Vendor discounts for filing sales tax on time, a state-by-state guide
Though all states penalize businesses for filing and/or remitting sales tax late, many also reward vendors for filing and remitting sales tax on time. A couple 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. Yet the overall rewards may not differ as greatly as it first seems: New York offers a generous 5% discount but has maximum discount of $200 per quarter; on the other hand, Nevada doesn’t cap its 0.25% discount.
The greatest savings for small sellers 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 an additional local discount. But there’s no gain without pain, because sales tax compliance in Colorado is notoriously complex.
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.
Read on for a list of state discounts for filing and remitting sales tax on time.
|State||Sales Tax Timely Filing Discounts|
5% on the first $100, 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
No discount for timely filing local sellers use tax, consumer use tax, local consumers use tax, or state and local rental tax
|Alaska||Varies by jurisdiction; for example, the Kenai Peninsula Borough (pdf) offers a 5% one-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 doesn't apply to use tax or local rental vehicle tax and shall not exceed $3,000 per city and county reported|
|Colorado||4% 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%
|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 collected on receipts from sales of tangible personal property|
|Indiana||Collection allowance of 0.73% of the tax paid if total tax liability for previous 12 months ending June 30 is $60,000 or less; 0.53% if total is $60,000.01 through $600,000; 0.26% if total is more than $600,000|
|Kentucky||Vendor's compensation allowed is 1.75% on the first $1,000, 1.5% on the remainder; maximum of $50 per month|
|Louisiana||1.05% 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|
|Maryland||1.2% on the first $6,000 collected and 0.9% on the amount above $6,000; maximum of $500 per return|
|Michigan||Discount allowed for timely filing applies to 0.6667 of the sales and/or use tax collected at the 6% rate
Rate and maximum discount vary depending on reporting frequency and amount of tax filed
2% of liability, limited to $50 per calendar reporting period and not to exceed $600.00 per calendar year
|Missouri||2% of the tax due|
|Nebraska||2.5%; maximum of $75 per month|
|Nevada||0.25% (no collection allowance allowed for use tax)|
|New York||5% vendor collection credit allowed for quarterly and annual filers; maximum of $200 per quarterly or annual reporting period|
|North Dakota||1.5%; maximum of $110 per month|
|Ohio||0.75 of 1% of the tax liability reported on line 6 of the Universal Sales Tax return.|
|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; out-of-state retailers without nexus who voluntarily collect may also qualify for a discount
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 Dakota||1.5% of the gross amount of the tax due; maximum of $70 per month; applies to electronic filers only|
|Tennessee||From July 1, 2022, through June 30, 2023, Tennessee provides a vendor’s compensation of 2% of the state tax due, not to exceed $25|
|Texas||0.5%; an additional discount of 1.25% applies to prepayments|
|Utah||1.31% seller discount|
|Virginia||1.116% if monthly taxable sales are less than $62,500; 0.837% if monthly sales are $62,501 to $208,000; 0.558% 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; see also 23VAC10-210-485|
|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||Vendors 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|
|District of Columbia||None|
Avalara Returns can simplify the filing and remittance of sales tax returns, increasing the likelihood that you'll file and remit on time.
This post was updated July 2022; it was originally published January 2019.
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