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Vendor discounts for filing sales tax on time, a state-by-state guide

All states penalize businesses for filing and/or remitting sales tax late. Many states also reward vendors for filing and remitting sales tax on time. In fact, over half of all states offer a vendor discount to businesses that file sales tax returns and remit sales tax payments by the due date, and some even sweeten the pot for businesses that file 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. For instance:

  • Alabama has tiered rates ranging from 2% to 5% based on the amount of tax due, plus a maximum discount cap 
  • New York offers a generous 5% discount with a maximum discount of $200 per quarter
  • Nevada provides a 0.25% discount with no cap 

Even the smallest discounts can add up to significant savings over time, so it’s good to know which states offer them. Small businesses operating with tight margins may find them particularly beneficial. As a matter of fact, the Colorado vendor discount is only available to small businesses.

Read on for a list of state discounts for filing and remitting sales tax on time.

StateSales tax timely filing discounts
Alabama

5% on the first $100 of sales tax due, 2% of all tax over $100; monthly sales tax 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

Eligible sellers may retain a discount of 2% of the simplified sellers use tax due on the first $400,000 of taxes collected and remitted, not to exceed $8,000 per month

Electronic payment information must be transmitted by 4:00 p.m. (central time) on or before the due date to be considered timely

No discount for timely filing local sellers use tax, consumer use tax, local consumers use tax, or state and local rental tax 

There are different vendor discounts for other taxes, including but not limited to lodging tax, state casual sales and use tax, and state contractor gross receipts tax

AlaskaVaries by jurisdiction; for example, the Kenai Peninsula Borough (see Sales Tax Quick Facts) offers a 5% on-time credit limited to $1,000 per quarter 
ArizonaPaper TPT filers can claim an accounting credit of 1% of the tax due to a maximum of $10,000 per calendar year; electronic TPT filers can claim an accounting credit of 1.2% to a maximum of $12,000 per calendar year, but only if they file all their TPT returns electronically for the calendar year; only applies to state transaction privilege tax (not local TPT)
Arkansas2% to a maximum of $1,000 per month; the 2% discount is allowed for local sales tax accounts (to a maximum of $1,000 per city and county reported); local use tax accounts are not eligible for the 2% discount 
CaliforniaNone
Colorado4% of the tax due (up to $1,000 per filing period); as of January 1, 2022, not available to businesses whose taxable sales during the filing period exceeded $1 million

The service fee for timely filing local option sales tax ranges from 0% to 4%
ConnecticutNone
DelawareN/A
Florida2.5% of the first $1,200 due; maximum of $30 per report; only available to taxpayers who file and pay electronically
Georgia3% on the first $3,000 of state and local sales and use tax, 0.5% on the remainder; taxpayers required to file electronically will not receive vendor’s compensation if a paper return or payment is submitted (download Sales and Use Tax Returns and Addendums for more information)
HawaiiNone
IdahoNone
Illinois$5 or 1.75% of the tax collected on receipts from sales of tangible personal property, whichever is greater; taxpayers required to file electronically will not receive the collection allowance for paper returns unless they obtain a waiver from the department
IndianaRetail merchant’s collection allowance of 1% 
IowaNone
KansasRetailers in Missouri, Nebraska, and Oklahoma are eligible for a discount on collected Kansas Retailers’ Compensating Use Tax at the following rates: 2% for Missouri vendors; 2.5% for Nebraska vendors up to the first $3,000 in tax remitted per month, with a maximum discount of $75; and 1% for Oklahoma vendors, with a maximum discount of $2,500
KentuckyVendor’s compensation allowed is 1.75% on the first $1,000, 1.5% on the remainder; maximum of $50 per month
Louisiana1.05% of the total amount of sales and use taxes due as of August 1, 2020 (previously 0.935%), limited to $1,500 per calendar month; the vendor’s compensation does not apply to the “sales tax imposed pursuant to LA R.S. 47:321.1
MaineNone
Maryland1.2% on the first $6,000 collected and 0.9% on the amount above $6,000; maximum of $500 per return
MassachusettsNone

