale Certificate FAQ. they want to pocket the sales
• See resale certificate rules for each state. tax businesses have collected
as soon as they can!
• H
 as one of your buyers presented you with a resale certificate?
You can verify the authenticity of their resale certificate here.
• Looking for information on how to obtain a resale certificate? Example:
Here’s how to do that in each state.
The monthly taxable period in
Colorado is January 1-31. Your
Colorado monthly sales tax
return for January would be due
by February 21.
Step 4

Set up sales tax collection on Ready to register for a

state sales tax permit?

your online shopping carts and Get instructions on how to

register yourself or hire a sales
marketplaces tax pro to register for you.

Origin-based and destination-based sales tax collection

Once you have your valid sales tax permit, your next step is to begin
collecting sales tax from your customers.

Each online shopping cart and marketplace allows you to set up sales tax
collection. Here’s where you can find guides on how to set up sales tax
collection on the major shopping carts and marketplaces.

States generally require online sellers to collect sales tax in

one of two ways:

1. Origin-based sales tax collection

2. Destination-based sales tax collection
This concept is also commonly referred to as “sales tax sourcing.”

Find out if your nexus state is an origin-based or destination

based state here.

Guide 2022 Sales Tax Preparedness Guide | 19

 Calculations & Collection

Origin-based sales tax collection

Important to note:
Online sellers who are based in states with origin-based sales tax sourcing
are required to collect sales tax at the seller’s business location. If your business has sales tax
nexus in a state, then you are
required to collect sales tax
If your business is based in an origin-based state like Texas, you would from ALL buyers in that state
determine the sales tax rate at your home, warehouse, store or other on ALL your sales channels
headquarters. Then, charge all your buyers in Texas that single sales tax (unless a marketplace is
collecting on your behalf).
rate.

This type of sales tax collection is simple. You’re only required to know
and charge a single sales tax rate to all buyers in the state.

Origin: Sale in Texas Important to note:

The Irving sales tax rate should be applied to this transaction: 8.25% The examples only apply when
selling to buyers in a state
State: Irving County: Dallas MTA: Total Rate Collected where your business is based.
6.25% + 1% + 1% = 8.25% If you have nexus in a state
for another reason — such
as having employees there,
inventory stored there, or
attending a tradeshow there
Destination-based sales tax collection — then charging sales tax is
different.
Online sellers who are based in states with destination-based sales tax
In many cases, when selling to
sourcing are required to charge the sales tax rate at the buyer’s “ship to”
a buyer outside your “home”
address. state, you would charge that
buyer the sales tax rate at their
As a seller, you are required to calculate and charge the state, county, city “ship to” location. This can
get a little tricky, but you can
and other local sales tax rates where your buyer is located. Most states
read more about origin and
have destination-based sales tax collection. destination-based sales tax
collection here
here..

Destination: Sale in New York

The Buffalo sales tax rate should be applied to this transaction: 8.75%

State: Erie County: Total Rate Collected

4% + 4.75% = 8.75%

Guide 2022 Sales Tax Preparedness Guide | 20

 Calculations & Collection

When do I charge sales tax on shipping?

Do you charge your customers for shipping? In some states, shipping

is considered a necessary part of an e-commerce transaction, and the
state requires that you charge sales tax on the amount you charged for
shipping. In other states, shipping is considered a separate charge and is
not considered taxable. Every state’s rules on shipping tax are
slightly different.

Note: In e-commerce, the point of sale is generally your buyer’s “ship to”
address. Always follow sales tax rules and laws in the state where your
buyer is located. Never charge a customer another state’s sales tax.
Example: A seller has nexus in Florida and Texas. That seller would never
charge a Texas sales tax rate to a Florida customer.

Here’s a map of the origin- and destination-based sales tax states:

Find your home state to

determine whether you should
collect sales tax based on your
location or the location of
your buyer.

Origin

Destination

No sales tax

Guide 2022 Sales Tax Preparedness Guide | 21

 Calculations & Collection

Shipping taxability example:

Shipping is taxable
Taylor’s Happy Mugs sells a coffee mug for $10 and charges $5 for $10.00 + $5.00 =
shipping. The total of the product price and shipping is $15. Since $15.00 x 5% sales tax =
shipping is taxable in the state where Taylor is shipping the product, $15.75
she charges 5% sales tax on that $15 total. This equals .75 sales tax.
So, the total price the customer pays would be $15.75.

Invoice
But now Taylor is selling the same items for the same price, but she
is not required to collect sales tax on the shipping charges. She only Mug $10.00
Shipping $5.00
charges the 5% sales tax on the $10 price of the mug. So, the total price
Subtotal $15.00
of the mug is $10.50 ($10 + 5% sales tax.) She then adds the $5 shipping
charge. The total amount the customer pays is $15.50. Sales Tax $00.75
Total $15.75

Fortunately, when setting up sales tax collection on your sales channels,

most channels allow you to indicate whether you want to charge sales tax
on shipping charges.

Here’s a list of states where shipping is considered taxable Shipping is not taxable
and non-taxable. $10.00 x 5% sales tax =
$10.50 + $5.00 =
$15.50

Invoice

Mug $10.00
Sales Tax $0.50
Subtotal $10.50

Shipping $5.00
Total $15.50

Is shipping taxable in your state?

Guide 2022 Sales Tax Preparedness Guide | 22

 Calculations & Collection

Collecting sales tax when drop shipping

Drop shipping and sales tax 01

You design and sell
Drop shipping — where you have your vendor ship an item directly to phone cases
your customer — can be a lucrative business model. However, it can
create complications when it comes to collecting sales tax.

