Do I Have to File a Return If I Didn't Collect Any Sales Tax?
- Sales Tax
- February 20, 2015 | Ryan O'Donnell
One question we frequently hear from new business owners is whether you need to file a sales tax return if there is no sales tax collected. The short answer is yes.
Once your business has applied for and been granted an active state sales tax permit, you are required to file an on time sales tax return based on your assigned filing frequency. Failing to do so may result in penalty charges. In Florida, for example, the minimum penalty for a late zero tax return is $50.
Why States Require Zero Tax Returns
Let's say your quarterly taxes are due April 1. The period of activity is January 1 through March 30. During this time period your business may or may not have had sales. Either way, you didn’t collect any sales tax. You still need to file a quarterly sales tax return by your assigned due date.
Filing a zero tax return distinguishes your business from businesses that collected taxes and simply failed to file a return (and this is never a good idea since most states charge penalties for unpaid or late taxes). Furthermore, it lets the state know you're still an active business.
Also consider that you might have revenue not related to sales tax that needs to be reported. For example, you might not have sold any goods that require you collecting sales tax but you might have services revenue that would require reporting on a return.
Sales to Resellers and Other Exempt Parties
One reason sellers sometimes don't end up collecting sales tax is if they sell to a buyer who is exempt from paying sales tax. If you sell raw materials to a business-owner who plans to resell them or who uses them to create new products, that business-owner doesn't have to pay sales tax.
Such resellers must show you a valid state resale certificate in order to take advantage of this sales tax exemption. Each state has many other categories of buyers who are exempt from paying sales tax. These categories often include nonprofit corporations, schools, religious organizations, and producers of vital products such as farmers. When you sell to any buyer claiming a sales tax exemption, you should be careful to collect their name, signature, and tax registration number. Avalara CertExpress is a free tool businesses can use to manage this information.
Some states require non-registered sellers to collect and remit sales tax on casual sales, and they have special forms available online for this purpose. If you didn't collect sales tax when you should have, you may end up having to pay the tax to the state out of your own pocket. Each state's rules are different in this regard, so you should find out how the states in which you have nexus define and regulate "casual sales." In other states, even if you are a registered seller, you are not required to collect any tax on sales that are not a routine or continuous part of your livelihood.
Just because you don't have any sales tax to report, that is no reason to wait until the last minute to file your return. If you do, you run the risk of not being able to get a hold of the friendly folks at the revenue department if you have questions (in such cases, be sure to check our state sales tax guides for answers). While it's true that circumstances beyond your control (such as a power outage) that prevent you from filing on time will be considered by most states as a valid reason for filing late, do you really want to deal with that? We recommend filing at least a week prior to your assigned due date.
Also, take the time to check your filing options. Many states offer zero tax filers TeleFiling as a filing option to eliminate paperwork and speed up the process.
Finally, remember to keep a copy of your return for your records regardless of whether you filed electronically or on paper and regardless of whether you have any sales tax to remit.