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Can I Get an Extension to File My Sales Tax Return?

  • Sales Tax
  • December 19, 2016 | Laura McCamy

It’s easy to get an extension to file your income taxes: Just fill out a form and send it in with the amount you owe (if any).

Sales tax returns are another matter. States generally expect businesses to remit sales taxes on time.

When it comes to sales taxes, retailers essentially act as an agent of the state in which the tax is due. You collect the money and hold it until it’s time to turn it over to the state department of revenue. Some ecommerce sellers even set up a separate bank account for sales tax revenue, to keep it separate from income.

Don’t expect tea and sympathy from the state if you file your sales tax late. For example, Texas charges a 5 percent penalty per month and interest accrues after 60 days. Plus the State Comptroller will estimate your sales and send you a bill for sales tax due, after which your penalty for nonpayment can double. New York  charges 1 percent interest and a 10 percent penalty per month from day one and all late filers pay a minimum of $50. Check the tax regulations in the states where you have nexus to make sure you understand the consequences of late filing.

Some states actually require sellers to file zero returns, and they can ding a business for not filing on time. For example, Connecticut requires filing even if no tax is due and may impose a penalty of $50 for late filers with no tax due. The Tax Commissioner may also revoke the seller’s permit for late filing.

But some states don’t require businesses to file when there were no sales.

Don’t Sweat Your Sales Tax Return

Sales tax returns are much simpler to complete than the Form 1040. Usually returns are just a page or two long.

Many states allow you to e-file, so filling out your sales tax return is as simple as adding numbers to boxes. The form will even do the math for you and then you can pay by credit card or electronic check. Boom! You’re done with your sales tax return.

The Nothing-Owed Sales Tax Return

States will assume you are in arrears if you don’t file your sales tax return on time, even if you don’t owe them a dime. Do file your sales tax returns for the states where you are registered, even if you didn’t have any sales during the filing period. If all the boxes get zeros and you can do it online, chances are it will only take you a few minutes.

If you had no sales, you might not think it's important to file your return on time, but think again. If you have nexus in California, the penalties and interest due are a percentage of the sales tax owed. Five percent of zero is zero, so you won't owe a penalty (but file your sales tax return anyway - it just takes a minute to e-file).

It's a different story in New York. The state assesses a civil penalty of $50 if you "fail to file or fail to timely file a return with no tax due." Connecticut also has a minimum $50 fine for late filing, plus the state Tax Commissioner could revoke your resale license.

Best practice is to file on time, even if you don't owe any sales taxes in the filing period. Once again, a check of the regulations governing late filing in the states where you have nexus is a good idea.

An Emergency Extension to File a Sales Tax Return

Maybe your house burned down or your computer got stolen. There was a death in the family, or a birth. Sometimes, despite your best intentions, life gets in the way of filing your sales tax return on time.

The California State Board of Equalization offers an online form for filing a Relief Request if you can’t file or pay your sales tax return on time. You will still have to pay interest on late a sales tax return, but California will waive the penalty.

Most of the other states don’t offer a formal relief process, but remember that tax collectors are human beings. If you have to file and pay late due to a life crisis, reach out to the agency that collects that state’s sales tax returns and explain the problem. You may be able to talk them into waiving the penalties and perhaps even the interest.

States also often give blanket sales tax return extensions after natural disasters. After Hurricane Sandy in 2012, New York gave additional time for affected businesses to file sales tax returns without assessing penalties or interest. North Carolina extended October 2016 sales tax return due dates till March 2017 for businesses in counties affected by Hurricane Matthew.

Sales tax automation software can help you keep on top of the deadlines. This makes it easier to file each sales tax return on time, no matter how crazy life gets.


Avalara Author
Laura McCamy
Avalara Author Laura McCamy