Michigan

Discount allowed for timely filing applies to 0.6667 of the sales and/or use tax collected at the 6% rate (2/3 of the tax due); if tax is remitted before the 12th of the month, the taxpayer can take an allowance of .75% and the maximum discount is $20,000; if tax is remitted between the 13th and the 20th of the month, the taxpayer can take an allowance of .5% and the maximum discount is $15,000  

 

Accelerated filers who pay tax by the 20th should calculate the discount using this formula: Tax x .6667 x .005; there’s no maximum discount; accelerated payments must be filed electronically


Rate and maximum discount vary depending on reporting frequency and amount of tax filed

MinnesotaNone
Mississippi

2% of liability, limited to $50 per calendar reporting period and not to exceed $600 per calendar year

Missouri2% of the tax due
MontanaN/A
Nebraska3% of the first $5,000 of sales tax collected each month ($150 per month per location in Nebraska) 
Nevada0.25% of state sales tax collected
New HampshireN/A
New JerseyNone
New MexicoNone
New York5% vendor collection credit allowed for quarterly and annual filers; maximum of $200 per quarterly or annual reporting period; the credit is not available to monthly filers
North CarolinaNone
North DakotaSales tax permit holders may retain 1.5% of the combined state sales, use, and gross receipts tax, with a maximum of $110 per month; wholesalers may deduct 1.5% of the tax due, with a maximum of $100 per month
Ohio0.75 of 1% of the tax liability reported on line 6 of the Universal Sales Tax return.
OklahomaNone
OregonNone
PennsylvaniaThe 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
Rhode IslandNone
South CarolinaWhen 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 taxpayers filing paper returns, the maximum discount is $3,000 per fiscal year; for taxpayers filing electronically, the maximum discount is $3,100 per fiscal year

Out-of-state sellers not required by law to collect South Carolina sales and use tax who voluntarily register to do so are allowed a maximum discount of $10,000 each fiscal year
South Dakota1.5% of the gross amount of the tax due; maximum of $70 per return period; applies to electronic filers only 
Tennessee

Tennessee provides a vendor’s compensation deduction for out-of-state businesses not required by law to be registered in the state that file returns on time; the deduction is 2% of the first $2,500 of state tax due; 1.15% of the amount over $2,500 on each report

A similar discount for vendors required to collect Tennessee sales tax was in effect from July 1, 2022, through June 30, 2023

Texas0.5%; an additional discount of 1.25% applies to prepayments
Utah1.31% of the total amount of tax due for monthly returns filed electronically; quarterly and annual filers may not take the seller discount
VermontNone
Virginia

Compensation is 0.8%, 1.2%, or 1.6%, depending on the volume of monthly taxable sales, of the first 3% of the state tax due; no compensation is allowed for the remainder of the state sales tax or for local tax

For dealers with monthly taxable sales of $0 to $62,500, the discount is 1.116%; for dealers with monthly taxable sales of $62,501 to $208,000, the discount is 0.837%; for dealers with monthly taxable sales of $208,001 and up, the discount is 0.558%; no discount allowed if average monthly sales tax liability exceeds $20,000

WashingtonNone
West VirginiaNone
Wisconsin

For sales taxes payable on or after October 1, 2023: 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 $1,333, the discount is $10; if the total sales tax due is greater than $1,333, the discount is the total sales tax amount times 0.0075 but cannot exceed $8,000 per reporting period

 

For sales taxes payable on or prior to September 30, 2023: 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 0.005 but cannot exceed $1,000 per reporting period

WyomingVendors may keep a credit of 1.95% of the total tax due for the first $6,250, 1% on the remainder; maximum of $500 per filing period, per vendor; returns and payments must be postmarked by the 15th of the month to qualify for the vendor compensation credit
District of ColumbiaNone

 

Avalara Returns can simplify the filing and remittance of sales tax returns, increasing the likelihood you'll file and remit on time. 

This post was updated September 2023; it was originally published in January 2019.

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