How to Conquer Your January Sales Tax Filing

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January is an interesting month for sales tax compliance. Whether your eCommerce business files monthly, quarterly, or annually in a state, you will almost certainly have a sales tax filing deadline in January. That’s why we call January the “Sales Tax Perfect Storm.” We’re here today to get help you get ready and not only weather the storm but to conquer it.

sales tax filing for small businessLike any other complex task, the way to attack it is by breaking it down into smaller chunks and plugging away piece-by-piece. Here is a quick refresher of the steps to get ready to file:

1) Find your sales tax filing due dates

A majority of states set January 20th as their sales tax due date for the month, but not all. So make sure you check. Here’s a list where you can check when January sales tax returns are due in your state.

2) Report your owed sales tax for each state where you have sales tax nexus

Nexus is defined as “significant presence” in a state. This includes presence such as an office, a remote employee, or stocking merchandise in a fulfillment service’s warehouse. If you have nexus in a state you will be required to register for a tax permit, withhold sales taxes, and file a sales tax return for that state. If you have questions, here is a guide to determining if you have nexus in a given state.

3) File your sales tax returns

Once you’ve figured out how much sales tax you’ve collected for each of the states where you have nexus, you’ve done the hard work. Now it’s time to file your sales tax return. There are usually a few options for filing in most states:

  • File Online: You’ll need to find your state’s sales tax portal online, fill out the forms, and submit payment through the state’s payment system.
  • File by mail: Even though this was the original option for filing sales tax returns, there are many states that are starting to discontinue allowing mailed returns. If your state supports filing by mail you’ll need to print out the forms and make sure they are sent with a postmark on or before the due date. This is a ton of work and headache when you can just file online.
  • AutoFile: A sales tax automation solution can automatically file your sales tax returns for you in most states. You won’t need to worry about reporting or completing forms as everything is done automatically, including figuring out if your state has a tax discount for filing on time and will apply that discount automatically.

No matter which method you use to file sales tax returns, you’ll want to make sure that you file in every state where you have nexus even if you owe no sales tax for that filing period.

4) Prepare for the next January “Perfect Storm.”

As your business grows throughout the next year make sure that you keep track of any new states where your new activities may have established nexus and make sure to register for permits in those states as soon as you discover that you have nexus, in order to start collecting right away.

On the other hand, you may discover that you no longer have nexus in a state anymore and you can contact that state’s department of revenue to begin ending your business relationship. Keep in mind that some states have “trailing nexus” where you must continue to file for a specified period after your nexus ends. As always, check with the state’s department of revenue to make sure.

common tax Nexus types

We know that sales tax compliance is never fun but when you have a solid system to automate the pain away it becomes much less of a hassle.

To learn more about sales tax, check out our Sales Tax 101 Guide for Online Sellers, or join our Sales Tax for eCommerce Sellers Facebook group.

TaxJar is a service that makes sales tax reporting and filing simple for more than 7,000 online sellers.  Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!

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