Vendor discounts for filing sales tax on time in 2019
Updated July 20, 2020; originally posted January 17, 2019.
All states penalize businesses for filing and/or remitting sales tax late, but fewer than 30 incentivize vendors for timely filing and remittance. Fewer still — only two that we know of — reward businesses for filing sales tax early.
Rewards for filing and paying sales tax on time (and correctly) vary by state and generally range from 0.25% to a whopping 5% of the tax due. Yet the overall rewards may not differ as greatly as it first seems: Though New York offers a generous 5% discount, it allows a maximum discount of $200 per quarter; on the other hand, Nevada doesn’t cap its 0.25% discount.
The greatest savings may be available in Colorado, where the vendor discount for state sales tax is 4%, there’s no cap, and many local tax jurisdictions offer a local discount. There’s no gain without pain, however, because sales tax compliance in Colorado is notoriously complex.
Even the smallest discounts can add up over time, so it’s good to know which states offer them. Read on for a list of state discounts for filing and remitting sales tax on time in 2020.
|State||2020 Sales Tax Timely Filing Discounts|
5% on the first $100, 2% of all tax over $100; monthly discount may not exceed $400; the discount for local sales tax is the same as for state sales tax, but non-state administered local taxes may have a different discount rate
|Alaska||Varies by jurisdiction; for example, the Kenai Peninsula Borough offers a 5% on-time credit limited to $1,000 per quarter|
|Arizona||Accounting credit of 1% to a maximum of $10,000 per calendar year for returns filed on paper; accounting credit of 1.2% to a maximum of $12,000 per calendar year for returns filed electronically; only applies to state transaction privilege tax (not local TPT)|
|Arkansas||2% to a maximum of $1,000 per month; for local sales and use tax, the 2% discount shall not exceed five thousand dollars ($3,000) per city and county reported; use tax accounts aren't eligible for the local discount|
|Colorado||4% of the tax due (up to $1,000 per filing period); the service fee for timely filing local option sales tax ranges from 0% to 4%|
|Florida||2.5% of the first $1,200 due; maximum of $30 per report; only available to taxpayers who file and pay electronically|
|Georgia||3% on the first $3,000, 0.5% on the remainder|
|Illinois||1.75% of the tax paid|
|Indiana||0.73% of the tax paid if total sales tax collected is less than $60,000; 0.53% if total is between $60,000 and $600,000; 0.26% if total is more than $600,000|
|Kentucky||1.75% on the first $1,000, 1.5% on the remainder; maximum of $50 per month|
|Louisiana||0.84%, limited to $1,500 per calendar month per dealer*; increases to 1.05% on August 1, 2020|
|Maryland||1.2% on annual collections of up to $6,000, 0.9% on the remainder, plus $18; maximum of $500 per reporting period|
|Michigan||0.5% on the first 4% of the tax (0.75% if paid by the 12th of the month); minimum of $6; maximum of $15,000 per month if paying by the 20th; maximum of $20,000 per month if paying by the 12th|
2%; maximum of $50 per location per month
|Nebraska||2.5%; maximum of $75 per month|
|New York||5%; maximum of $200 per quarter|
|North Dakota||1.5%; maximum of $110 per month|
|Pennsylvania||The lesser of $25 or 1% of the tax collected for monthly filers; the lesser of $75 or 1% for quarterly filers; the lesser of $150 or 1% for semi-annual filers|
|South Carolina||When the total tax due is less than $100, the discount is 3% of the tax due; when the total tax due is $100 or more, the discount is 2% of the tax due; for in-state taxpayers filing paper returns, the maximum discount is $3,000 per fiscal year; for in-state taxpayers filing electronically, the maximum discount is $3,100 per fiscal year; for out-of-state retailers who voluntarily collect, the maximum discount is $10,000 per fiscal year|
|South Dakota||1.5%; maximum of $70 per month; applies to electronic filers only|
|Texas||0.5%; an additional discount of 1.25% applies to early payments|
|Virginia||1.116% (1.6% for food and personal hygiene products) if monthly taxable sales are less than $62,500; 0.837% (1.2% for food and personal hygiene products) if monthly sales are $62,501 to $208,000; 0.558% (0.8% for food and personal hygiene products) if monthly taxable sales equal or exceed $208,001; no compensation is allowed on the remainder of the state sales tax; no discount on local tax; no discount allowed if average monthly sales tax liability exceeds $20,000; no discount allowed on electronically filed returns|
|Wisconsin||If the total sales tax due is $0 to $10, the discount is equal to the total sales tax; if the total sales tax due is $10 to $2,000, the discount is $10; if the total sales tax due is greater than $2,000, the discount is 0.5% but cannot exceed $1,000 per reporting period|
|Wyoming||1.95% on the first $6,250, 1% on the remainder; maximum of $500 per filing period, per vendor|
*The vendor’s compensation in Louisiana is 0.935%, but a portion of the state sales tax isn’t eligible for the discount. To simplify calculation, the Louisiana Department of Revenue recommends using the 0.84% rate, which is the equivalent of 4 cents out of 4.45 cents. Effective August 1, 2020, the vendor's compensation rate increases to 1.05%.
Although there’s no set discount in Idaho or Vermont, vendors are allowed to keep any excess collections prescribed under the bracket system. This used to be the case in Maine, but the state no longer uses the bracket system so there are no excess collections for vendors to keep.
Alaska, Delaware, Montana, New Hampshire, and Oregon have no general sales tax. However, New Hampshire provides a discount of 3% for timely filing of its meals and room tax. And certain localities in Alaska do discount the timely filing of local sales tax.
It can be difficult to learn how to determine the allowable vendor compensation — many state tax authorities don’t put this information front and center. Furthermore, while the discount is fairly straightforward in some states, in others (such as Virginia), additional constraints may apply.
Remember that sales tax filing discounts are subject to change in all states and should always be confirmed before being claimed.
Avalara Returns Services helps you to file on time, every time.
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