Paying the Tax

April 13, 2006

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After you've collected sales tax from your purchasers, the obvious next step is reporting and paying the tax to the appropriate authorities. Most states generally require you to file a tax return and remit the sales and use taxes you have collected on a monthly basis. However, each state has special rules that may require you to file and pay or a more frequent or less frequent basis, depending on the amount of your tax liability.

State due dates. Click on your state on the map below to find out (1) the state's reporting period for filing sales tax returns and paying the taxes and (2) the name, address, and phone number of the agency that administers the state's tax. The states shaded in blue do not impose a general sales tax.

Claiming refunds. If you remit more tax than you actually owe, either because of a clerical error or because of a misinterpretation of the law, a state will generally refund the excess payment. However, if the overpaid tax was collected from a purchaser, most states will require proof that you reimbursed the purchaser for the overpaid tax as a prerequisite to providing the refund.

Recordkeeping. As is the case when you file any tax return, you must maintain an accurate set of books and records that substantiates the sales tax liability you reported on the return. The requisite records generally will include such items as receipts, invoices, cash register tapes, working papers, and exemptions certificates provided by purchasers. Each states specifies a length of time for which the records must be maintained.

Local taxes. Perhaps the most difficult aspect of dealing with your sales tax obligations arises if you happen to do business in a state where local jurisdictions administer their own sales taxes. Usually, you'll have separate reporting requirements for each such "home rule" locality where you make sales. Unfortunately, the administrative agencies for such localities are frequently understaffed and poorly financed, and offer little in the way of taxpayer assistance and procedures. Believe us, if you have to pay local taxes, you're fortunate if you happen to do business in a state where local taxes are merely added on to, and are collected and reported with, the state tax.