Drop shipping example:

You sell phone cases on your website, but use a third-party printing
company to print your design on the cases and ship them to your
02
A third-party printing
customer.
company prints your
designs onto the
In this example, three things are happening:
phone cases

1. Your customer buys the item from you.

2. You buy the item from your vendor.
3. Your vendor ships the item to your customer.

In this case, if your vendor has nexus in your state, they’ll be required to
charge you sales tax on that purchase. Unless you present them with a
03
After printing,
resale certificate stating that the item you bought from them is for resale.
they ship the item to
And if your customer is in a state where you have nexus, then you’ll be
your customer
required to charge sales tax to your customer.

Drop shipping can get complicated. It depends on where the three

parties — you, your vendor and your customer — are located and have
sales tax nexus. You may be required to charge sales tax to your customer,
and your vendor may charge sales tax to you.

You can read more about drop shipping and sales tax. This post walks
you through several scenarios to help you determine who charges sales
tax. It will also explain how to use a resale certificate to buy items for
resale without paying sales tax to your vendor.

Key points
to remember:

• Set up sales tax collection on all your online • S

 hipping charges are taxable in some states. • D
 rop shipping relationships are some of the
shopping carts and marketplaces. Be sure to indicate whether you want to most complicated in sales tax. You’ll need
charge sales tax on shipping when you set up to work with your drop shipping vendor to
• T
 hough some states have “origin-based” sales tax collection. determine who is responsible for collecting
sales tax collection, you will — for the most sales tax.
part — collect the sales tax at the rate at
• Y
 ou can look up sales tax rates using TaxJar’s
your buyer’s “ship to” address.
Sales Tax Rate Calculator.
Guide 2022 Sales Tax Preparedness Guide | 23
 Reporting

Step 5

Report how much sales tax you Key points

to remember:
collected
• A handful of states, like
Soon enough, a sales tax filing due date will roll around. When preparing origin-based and single-rate
states, have an easy sales tax
to file a state sales tax return, you need to determine how much sales tax
filing process
you collected from buyers in not only the entire state, but in each county, • Most states require that
city and other special taxing district. you break down sales tax
by county, city and other
special taxing district
Why is reporting sales tax important?
• This process can be
simplified with automation
States rely on sales tax dollars to pay for infrastructure, public safety
and other budget items. But they won’t know which city or local area
to allocate those funds to unless you break down your transactions for
them.

In a small number of states, like origin-based states or states that only

have a single statewide sales tax rate, filing sales tax isn’t very difficult.
But, in most cases, breaking all your transactions down manually is a time-
consuming chore, especially if you are a high-volume seller or you sell on
multiple channels.

Below, is a small portion of California Schedule B. And Schedule B is just

one part of the multi-part California sales tax return. [Source]
 Filing

Step 6

File your sales tax returns Late filing?

If you know you are going to

Your next step is to file your sales tax returns with the state. Most states need to file late, some states
allow you to file sales tax online, and some require it. If you wish to file allow you to request a last-
manually, login at your state’s taxing authority website to file. Here are minute filing extension. But
keep in mind that most don’t
instructions for manually filing sales tax returns in each state.
extend your time to pay sales
tax, just the filing aspect.
At TaxJar, we recommend filing at least a few days early to avoid any A seller may still end up with
problems with your filing and to deal with any state idiosyncrasies. fines and penalties even when
granted a filing extension.

For example, while the sales tax due date in Florida is technically the
20th of the month after the taxable period, Florida requires that a seller
pays via electronic funds transfer (EFT) and that his payment hits their
bank account by that date. So, to file “on time” in Florida, the seller
needs to know how much he owes, and transmit his funds to the Florida
Department of Revenue several days before the stated due date.

Failing to file on time in Florida will result in a $50 fine, plus interest on the
outstanding amount of sales tax owed. Other states have similar fines,
and require sellers to pay interest when filing late.

If a seller is accidentally late filing and receives a penalty, then the seller
can often contact the state’s taxing authority and ask for a penalty waiver.
This generally only works the first time a seller is late. You can find here
the list of phone numbers for every state’s taxing authority. (Even
though we live in the digital age, many states prefer that you call rather
than ask for help online.)

Guide 2022 Sales Tax Preparedness Guide | 25

 Filing

Here are two key things to remember when filing a sales

tax return: Key points
to remember:
File “zero returns.” It’s important to file a sales tax return every time you
have a filing due, even if you didn’t collect any sales tax over the taxable • A lways file zero returns –
failing to do so will result in
period. States consider your sales tax filings to be a “check in.” If a seller
fines or even losing the sales
fails to file, the state could charge a penalty or even revoke the seller’s tax permit
sales tax license. Be prepared to file sales tax returns by the due date, • Check and see if your state
every time, even if you don’t owe a penny in sales tax. offers sales tax discounts.
• If you’d rather never worry
about sales tax filing again,
Don’t forget sales tax discounts. About half the states with a sales tax automate sales tax filing with
allow on-time sales tax filers to keep a very small amount (usually 1-2%) TaxJar AutoFile
of the sales tax collected.

Here is a list of states with sales tax discounts.

States with sales tax discounts

Guide 2022 Sales Tax Preparedness Guide | 26

Sales tax compliance made easier
Automate your sales tax with TaxJar

Automating your sales tax through a trusted solution increases efficiency

and accuracy, but also allows you to focus on what’s most important:
running your business.

TaxJar's AutoFile is our automatic electronic filing service for state sales
tax, built on best-in-class technology. Once enrolled in a particular state,
we’ll use the data that we receive from your e-commerce platforms or
ERP systems to prepare and submit an accurate return along with your
remittance. TaxJar manages all your filing details and deadlines, scaling up
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Guide 2022 Sales Tax Preparedness Guide | 27